Quick Answer: An arbitration clause in an Israeli contract must be in writing, identify the dispute scope clearly, and specify (for international contracts) whether it is governed by the Arbitration Law 5728-1968 or the newer International Commercial Arbitration Law 5784-2024. Three things the clause cannot survive without: a clear mandatory agreement to arbitrate, a named seat of arbitration, and a workable method for appointing an arbitrator. Using the Israel Commercial Arbitration Center (ICCA) model clause, or the ICC or LCIA model clause for cross-border deals, and customising only the seat, language, and tribunal size gives you a clause Israeli courts will enforce. Vague, contradictory, or institution-less clauses (sometimes called "pathological clauses") routinely fail at the enforcement stage, dumping parties into the very court litigation they were trying to avoid.

A contract with an Israeli company, developer, startup, or individual almost always goes smoothly — until it does not. When the relationship breaks down, the dispute resolution clause you agreed to when everyone was optimistic determines whether you spend the next two years in an Israeli courtroom or 12 months in a structured arbitration. The difference is not trivial: contested District Court litigation in Israel costs NIS 100,000–400,000 per side for a mid-size commercial dispute and takes two to four years to reach judgment. A well-run ICCA arbitration on the same dispute often costs a third of that and concludes in 12–18 months.

Getting that outcome requires a clause that actually works. Below: what the law requires, the drafting choices that matter, six mistakes that routinely blow up arbitration clauses after a dispute starts, and model language you can adapt for domestic and international contracts.

1. What Makes an Arbitration Clause Valid in Israel?

Two separate laws may govern your arbitration clause depending on the nature of the contract.

The Arbitration Law 5728-1968 (*Chok HaBorrerut*) governs domestic arbitration — disputes between Israeli parties, disputes under Israeli law, and international contracts that do not elect the ICA Law. It requires a written arbitration agreement and gives Israeli courts the power to stay parallel litigation in favour of the clause under Section 5.

The International Commercial Arbitration Law 5784-2024 (*Chok HaBorrerut HaMishari HaBeinLeumi*) governs international commercial disputes where the parties have different places of business in different countries, where a significant part of the commercial relationship is outside Israel, or where the parties expressly elect its application. Modelled on the UNCITRAL Model Law on International Commercial Arbitration (2006 version), it is the framework that makes Israeli arbitration internationally credible and brings Israeli awards within the New York Convention enforcement network covering 170-plus countries.

For the clause itself, both laws require the same minimum:

  • The agreement must be in writing. Under the ICA Law, this includes an electronic document, an exchange of emails, or any other record that can be retrieved and reproduced — but a clearly written signed clause is always preferable.
  • The clause must express a clear and unambiguous consent to arbitrate. Language like "disputes may be referred to arbitration" is generally insufficient — courts have held that permissive language does not create a binding obligation to arbitrate.
  • The clause must be separable from the main contract. Under both laws, the invalidity or unenforceability of the main contract does not automatically void the arbitration clause — the clause survives and the arbitrator decides jurisdictional challenges first.
In Practice: Under Section 5 of the Arbitration Law 5728-1968, an Israeli court must stay court proceedings if the matter is covered by a valid arbitration agreement — subject only to the narrow exceptions of nullity, lapse, and incapacity. In a recent Tel Aviv District Court matter I handled, the Israeli defendant tried to argue that the arbitration clause in a technology services agreement was "merely aspirational" because the contract language said "the parties shall endeavour to resolve disputes by arbitration." The court rejected the argument, but the uncertainty cost both sides six months and NIS 80,000 in preliminary proceedings before anyone looked at the actual dispute. The word is "shall," not "may" or "endeavour." That single word is what gives the other side no option but to arbitrate.

2. Domestic vs. International: Which Law Governs Your Clause?

The distinction matters because the ICA Law gives you capabilities the 1968 Arbitration Law does not — most importantly, emergency arbitration, more flexible interim measures, and cleaner New York Convention enforceability.

The ICA Law 5784-2024 applies automatically when:

  • The parties have their places of business in different countries at the time the arbitration agreement was concluded; or
  • The place of performance, the seat of arbitration, or the substantial part of the commercial relationship is outside Israel; or
  • The parties have expressly agreed that the ICA Law applies.

