Introduction
In today’s developed global markets, international arbitration plays a crucial role in resolving complex commercial disputes efficiently and in a relatively short period. This publication highlights Israel’s recent enactment of the International Commercial Arbitration Law 2024, a transformative process aligning Israel’s arbitration framework with global standards, including principles under the UNCITRAL Model Law and the New York Convention.
In Israel, the Arbitration Law of 1968 primarily established the framework for arbitration, whether local or international. However, the 1968 Law has become outdated and does not suit the specific characteristics of current international arbitration proceedings. The International Commercial Arbitration Law 2024 (the “New Law”) enhances legal clarity, promotes efficiency, and will result in the reduction of costs of cross-border disputes, positioning Israel as a credible and attractive jurisdiction for international arbitration. By fostering a business-friendly environment, the New Law aims to support international commerce, offering a streamlined, confidential, and reliable mechanism for dispute resolutions.
Through a comparative analysis of arbitration practices in other jurisdictions, this publication examines among others, the key features of the New Law, its alignment with international practices, its potential to increase international arbitration proceedings locally and to reinforce Israel’s position in the global arbitration arena.
Significant Provisions of the New Law
International arbitration under the New Law is defined (i) the parties’ operations are located in different jurisdictions, or (ii) the arbitration venue, the significant contractual obligations, or the physical sites related to the dispute are outside the parties’ jurisdiction, or (iii) the parties agreed in writing that the arbitration involves more than one jurisdiction.
The New Law limits Court intervention in arbitration proceedings to specific powers such as summoning witnesses upon the arbitral tribunal’s request or refusing to stay legal proceedings if the arbitration agreement is invalid, unenforceable or not applicable. Additionally, powers previously granted to Courts under the 1968 Law, such as annulling arbitrators’ decisions or witnesses summoning, resolving fee disputes and correcting deficiencies in arbitral awards, are no longer included within the New Law.
The New Law regulates the powers granted to arbitrators regarding interim measures and their enforcement. It allows the parties to request Israeli Courts to recognize and enforce interim measures, even if such measures were granted in arbitration proceedings conducted outside of Israel.
According to the New Law, it is required to submit a request to the Court to have an arbitral award recognized and declared enforceable, whether it was issued in Israel or abroad. If a party seeks to appeal an arbitral award issued outside of Israel, such party will be required to file its objection in response to the enforcement submission. The New Law contains several different grounds upon which the Court may refuse to recognize or enforce an arbitral award. These include matters such as defects in the parties’ capacity, failure to provide notice of the proceedings, arbitrators acting beyond their authority, as well as grounds related to public policy or the inability to resolve the dispute through arbitration under Israeli law.
An application for permission to appeal is only available for four types of cases, those concerning the appointment of an arbitrator, the disqualification of an arbitrator, the arbitrator’s incapacity or failure to act, or the arbitration panel’s power to determine its own scope of authority.
The Ability of the New Law to Balance between Continuity and Innovation
The New Law applies to arbitration proceedings initiated on or after its enactment, regardless of when the arbitration agreement between the parties was signed. The New Law states that the provisions of the 1968 Law, do not apply to international commercial arbitration. By extending the scope of the New Law to all arbitration agreements entered into post-enactment, the Legislation seeks to remove potential disparities and inconsistencies that may arise from the application of different legal systems regarding similar disputes. This ensures that parties involved in international transactions can operate with confidence, knowing that disputes will be resolved under a modern and internationally recognized legal framework.
The New Law generally allows ongoing arbitration proceedings initiated before its enactment to continue under the previous legal framework. This ensures continuity and stability for ongoing disputes, allowing parties to proceed with arbitration without disruption.
Consequently, the New Law strives to balance between preserving the continuity of ongoing arbitration proceedings and promoting a forward-looking regulatory environment that aligns with the evolving dynamics of international standards. The New Law not only ensures certainty and predictability for the parties engaged in arbitration but also provides a sense of trust in Israel’s legal system as a reliable forum for dispute resolution.
Online Arbitration in Israel
The increasing global reliance on technology enhances the potential of online arbitration as a tool to advance Israel as a leading international arbitration hub. By incorporating online dispute resolution (ODR) platforms into its arbitration framework, Israel can offer innovative solutions suitable to the evolving needs of the business world. These platforms offer enhanced flexibility, lower costs, and reduced delays, making arbitration more accessible and efficient for both domestic and international parties.
