It is extremely important to include an arbitration clause in an agreement between the parties. To review the wording of the clause click here
The Commercial Arbitration Institute opens its doors and invites the parties in dispute to conduct preliminary discussions in the conference rooms free of charge at the Arbitration Institute
Israeli Institute of Commercial Arbitration is the first and oldest arbitration and dispute resolution institute in Israel…
When commercial agreements are signed, it is customary to draft detailed engagement agreements between the parties. In many cases, it is customary to provide a reference in the agreement to the situation of future conflicts that may arise between the parties to the agreement.
One of the accepted solutions in this context is an “arbitration agreement” (also referred to as an “arbitration clause”). This is a reference to a procedure that allows the parties to settle their commercial disputes through an objective mediator chosen by the parties. The arbitrator listens to each of the parties, examines their claims and the evidence presented to him, and he reaches a fair decision to resolve the conflict. This, without the conflict being heard in a court of law.
Legal proceedings tend to be lengthy and they can last for many years, imposing a heavy burden in terms of time and high and unnecessary legal expenses for all those involved in the conflict. In arbitration proceedings, it is possible to iron out the problems and reach agreements between the parties efficiently, with dignity, quickly, and – no less important – in a cost-effective manner.
For these reasons, arbitration procedures have become very acceptable in the business community in Israel, and it is customary to entrench them in agreements with new business partners.
When the parties reach an understanding that the most ideal way to settle disputes is not through legal proceedings which consume resources, time and energy, but pleasantly and patiently, together with an objective third party, who will help resolve the conflict.
Many business entities understand that a commercial arbitration process is the best alternative for them. Hence, they include a commercial arbitration clause in all their commercial contracts by default.
Commercial arbitration is especially recommended in disputes that require special understanding and expertise, where it is possible to appoint an arbitrator who is an expert in the field, such as: real estate, urban renewal, high-tech, contractual claims and international disputes.
Before appointing the arbitrator, it is important to verify some basic criteria in relation to the arbitrator, in order to ensure fairness and professionalism and, naturally, the success of the arbitration process.
In light of the foregoing, what are the considerations in choosing an arbitrator?
Several matters should be examined to verify the suitability of a potential arbitrator who will conduct the arbitration proceedings:
1. Professionalism and familiarity with the subject matter of the dispute
It is recommended that the arbitrator be an experienced and professional lawyer, who is familiar with the provisions of the law in general and the provisions of the Arbitration Law in particular.
Moreover, it is important that the arbitrator comes from the world of the content of the subject of the dispute, is familiar with the business environment in which the parties work and the professional terminology of the dispute.
The arbitrator must be flawless in all matters relating to fairness and integrity. Any doubt serves as a reason to disqualify the arbitrator and prefer another arbitrator.
3. No conflicts of interest
The arbitrator must be free of extraneous or irrelevant considerations, free of personal interests and must be impartial.
4. Supervision of the arbitration process
The arbitration process is subject to the supervision of the court and therefore it is advisable to avoid direct contact between the arbitrator and any of the parties. Contact with one of the parties could result in a motion being filed with the court to disqualify the arbitrator.
Therefore, it is recommended to conduct the arbitration proceedings through the Arbitration Institute, which ensures that there is no connection between the arbitrator and any of the parties.
Adherence to the above conditions will ensure that the chances of success of the arbitration process are increased.
In many cases, parties to a dispute debate whether to choose arbitration proceedings or to conduct the dispute in court. It is recommended to examine the following aspects in order to ensure that the parties choose what is best for them:
When the parties who approach the Commercial Arbitration Institute are motivated by a desire to reach a fair and practical solution quickly and through cooperation, the commercial arbitration process can be concluded within just a few weeks. In cases where the dispute is complex and the parties fail to reach agreement, the arbitration proceedings could go on for several months.
This is in contrast to a scenario where the parties resort to court proceedings and conduct litigation that could last for several years, with all that this entails in terms of investing energy as well as financial costs.
The desired situation in commercial arbitration proceedings is to reach an agreed solution. In such a situation, the arbitrator makes a proposal to the conflicting parties that he formulates after understanding the essence of the dispute and the interests of the parties. The parties accept the arbitrator’s proposal and their agreement is validated as an arbitral award. Since this is an agreed solution, there is a high probability that both the parties will cooperate to implement the solution in the arbitrator’s award.
When parties to a commercial dispute fail to reach an agreed solution, there is no avoiding the arbitrator’s decision, which – in accordance with the agreement of the parties – is binding on them. It should be noted that the parties can agree in advance that it will be possible to appeal the arbitral award.
Severing business ties between parties whose relationship has broken down is a legitimate way to end a business dispute. When it comes to the severance of an engagement between business partners, the arbitral award determines the separation of powers and, where necessary, the arbitrator can accompany the separation procedure whereby the outline for the actual dissolution of the partnership is to be implemented between the parties.
The arbitrator is appointed in one of the following ways:
The Israeli Institute of Commercial Arbitration was established in 1989 as a non-profit organization at the time of the founding of the Union of Chambers of Commerce.
The late Prof. Smadar Ottolenghi was one of the founders of the Institute and she served as its first president for approx. 15 years.
The Commercial Arbitration Institute works to resolve disputes in alternative ways – arbitration and mediation.
The Institute offers a professional, fast and high-quality solution at affordable prices.
During the years of its existence, the Institute has acquired a great deal of experience and it has conducted thousands of arbitrations in all areas of business and in all branches of law, including in relation to real estate, companies, communications, construction, business and more.
The Commercial Arbitration Institute is recognized and respected in Israel, and the number of cases referred to the Institute by various courts is proof of this.
The Institute’s arbitrators and mediators include arbitrators and mediators from a variety of fields: retired judges, lawyers, accountants, engineers, appraisers, economists and more.