Background
In the State of Israel, the arbitral process is a tool for settling disputes which has gained a lot of momentum over recent decades.
Israel has a developed economy in which commercial transactions are carried out on a huge scale. The Israeli economy has grown significantly in recent years and has become an integral part of the global economy. Huge companies conduct transactions with international companies, and the hi-tech industry carries out global transactions and investments..
Many companies worldwide prefer to resolve their disputes in alternative procedures outside the court. The arbitral process is the most popular mechanism due to its many advantages. For example: the selection of the arbitrator by agreement between the parties – a significant advantage which gives the parties to the proceedings great confidence in the process itself; the arbitral process is a fast and efficient process compared to court proceedings which last for many years; the discrete and confidential nature of the proceedings ensure that the arbitral proceedings, as well as the arbitral award, are not open to the public; and of course it limits the court’s intervention in the arbitral process, as part of the perception of the autonomy of the parties to the proceedings.
These advantages serve as an incentive for many companies to carry out international transactions, while incorporating an arbitration clause in the agreements.
In Israel, the main law governing the field of arbitration is the Arbitration Law, 5728-1968. This law is outdated and has not kept pace with the unique characteristics of international arbitral proceedings. Consequently, many gaps have arisen between the arbitral process throughout the world and the established rules in Israel. Inter alia, these gaps are reflected in the determination of the seat of the arbitration, the arbitrator’s powers and flexibility in conducting the proceedings, respecting the will of the parties and the intervention of the court in the arbitral procedure.
Adoption of the UNCITRAL Model
The Ministry of Justice, with the assistance of the Israeli Institute for Commercial Arbitration, together with academics and international arbitrators, submitted the draft International Commercial Arbitration Law. The main purpose of the proposal for Israeli law is to adopt the UNCITRAL Model, which establishes accepted and recognized international standards for conducting international commercial arbitration, thereby promoting Israel’s status as a seat for holding international arbitrations and contributing significantly to business and trade between international companies in Israel.
The UNCITRAL Model was formulated by the United Nations Commission on International Commercial Law. This model constitutes a well-known and accepted international standard in international commercial arbitrations and, to date, it has been adopted by almost 100 countries worldwide.
Within the framework of the meeting of the Knesset’s Constitution, Law and Justice Committee regarding the International Commercial Arbitration Bill, Dr. Menashe Cohen, President of the Israeli Institute for Commercial Arbitration, noted that “there is room to make Israel a center for international arbitration. There is a developed infrastructure here with high level, long-standing, reliable and reputable arbitration institutions. The lawyers in Israel are of a high standard, and there is a very developed market of services and trade that carries out large-scale transactions, for example in the field of hi-tech, and there is no reason why Israeli companies should not conduct their arbitrations here in Israel!”
On February 14, 2024, the International Commercial Arbitration Law was enacted in the Knesset, and Israel is expected to be added by the Secretary of UNCITRAL to the list of countries that have adopted the model law.