Furthermore, the adoption of ODR has the potential to significantly increase the application of the New Law. By offering a more accessible and user-friendly framework, ODR can encourage businesses that might otherwise avoid arbitration due to logistical or cost concerns to engage in this efficient dispute resolution mechanism. Embracing digital innovation enhances Israel’s attractiveness as a leading forum for resolving cross-border disputes, aligning with global trends and the expectations of the international business community.
Comparative Analysis of International Arbitration Laws
United States
As mentioned, the New Law is largely based on the UNCITRAL Model Law of International Commercial Arbitration. Major similarities can be seen, such as the adoption of the UNCITRAL Model Law’s definition of “international arbitration”. However, despite aligning with international standards, the New Law introduces innovative and unique approaches suitable to the Israeli context and its specific business needs.
The Israeli Law differs from the UNCITRAL Model Law in several aspects, yet it upholds the core principles of the Model, ensuring consistency with its underlying framework. Unlike the Model Law, which prohibits appeals of certain court decisions such as the appointment or disqualification of arbitrators and the tribunal’s jurisdiction, the New Law permits parties to request court approval for appeals in these cases. Additionally, the Israeli Law limits arbitrators to issuing interim orders rather than preliminary ex-parte orders, unless the parties explicitly agree otherwise. These adaptations aim to provide a balance between procedural flexibility, party autonomy and the integrity of arbitration proceedings.
The New Law also includes provisions that enable the recognition and enforcement of foreign arbitral awards, in accordance with the 1958 New York Convention. For example, Section 44(a) of the New Law reflects Article III of the Convention, treating foreign arbitral awards as binding and enforceable under local law. Similarly, Section 43 matches Article V of the Convention, outlining grounds for refusing recognition or enforcement of arbitral awards, whether foreign or domestic. However, the Israeli Law goes further by including procedural adaptations, such as clear deadlines for submitting requests and granting Courts the authority to suspend annulment proceedings.
Article 3 states that matters addressed by the New Law, which are also governed by an international treaty to which Israel is a party, such as the New York Convention, will be regulated and resolved in accordance with the provisions of the particular treaty.
Europe
Europe has a lengthy tradition of arbitration, influenced heavily by the principles laid out in the UNCITRAL Model Law on International Commercial Arbitration and 1958 New York Convention, which many European countries have adopted or used as a reference for their own laws. Key features in the European Laws relate, among others, to the ability of arbitrators to decide on their own powers, the limited scope of Court intervention and the recognition and enforcement of arbitral awards. Such principals are adopted across European jurisdictions, providing a uniform framework for international commercial arbitration.
The New Law closely aligns with European arbitration models yet introduces certain tailored provisions to address specific local needs, particularly in areas such as the appointment of arbitrators, interim measures and the enforcement of arbitral awards.
Conclusion
The New Law marks a significant step in aligning Israel’s arbitration framework with international standards. Replacing the outdated Arbitration Law of 1968, the New Law incorporates principles from the UNCITRAL Model Law and the New York Convention, empowering Israel with modern tools for resolving cross-border commercial disputes. The New Law bolsters confidence in Israel’s ability to sustain stable business operations, offering a reliable and advanced legal framework that enhances its appeal to international investors.
Compared to arbitration laws in jurisdictions like the United States and Europe, the New Law blends global principles with unique adaptations. Complementary initiatives, such as adopting online arbitration platforms, further aim to position Israel as a global hub for commercial dispute resolution.
As outlined in the explanatory notes to the New Law, any ambiguities in its provisions will be interpreted in alignment with international legal standards rather than Israeli law. This approach aims to ensure uniform application of the New Law and strengthen its global relevance. The New Law is expected to enhance the integration of Israeli businesses into the international market while significantly reducing costs associated with resolving cross-border disputes.
The New Law is expected to strengthen economic stability, trust among international businesses, and establishes Israel as a leading player in the global arbitration landscape. It supports the growth and global competitiveness of Israeli businesses while reaffirming Israel’s commitment to fairness, efficiency, and integrity in dispute resolution.
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