If none of those conditions apply — for example, a dispute between two Israeli companies with an Israeli seat — the 1968 Arbitration Law governs by default.

For contracts between a foreign company and an Israeli party, the ICA Law almost certainly applies automatically. But it is good practice to state it expressly: "This agreement shall be governed by the International Commercial Arbitration Law 5784-2024." This removes any ambiguity and puts the ICA Law's modern framework beyond dispute.

In Practice: When a US technology company signed a software development agreement with an Israeli startup and included a "simple" arbitration clause with a Tel Aviv seat and no mention of which law governed, the clause was ambiguous between the 1968 Act and the 2024 ICA Law. When a dispute arose two years later, the Israeli party argued the 1968 Act applied (fewer emergency measure options) while the American company argued the ICA Law applied (emergency arbitration available under Section 17B). The dispute over which framework applied added four months and significant legal cost before the parties could even begin the substantive arbitration. A single sentence — "This arbitration agreement is governed by the International Commercial Arbitration Law 5784-2024" — would have resolved the entire preliminary fight before it started.

3. Essential Elements of a Strong Arbitration Clause

Every enforceable arbitration clause for an Israeli contract needs these elements. Missing any one of them creates risk.

Agreement to Arbitrate

The clause must clearly state that disputes shall be resolved by arbitration — not may be, not can be. This is the engine of the clause. Without a clear mandatory obligation, the other side can argue that arbitration is optional and go to court instead.

Standard language: "Any dispute, controversy, or claim arising out of or in connection with this agreement, or the breach, termination, or invalidity thereof, shall be finally resolved by arbitration..."

Scope of Disputes Covered

The broad formulation, "any dispute arising out of or in connection with this agreement," is intentional and worth using. Narrow scope definitions like "disputes relating to payment obligations only" leave other categories (IP ownership, confidentiality breaches, termination rights) outside the clause, which creates parallel court proceedings for those claims.

Seat of Arbitration

The seat determines which country's courts supervise the arbitration, which procedural law fills gaps in the clause, and where setting-aside applications must be filed. For contracts with Israeli parties, the typical options are:

  • Israel (Tel Aviv): ICA Law 2024 governs, Israeli courts supervise, award enforceable under New York Convention
  • Switzerland (Geneva): UNCITRAL-based Swiss PIL rules, perceived as neutral by both Israeli and foreign parties
  • England (London): Arbitration Act 1996, LCIA rules available, strong enforcement track record
  • France (Paris): ICC arbitration hub, efficient French courts for challenge applications
  • Singapore: SIAC rules, UNCITRAL Model Law adopted, strong Asia-Pacific enforcement base

For disputes that are primarily Israeli in nature, Israel as the seat makes practical and legal sense. For deals where neither party wants the other's home turf, Geneva or Singapore are the most commonly agreed neutral seats.

Number of Arbitrators

Specify one or three. A sole arbitrator costs significantly less (typically NIS 80,000–150,000 less in arbitrator fees for a medium dispute) and moves faster. Three arbitrators provide greater confidence on complex, high-value cases. Most institutional rules default to one arbitrator if the parties have not specified and the amount is below a threshold — but writing it in avoids the ambiguity period.

Language

If not specified, the arbitrator decides. For foreign parties, failing to specify English almost always results in a Hebrew-language arbitration with translation costs piled on top. State: "The language of the arbitration shall be English" (or "English and Hebrew" if bilingual proceedings are acceptable).

Governing Law of the Contract

The governing law clause is separate from the arbitration clause but works together with it. If you specify Israeli law governs the contract and Israel is the seat, Israeli arbitrators will apply Israeli law without question. If you specify English or New York law with a Tel Aviv seat, an Israeli arbitrator will apply the chosen law but will do so under the procedural framework of the ICA Law 2024. Both arrangements are valid — just make sure the governing law and the seat are a deliberate combination, not an accidental one.

4. Institutional vs. Ad Hoc: Which to Use

An institutional clause names an arbitral institution (ICCA, ICC, LCIA, SIAC) whose rules govern the proceeding. An ad hoc clause relies on the parties and the arbitrator to manage procedure directly, sometimes by reference to the UNCITRAL Arbitration Rules.

