Arbitration

What is arbitration?

Arbitration is the resolution of disputes through arbitration 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 even before the conflict between the parties arises within the arbitration clause of the contract or according to a late agreement – at the outbreak of the conflict.

The arbitration procedure ends with an award that can be submitted to the court for approval. An arbitral award that has been legally confirmed is a court decision, for all intents and purposes, and it can also be enforced through the enforcement office.

Who is authorized to conduct arbitration proceedings?

In the Arbitration Law, “arbitrator” is defined as any person appointed to serve as an arbitrator under an agreement between the parties. As a general rule, any person in Israel may serve as an arbitrator, even if he is not a lawyer by profession.

However, there is a distinct advantage to choosing a professional who has been trained to manage arbitration procedures, and who is familiar with both the provisions of the law and the accepted norms in the field in which the dispute arose.

How does arbitration begin?

Arbitration proceedings begin with the signing of an arbitration agreement between the parties to the dispute. The signing of the agreement is a preliminary requirement for the existence of the arbitration procedure. The arbitration agreement may be a dedicated arbitration agreement sometimes called an “arbitration deed”. However, it is usually a single clause in a more comprehensive agreement that regulates all the issues on which the parties disagree.

To the extent that the parties did not sign an arbitration clause before the outbreak of the conflict, but upon the outbreak of the conflict the parties prefer to litigate outside the walls of the court, they can still agree on transferring the dispute to be resolved in the framework of arbitration.

Even when a case comes to litigation in a court, and the judge recommends the parties to manage the conflict between them within the framework of arbitration, upon receiving the consent of the parties to this, the judge is authorized to transfer the case to an arbitration procedure.

How is arbitration concluded?

Arbitration proceedings can end in two main ways:

reaching an agreed solution
The desired situation in business arbitration procedures is to reach an agreed solution. In such a situation, the arbitrator offers the conflicting parties an offer that he formulated after understanding the essence of the conflict and the interests of the parties. The parties accept the arbitrator’s proposal and their agreement becomes valid as an arbitration award. Since this is an agreed upon solution, there is a high probability that both parties will cooperate to implement the solution in the arbitrator’s award.

the arbitrator’s decision
When parties to a conflict fail to reach an agreed solution, there is no escape from the arbitrator’s decision, which, according to the agreement of the parties – this decision is binding on them. It should be noted that the parties can agree in advance that it will be possible to appeal the arbitration award, in which case it will be possible to appeal either before an arbitrator or before a court.
What is an arbitral award and what does it mean?

An arbitral award is a term that refers to the final decision of the arbitrator in the arbitration process. It should be noted that not every decision of the arbitrator is an arbitration award. During the arbitration procedure, the arbitrator can issue interim decisions. The decisive ruling of the arbitrator in the dispute which ends the arbitration procedure is the one called “arbitration award”.

The arbitration award can be brought to a court for approval. An arbitration award that has been confirmed as a judgment given by a court. The approved arbitration award can be submitted for execution in the enforcement system like a court verdict.

Can the arbitrator’s decision be appealed?

The default in arbitration proceedings is that there is no appeal against the arbitration award.

At the same time, the Arbitration Law allows the parties to agree in advance that it will be possible to appeal the arbitration award. The parties can choose between an appeal before another arbitrator and an appeal with permission to the court.

The Business Arbitration Institute allows the parties to choose whether they prefer the arbitration award to be final and not subject to appeal or whether they prefer the arbitration award to be subject to appeal. This consent must be in writing and in advance, before the start of the arbitration procedure.

The advantages of arbitration procedures

Arbitration makes it possible to resolve disputes in a way that saves all involved both a lot of time and significant expenses. All this, in a discreet procedure, which is carried out at ease, and in a way that allows the conflict to be brought to a quick end.

In addition, the parties have full discretion regarding the design of the arbitration procedure, starting with the selection of the arbitrator (you can choose a specific arbitrator or refer to the arbitration institution for the appointment of an arbitrator) and the scope of the arbitrator’s authority; Through the manner in which the arbitration procedure is conducted (procedures, laws of evidence) and the law that will apply in the arbitration procedure (Israeli law, foreign law, Torah law, the discretion of the arbitrator, etc.) the trial).

What is the difference between mediation and arbitration?

Mediation is a procedure in which the parties appoint a third party who is supposed to bring them to an agreement to end the conflict, without the mediator having the authority to decide between them. So, if the parties do not reach an agreement, the dispute is settled and a decision is required, either in court or in arbitration.

On the other hand, arbitration is a procedure in which the parties appoint a third party who is supposed to decide the dispute between them. The parties determine in the agreement the framework of the arbitrator’s authority, the arbitrator hears the parties and decides the dispute according to the claims and evidence presented by the parties to him.

How is arbitration better than legal proceedings?

Arbitration procedures are superior to legal procedures conducted in court, in the following aspects:

The litigation procedure is short in a normal legal procedure, the litigation is not limited in time. In practice, a legal proceeding in a court can last for years and end in heartache for one or both parties, which may result in an appeal procedure, with all that implies. An arbitration procedure is an inherently short procedure that lasts several months. The arbitration award is given (according to the institution’s rules) within a month of the last meeting or submission of the summaries.
Low costs A legal procedure may involve huge costs, both in payments to the court (fee at the rate of 2.5% of the amount of the claim as well as expenses incurred during the procedure) and in payments of fees and expenses to the lawyers. In an arbitration procedure, which is essentially short, the expenses are quite limited.
You could choose the party that will decide the conflict

In a court proceeding, the parties do not have the option to choose the judge who will hear the case. The case can be directed to a judge who is very knowledgeable about the subject of the conflict or to one judge who does not know the basic concepts of the field of the conflict. On the other hand, in an arbitration procedure, the parties may choose the arbitrator who will assist them in resolving the dispute.

