The Israeli Arbitration Law: Principles and Trends
Introduction Arbitration is a dispute resolution mechanism that operates outside the formal
Arbitration is the resolution of disputes by way of adjudication by an arbitrator instead of judicial proceedings in courts. In order for an issue to be discussed before an arbitrator, both parties must agree to this in writing. The agreement can be made even before a conflict arises, in the form of an arbitration clause in a contract, or as a later agreement once a dispute has already developed.
Arbitration proceedings end with an award that can be filed in court for approval. Once confirmed, an arbitral award holds the same authority as a court decision and can be enforced through the Execution Office.
International arbitration is a method of resolving cross-border commercial and civil disputes outside the formal court system. It is particularly suitable for parties from different legal jurisdictions, enabling them to resolve conflicts under mutually agreed-upon rules, neutral laws, and before arbitrators with relevant international expertise.
Key characteristics of international arbitration include:
Israel has become a growing hub for international arbitration. Strategically located and home to world-renowned legal and commercial professionals, Israel offers an attractive environment for resolving cross-border disputes. Importantly, Israel adopts international legal standards and aligns its arbitration practices with globally recognized norms.
The Israeli Institute of Commercial Arbitration (IICA) is at the forefront of this development. It is the only institution in Israel offering international arbitration rules that meet global standards, with proceedings that can be conducted in multiple languages, under various legal systems, and with foreign or international arbitrators.
IICA’s international arbitration services are ideal for parties involved in complex cross-border commercial transactions, joint ventures, intellectual property disputes, and international contracts.
The selection of the arbitrator is a critical step in arbitration. The arbitrator must be a reliable, experienced, and impartial individual who understands the subject matter of the dispute.
The Israeli Institute of Commercial Arbitration offers a unique advantage: a long and distinguished list of arbitrators, including international arbitrators with cross-border expertise.
Parties may choose their arbitrator from this list, or request that the President of the Institute appoint one. This process ensures transparency, trust, and alignment with the dispute’s subject matter.
The IICA is Israel’s first and most established arbitration institution. With almost four decades of experience, a global network of arbitrators, and a commitment to excellence, it is the premier choice for international dispute resolution.
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+ How Does Arbitration Begin?
– Arbitration proceedings begin with the signing of a written arbitration agreement between the parties. This agreement is a prerequisite for commencing arbitration. It may appear as a dedicated document – often called an “arbitration deed” – or as a clause within a broader commercial contract.
If a dispute arises without a pre-existing arbitration clause, the parties can still agree to resolve it through arbitration. Even in cases already before the court, a judge may suggest arbitration; if both parties consent, the court may refer the matter to arbitration.
+ How Does Arbitration End?
– Arbitration proceedings can end in two main ways:
| Agreed Settlement | Ideally, parties reach a mutually agreeable solution. The arbitrator, after understanding the dispute and the interests involved, may propose terms for resolution. If accepted, this agreement is formalized as an arbitral award, increasing the likelihood of full cooperation in implementation. |
| The arbitrator’s ruling | If no agreement is reached, the arbitrator issues a binding ruling, as agreed upon by the parties. |
+ What Is an Arbitral Award?
– An arbitral award is the final and binding decision issued by the arbitrator at the conclusion of proceedings. While interim decisions may occur during arbitration, only the final determination is considered the official “award.”
Once confirmed by a court, the arbitral award holds the same status as a court judgment and can be enforced accordingly through the Execution Office.
+ Advantages Over Court Proceedings
– Arbitration presents significant advantages over traditional litigation:
| Shorter Timelines | Unlike court cases, which can take years, arbitration typically concludes within months. The IICA requires awards to be issued within 3 months of the last hearing or filing of summations. |
| Lower Costs | Arbitration avoids substantial court fees and prolonged attorney involvement, reducing total expenses. |
| Choice of Arbitrator | Unlike in court, parties can choose an arbitrator with relevant expertise. |
| Confidentiality | Proceedings are private and hearings are held behind closed doors. Rulings are not published or searchable online, helping protect sensitive business information, trade secrets, or reputational concerns. |
| Flexibility in Process | Parties may customize the procedural framework of the arbitration, including timelines, evidentiary rules, and the governing law – whether Israeli law, foreign law, religious law, or the arbitrator’s discretion. This ensures that the process is aligned with the specific needs of the dispute and the preferences of the parties involved. |
| Finality | Arbitration typically results in a final, non-appealable decision, allowing parties to move forward with certainty. This saves time and cost compared to lengthy appeals in court. |
+ How to Draft an Arbitration Clause
– To draft a valid arbitration clause, include clear language stating that any dispute arising from the contract will be resolved through arbitration under the rules of the Israeli Institute of Commercial Arbitration. Specify:
Example:
“Any dispute arising out of or relating to this agreement shall be resolved by arbitration administered by the Israeli Institute of Commercial Arbitration (IICA), in accordance with its rules. The seat of arbitration shall be Tel Aviv, Israel. The proceedings shall be conducted in [language]. The award shall be final and binding.“
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