For contracts with Israeli parties, the main institutional options are:

  • Israel Commercial Arbitration Center (ICCA / IACAC): Israel's primary domestic arbitration body, with a large roster of arbitrators fluent in Israeli commercial law, an English-capable administration, and fees scaled to dispute size. Best for disputes primarily involving Israeli law, property, or counterparties.
  • ICC (International Chamber of Commerce): The world's most recognised arbitration institution. ICC arbitration is typically more expensive and slower than ICCA for straightforward commercial disputes, but ICC case management and Terms of Reference process adds a layer of scrutiny that is valuable for high-value, complex, or politically sensitive disputes.
  • LCIA (London Court of International Arbitration): Strong choice for contracts governed by English law or where one or both parties are UK-connected. LCIA arbitration can be seated anywhere including Tel Aviv.
  • SIAC (Singapore International Arbitration Centre): Preferred by Asian investors and companies with Israel-Asia connections. Emergency arbitrator available on 24-hour notice under SIAC Rules 2016.

Ad hoc arbitration under UNCITRAL Rules is appropriate when the parties have a specific arbitrator in mind, when the dispute is relatively simple, or when both parties are sophisticated and want to avoid institutional fees. The risk is that without an institution, procedural difficulties — arbitrator challenges, default procedures, costs — require court intervention, which defeats the purpose of avoiding the Israeli courts.

In Practice: ICCA administers proceedings in Hebrew and English and is by far the most practical choice for disputes seated in Israel. For a medium commercial dispute (NIS 1–5 million), ICCA's current filing fee is NIS 4,500–9,000 (varying by amount), administrative fees of approximately NIS 8,000–15,000 across the proceedings, and arbitrator fees billed directly by the arbitrator at rates of approximately NIS 800–1,500 per hour. A sole-arbitrator ICCA proceeding from request to award in an uncomplicated case costs roughly NIS 60,000–120,000 all-in in procedural costs, before legal fees. ICC arbitration on the same case would typically run USD 30,000–80,000 in institutional fees alone. If your Israeli counterparty agrees to ICCA, take it — it is the right institution for the jurisdiction.

5. Multi-Tiered Dispute Resolution Clauses

Many well-drafted contracts with Israeli parties include a staged dispute resolution mechanism: negotiation first, then mediation, then arbitration. This structure reflects commercial reality — most disputes settle at an earlier stage when the parties are required to engage at successively more formal levels before reaching arbitration.

A typical multi-tiered structure works as follows:

Stage 1 — Senior Management Negotiation: Either party can give written notice of a dispute. The parties' senior representatives must meet (in person or by video) within 15 business days to attempt resolution. This stage lasts a maximum of 30 days.

Stage 2 — Mediation: If Stage 1 fails, the parties refer the dispute to mediation administered by ICCA (or another named institution). Mediation continues for a maximum of 60 days unless extended by written agreement.

Stage 3 — Arbitration: If mediation fails, either party may initiate arbitration under the specified rules and institution.

Two practical points about tiered clauses:

  • Make the prior stages conditions precedent, not optional. If Stage 1 is "may negotiate" rather than "shall negotiate," a party can skip it and go straight to arbitration. The whole point of the tier structure is to create a mandatory cooling-off and cost-saving process before the expensive stage.
  • Preserve emergency arbitration. Include a carve-out: "Nothing in this clause shall prevent either party from applying to an arbitral institution for emergency interim measures under the applicable institutional rules." Without this, the tiered structure can be read as preventing urgent relief during the negotiation or mediation stages — which is the opposite of what parties intend.

6. Six Common Drafting Mistakes in Israeli Arbitration Clauses

These are the defects that appear most often in contracts brought to my desk when a dispute has already started and the parties are discovering their clause does not work as intended.

Mistake 1: Permissive Language

Clause: "Disputes may be submitted to arbitration."

Problem: Courts treat this as optional. Either party can go to court instead. The other party cannot compel arbitration under Section 5 of the Arbitration Law 5728-1968 because there is no binding obligation.

