Last week the Knesset voted in favor of enacting the International Commercial Arbitration Law, falling into line with more than 80 countries around the world on everything regarding the mechanism for settling disputes outside of the courts, as more and more corporations are choosing to do.
The law that was passed has considerable potential consequences for economics and legal discussions. “Globes” explains the questions that arise as a result of the integration of the international law into Israeli law.
How common is commercial arbitration?
In recent years, more and more companies prefer to solve their disputes outside of the courts, that is to say through arbitration or mediation. Arbitration is a mechanism in which the parties have agreed on one person or more who will rule on the dispute. When it comes to international companies, lawyers say that this preference has in many senses become the default.
The reasons for this are diverse and together with a desire for a fast and efficient procedure, it also includes a desire for confidentiality, and less oversight by the courts. If you also add to this the unpredictable red tape in the courts, then few companies will choose to conduct their affairs there. “Pre-agreed international arbitration avoids disputes on jurisdiction between countries and resolves each party’s concern about litigation on the other party’s ‘home turf. The new law may contribute to making Israel an attractive destination for holding international arbitrations and make it easier to do international business with Israeli companies.” explains Advs. Dror Varsano and Nir Weintraub of the Arnon, Tadmor-Levy law firm.
Adv. Gideon Weinbaum, Partner and Head of the Litigation and Dispute Resolution Department at the Epstein Rosenblum Maoz (ERM) law firm adds that the law, “Might give more certainty in a number of issues concerning international arbitration procedures, and we hope that with its enactment, holding international arbitration in Israel will become an acceptable and attractive option for foreign litigants as well.”
Previously it was also possible to go to arbitration. Why do we need a new law?
The law that was enacted in Israel in the 1960s did not include any reference to international arbitration, that is to say which is conducted between foreign players, and it was not coordinated with the arrangements drawn up by the United Nations, known as the “Model Law”, which has been adopted in more than 80 countries around the world. Now it is.
DLA Piper Partner and Head of Litigation, Arbitration and Investigations Middle East Adv. Andrew Mackenzie explains, “The law provides businesses with the security to engage in deals in Israel. Like the 1996 Arbitrations Law for London, this legislation positions Israel as a strong center for arbitration, nurtures a friendly environment for businesses, in which the parties can conduct flexible procedures with certainty. the law in allows Israel to align with global arbitration standards as they exist in business centers such as New York, London, Paris, Hong Kong and Dubai. This welcome development brings clarity and transparency to international business arbitration procedures in Israel and reduces the reliance on archaic precedents and judgments and ambiguous civil regulations.”
Was the absence of the law the reason that there have not been many arbitration procedures in Israel so far?
Adv. Marina Roizer, Partner in the Litigation Department at S. Horowitz & Co. law firm, who practices in international arbitration and who closely supported the legislation process as a representative of the Israel Forum for International Arbitration explains, “It is difficult to put your finger on one thing that prevents this, but the fact that Israel had not adopted the model law until now, and was not part of the international standard, was a consideration.”
Is this good for the Israeli economy. Who will profit from this?
Before the war, they were hoping here that Israel would become a “hub” for international arbitration. Today this hope is a little bit more restrained but nevertheless, there are those that believe that the legislation will bring more foreign players here. And more foreign players is also more work for Israeli lawyers – and if these foreign companies agree to discuss the case in Israel, it will also significantly make the procedure cheaper from the point of view of the Israeli companies.
Adv. Roizer says, “The procedure in Israel is less expensive and more convenient than a procedure overseas, which can be very expensive to the point that conducting it becomes not worthwhile.” Therefore, she explains, from the point of view of Israeli companies, this is very, very dramatic.”
Who will lose?
Lawyers and judges who are not familiar with the new law. “The new law creates a different regime than the existing one and it can apply automatically without the parties realizing it,” says Adv. Jacob Enoch, Partner and Head of the Mergers & Acquisitions Department and International Arbitration Practice at Firon law firm.
He adds, “Israeli parties to a commercial agreement that is designed to be conducted abroad and which sets out that any dispute between them will be decided by arbitration in Israel, unknowingly apply the provisions of the new law to themselves. By the way, they apply norms that are different from those accepted for normal arbitration in Israel.”
And from the point of view of the State of Israel?
According to Adv. Gidon Even-Or, Partner in the Litigation and Dispute Resolution Department and Head of the International Arbitration Sector at AYR – Amar Reiter Jeanne Shochatovitch & Co. law firm in terms of the vision of the state, the legislation is a significant achievement. “From the moment that the model law was adopted, and makes it something more modern and friendly, this is going to incentivize deals and lower barriers.”
Published by Globes, Israel business news – en.globes.co.il – on February 18, 2024.
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