Recommendations for appointing an arbitrator

Discretion A court proceeding is conducted behind closed doors so that the entire hearing is open to the public. The court’s decisions in the case are published and accessible in the search engines on the Internet. On the other hand, the arbitration meetings are held behind closed doors, there is no media exposure and the arbitration files are not open to the public.
The design of the arbitration procedure and the manner of decision in a court proceeding The parties, nor the court, have any discretion regarding the conduct of the procedure, as it is predetermined in the procedural rules. In an arbitration procedure, if the parties so desire, the parties are given the opportunity to shape the arbitration procedure as they wish, including with regard to the question of whether the procedural rules, the laws of evidence, the substantive law, etc. will apply.
Finality of the procedure and appeal

A court proceeding goes on for several years, at the end of which a verdict is given, with each of the parties having the right to appeal the verdict. This means that the legal process has not ended and will continue to be conducted before the court of appeal for another period. In an arbitration procedure, the principle of the finality of the hearing is important, and therefore the default is that the arbitrator’s decision is binding on the parties and is not subject to appeal. At the same time, the parties have the possibility to choose in advance whether they wish to appeal the arbitration award and what is the preferred appeal method for them.

Appeal of an arbitration award

How do you choose an arbitrator?

The selection of the arbitrator is based on the professional authority and personal assessment of the arbitrator and the agreement and understanding of the parties that he is indeed the most suitable person to resolve the dispute between them.

It is highly recommended to choose an experienced arbitrator who is knowledgeable in the field of the conflict, an honest, decent and impartial person.

It is not recommended to specify the name of only one arbitrator in an arbitration agreement, for the reason that that arbitrator may later be tainted by a conflict of interest, may withdraw from the field, may refuse to discuss the case or his health may deteriorate. In each of these cases, it may be necessary to go to court in a process of requesting the appointment of an arbitrator. With proper planning of the arbitration clause, this can be avoided.

Regarding the considerations for choosing an arbitrator, go to the page: How to choose an arbitrator?

Does the arbitration procedure have any disadvantages or limitations?

Arbitration is limited only to disputes that can be agreed upon. The source of the arbitrator’s authority derives from the agreement of the parties, which gives him the power to decide the dispute between them. Therefore, the decision of the arbitrator is limited only to the parties who appointed him and he is not able to give an arbitrary verdict, which is directed towards all Alma.

Moreover, the authority of the arbitrator is limited in accordance with the arbitration agreement agreed upon by the parties. Thus, if the parties chose to limit the authority of the arbitrator to decide only on a certain matter and only under certain conditions, the arbitrator is not allowed to exceed the limits of the authority granted to him.

Due to the above, the arbitrator is not allowed to order a witness, who is not a party to the arbitration proceedings, to appear before him, since the arbitrator has no authority over the witness.

In addition, the arbitrator is not allowed to issue garnishment orders or orders preventing departure from the country, addressed to third parties who are not parties to the arbitration procedure (banks, the licensing office, the land registry office, etc.).

In such cases, the arbitrator may be assisted by the court (see Section 16 of the Arbitration Law – auxiliary powers of the court) and the court, at the request of the arbitrator or one of the parties, may issue a subpoena for a witness or a seizure order for the arbitrator.

Why arbitration in the Israeli Institute for Business Arbitration

An arbitration proceeding conducted within the framework of the Business Arbitration Institute has clear advantages over a legal proceeding in a court of law or a private arbitration proceeding:

Appointing an arbitrator – the parties are given the opportunity to choose an arbitrator from a list compiled for them by the president of the institution and adapted to the subject of the dispute.
Also, the parties may agree among themselves on choosing a specific arbitrator from the list of the institution’s arbitrators, or agree that the arbitrator will be determined by the president of the institution.
An impressive gallery of arbitrators – the Institute for Business Arbitration has a long and distinguished list of arbitrators in various and varied fields of practice: most of the retired judges of the Supreme Court, senior judges from the district and peace courts, leading lawyers, accountants, engineers, appraisers, economists and even those with dual qualifications (for example – attorney/engineer, attorney/CPA, etc.).
Professional management of the arbitration procedure – the arbitration procedure is conducted in accordance with the institution’s arbitration rules. The professional staff of the institution ensures that there will be no direct contact between the arbitrator and the parties and their proxies. The institution’s secretariat is responsible for forwarding the requests of the parties to the arbitrator and for forwarding the arbitrator’s decisions to the parties. The secretariat is also responsible for coordinating meetings and schedules, transferring material between the parties and the arbitrator, and producing documents. The institution’s management is at the disposal of the parties for any question and request related to the administration of the arbitration.
Schedules – the meetings are scheduled as soon as possible.
The arbitration award – delivered to the parties with reasons and in a very short time – within a month at most from the date of the last meeting or submission of the summaries in the case.
Appellate court – with the consent of the parties, given in advance, the arbitration award can be appealed before a single arbitrator or before a panel of three, according to their choice.
Payments – The Arbitration Institute, as a public institution, ensures that the costs of the arbitration procedure will be fair and reasonable.
Atmosphere – the arbitration meetings at the institution are held in a relaxed and peaceful atmosphere, but the discussions are pleasant and comfortable and during the discussions light refreshments are served, all this in order to create a pleasant and open atmosphere that will facilitate the discussion.