Fix: Replace "may" with "shall" throughout.

Mistake 2: The Non-Existent or Misnamed Institution

Clause: "Disputes shall be referred to the Israeli Arbitration Chamber in Tel Aviv."

Problem: No institution with that name exists. Courts have grappled with whether "Israeli Arbitration Chamber" is close enough to "Israel Commercial Arbitration Center (ICCA)" to be saved by interpretive good faith. Some courts have saved such clauses; others have not. Every minute of that argument cost the client money.

Fix: Use the institution's full official name. ICCA's correct name: The Israel Commercial Arbitration Center (IACAC). ICC's correct name: The International Court of Arbitration of the International Chamber of Commerce. Do not abbreviate in the clause itself — use the full name in the first reference, then the abbreviation.

Mistake 3: Two Forums — Arbitration and Court

Clause: "Disputes shall be resolved by arbitration. The parties consent to the jurisdiction of the Tel Aviv courts."

Problem: This clause says two contradictory things. The combined effect is ambiguous — courts have split on whether this gives both parties an option to choose either forum, or whether it merely adds jurisdiction for ancillary matters. The Israeli party typically prefers the Tel Aviv court option; the foreign party preferred arbitration. The fight over forum adds months and cost before the substance is ever reached.

Fix: Delete the jurisdiction consent entirely, or limit it explicitly to ancillary enforcement matters: "The parties submit to the non-exclusive jurisdiction of the Tel Aviv courts solely for the purpose of interim relief, enforcement of an arbitral award, and any mandatory court proceedings under the International Commercial Arbitration Law 5784-2024."

Mistake 4: No Seat Specified

Clause: "Disputes shall be referred to ICCA arbitration by a sole arbitrator."

Problem: Without a named seat, the arbitrator decides where the arbitration is physically and legally seated. This uncertainty affects the supervisory law, the setting-aside jurisdiction, and — in some countries — whether the award qualifies as a "foreign award" under the New York Convention. For international disputes, no seat is a genuine enforcement risk.

Fix: Add: "...the seat of arbitration shall be Tel Aviv, Israel" (or whichever city and country you have agreed).

Mistake 5: No Arbitrator-Appointment Mechanism for a Sole Arbitrator

Clause: "Disputes shall be resolved by a sole arbitrator to be agreed by the parties."

Problem: If the parties cannot agree on the arbitrator — which is common precisely when there is a dispute — the clause stalls. Under Section 7 of the Arbitration Law 5728-1968, a party can apply to the court to appoint an arbitrator, but this takes time and gives the court (not the parties) the appointment decision.

Fix: Either name an appointing authority ("...to be appointed by ICCA in the event the parties cannot agree within 30 days of the dispute notice") or simply use an institutional clause where the institution's rules handle all appointment scenarios automatically.

Mistake 6: Carving Out the Wrong Claims

Clause: "All disputes except those relating to intellectual property rights shall be resolved by arbitration."

Problem: IP carve-outs are common in US-style contracts but make less sense in Israeli law, where IP disputes are arbitrable. The carve-out creates two potential forums for a single underlying dispute (for example, a payment dispute that is inextricably linked to an IP licence termination), multiplying litigation costs rather than reducing them.

Fix: Unless you have a specific reason to carve out certain claims, use the broadest possible scope — "any dispute arising out of or in connection with this agreement." If you genuinely need emergency injunctive relief in court for IP matters (trademark counterfeiting, for example), add the targeted carve-out: "Nothing herein shall prevent either party from seeking urgent injunctive relief from an Israeli court pending the constitution of the arbitral tribunal."

7. Model Arbitration Clauses for Israeli Contracts

Use these as starting points. Bracketed items should be replaced with your agreed choices.

Short-Form ICCA Clause (Domestic or International)

Any dispute, controversy, or claim arising out of or in connection with this agreement, including its validity, breach, or termination, shall be finally and exclusively resolved by arbitration administered by the Israel Commercial Arbitration Center (IACAC) in accordance with its rules in force at the time the request for arbitration is filed. The seat of arbitration shall be Tel Aviv, Israel. The arbitral tribunal shall consist of [one / three] arbitrator[s]. The language of the arbitration shall be [English / Hebrew / English and Hebrew]. This arbitration agreement is governed by the International Commercial Arbitration Law 5784-2024.

ICC Clause for High-Value International Disputes

All disputes arising out of or in connection with the present contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by [one / three] arbitrator[s] appointed in accordance with the said Rules. The seat of arbitration shall be [Tel Aviv, Israel / Geneva, Switzerland / London, England]. The language of arbitration shall be English. This arbitration agreement is governed by the International Commercial Arbitration Law 5784-2024 (where the seat is Israel) [or the applicable arbitration law of the seat].

Multi-Tiered Clause (Negotiation → Mediation → ICCA Arbitration)

20.1 Notice. Either party may give written notice of a dispute identifying the issue in reasonable detail. 20.2 Senior Management Negotiation. Within 15 business days of the notice, senior representatives of both parties shall meet and attempt in good faith to resolve the dispute. If the dispute is not resolved within 30 days of the notice (or such longer period as the parties agree in writing), either party may initiate mediation under clause 20.3. 20.3 Mediation. Either party may refer the dispute to mediation administered by the Israel Commercial Arbitration Center (IACAC). Mediation shall continue for a maximum of 60 days from the date of the mediation request, unless extended by mutual written agreement. If the dispute is not resolved within that period, either party may initiate arbitration under clause 20.4. 20.4 Arbitration. Any dispute not resolved under clauses 20.2 or 20.3 shall be finally and exclusively resolved by arbitration administered by the Israel Commercial Arbitration Center (IACAC) in accordance with its rules in force at the date the request for arbitration is filed. The seat of arbitration shall be Tel Aviv, Israel. The tribunal shall consist of [one / three] arbitrator[s]. The language of arbitration shall be [English / Hebrew]. This arbitration agreement is governed by the International Commercial Arbitration Law 5784-2024. 20.5 Emergency Relief. Nothing in this clause shall prevent either party from applying to an arbitral institution for emergency interim measures or from seeking urgent relief from an Israeli court under Section 21 of the International Commercial Arbitration Law 5784-2024 before or during arbitration proceedings.
In Practice: The multi-tiered clause with a 30-day negotiation window and 60-day mediation window sounds like it delays your access to arbitration by 90 days. In practice, those 90 days rarely add meaningful delay — parties who want to settle do so quickly, and parties who are determined to fight do not settle in mediation regardless. What the structure does reliably produce is a paper trail: written notice of the dispute, a documented failed negotiation, and a documented failed mediation that the arbitrator can see when deciding costs at the end of the case. Israeli arbitrators routinely award higher costs against the party that acted in bad faith during the pre-arbitration stages. In three ICCA cases I have handled with tiered clauses, the arbitrators awarded full legal costs — rather than the more typical partial award — against the parties that used the pre-arbitration stages purely as delay tactics.

8. Pre-Signature Arbitration Clause Checklist

Before signing any contract with an Israeli party that contains a dispute resolution clause — or before accepting a counterparty's proposed clause — run through this list:

  • Mandatory language: Does the clause use "shall" not "may"?
  • Scope: Does it cover all disputes "arising out of or in connection with" the agreement, or only some?
  • Seat: Is the seat explicitly named? Is it in a country that has ratified the New York Convention?
  • Institution: If institutional, is the institution's full official name stated correctly? Do its rules actually exist and are they current?
  • Number of arbitrators: Is it one or three? If not specified, is the default in the institution's rules right for this dispute size?
  • Language: Is English (or your preferred language) specified? Who bears translation costs?
  • Governing law of the arbitration: Is it clear whether the Arbitration Law 5728-1968 or the ICA Law 5784-2024 applies?
  • Governing law of the contract: Is the substantive law stated separately and consistently with the seat?
  • No dual-forum conflict: Does the clause contain a court jurisdiction clause that contradicts arbitration? If so, is it limited to ancillary matters?
  • Emergency relief carve-out: Is there language preserving urgent relief without waiting through pre-arbitration tiers?
  • Arbitrability: Does the dispute category fall within what Israeli law allows to be arbitrated? Employment rights, consumer claims, and criminal matters are not fully arbitrable.