Quick Answer: The Israeli limitation clock runs the same way in arbitration as in court. Section 1 of the Prescription Law 5718-1958 defines "court" to include an arbitrator, so a money or contract claim generally prescribes seven years after the cause of action arose, whichever forum you use. What stops the clock is starting the proceeding. In an international commercial arbitration seated in Israel, Section 30 of the International Commercial Arbitration Law 5784-2024 fixes that moment as the day the respondent receives your request to refer the dispute to arbitration. For a domestic arbitration the statute is less precise, so do not leave it to the last weeks.

Foreign creditors and suppliers with an Israeli contract tend to wait longer than Israelis before acting. Suing abroad is expensive and unfamiliar, so they send letters, negotiate and hope. Meanwhile the Israeli prescription period (hityashnut) keeps running, and an arbitration clause in the contract does nothing to slow it down. This guide covers how long you have, when the period starts and pauses, what counts as starting an arbitration, and what to do when the deadline is close.

1. Does the statute of limitations apply in Israeli arbitration?

Yes. Section 1 of the Prescription Law defines "court" (beit mishpat) as any judicial authority or arbitrator, other than a religious court. Every rule in the law therefore applies before an arbitrator: the periods, the start date, the suspensions and the effect of an acknowledgment.

Two features of the law shape how it works in practice:

  • It bars the remedy, not the right. Section 2 says the tribunal will not hear a prescribed claim, but prescription alone does not cancel the right. That is why security survives: under Section 20, a creditor holding a mortgage, pledge or similar charge can still enforce it after the claim has prescribed.
  • The respondent must raise it, and early. Under Section 3, prescription is only considered if the defendant pleads it at the first opportunity after the claim is filed. An arbitrator will not raise it on their own. A respondent who argues the merits first and mentions prescription later may lose the defence. Assume a competent Israeli respondent will plead it in the statement of defence.

2. How long you have

Section 5 of the Prescription Law sets the main periods:

  • Seven years for any claim that does not concern land. Unpaid invoices, breach of a distribution or services agreement, shareholder loans and joint venture disputes all fall here.
  • Fifteen years for claims concerning land.
  • No prescription for claims to enforce a right in land that has gone through title settlement (mekarkein musdarim). Section 159(b) of the Land Law 5729-1969 disapplies the Prescription Law for those claims.

Other statutes set their own periods, and the most common one in arbitration is insurance. Under Section 31 of the Insurance Contract Law 5741-1981, a claim for insurance benefits prescribes three years after the insured event. For life, illness and hospitalisation, and long-term care insurance under policies made or renewed from 25 November 2020, the period is five years. An insurance policy cannot shorten these periods against the insured, because Section 39 allows deviation from Section 31 only in the insured's favour.

3. When does the clock start?

Section 6 starts the period on the day the cause of action arose. For a debt that is usually the due date; for a breach, the day of the breach. It is not the day you decided to do something about it. Each unpaid instalment under a long-term contract has its own start date, so the oldest part of a claim can expire while the rest is still alive.

Several rules move or pause the clock:

  • Late discovery (Section 8). If the facts forming the cause of action were hidden from you for reasons outside your control, which you could not have prevented with reasonable care, the period runs from the day you learned of them.
  • Misconduct by the other side (Section 7). The period is suspended while you were kept from suing because the defendant knowingly misled you, used force, threatened you or exploited your distress.
  • Minors and incapacity (Sections 10 and 11). Time before the claimant turns 18 is not counted, and neither is time when the claimant could not manage their affairs and had no guardian.
  • Inaccessible countries (Section 14). Time is not counted while a party was in a country where, because of conditions there or Israel's relations with it, the case could not be pursued.

Being abroad in an ordinary country does not stop the clock. Neither does living far away, not reading Hebrew, or being in negotiations.

4. What stops the clock in an arbitration

Section 5 frames the periods as the time in which a claim prescribes "if no action has been filed" on it. Filing stops the clock. The question in arbitration is what counts as filing, and the answer depends on which arbitration statute governs.

International commercial arbitration seated in Israel. The International Commercial Arbitration Law 5784-2024, based on the UNCITRAL Model Law, took effect on 14 February 2024 and applies to international commercial arbitrations seated in Israel that commenced on or after that date. An arbitration is international under Section 3, for example, where the parties' places of business were in different countries when they made the agreement. Section 30 provides that, unless the parties agreed otherwise, the proceeding opens when the claimant sends the respondent a request to refer the dispute to arbitration, and the start date is the day the respondent receives it. That gives a foreign claimant a clear target: a written request, received in time, with proof of receipt. Check the arbitration clause and any institutional rules it adopts, because they can set a different trigger.

Domestic arbitration under the Arbitration Law 5728-1968. The 1968 law does not contain an equivalent of Section 30. It provides a procedure for appointing an arbitrator: under Section 8(b), a party must first give the other side written notice proposing or naming an arbitrator before asking the court to appoint one. Whether that notice, the appointment, or the submission of a statement of claim to the arbitrator is the moment that stops prescription is a question for the wording of the clause and the case law. If time is short, choose the step whose date cannot be argued about.

Things that do not stop the clock. Demand letters, settlement talks, mediation, and complaints to a regulator. None of them is the filing of a claim.

In Practice: Take a German supplier whose Israeli distributor stopped paying an invoice due on 1 March 2019. The seven years end on 1 March 2026. Because the parties' places of business are in different countries and the clause names Tel Aviv as the seat, the 2024 law governs any arbitration commenced after 14 February 2024. A request for arbitration that reaches the distributor in February 2026 commences the arbitration in time. A request posted in late February and delivered in March does not. The supplier should send it by a method that produces a dated receipt, and early enough to absorb delays.

5. Acknowledgments and part payment

Section 9 restarts the period from the date of an acknowledgment. If the defendant admits the claimant's right in writing, or before a court, the period begins again from that day, even if the admission comes after the original period has already ended. An act that performs part of the right, such as a part payment, counts as an acknowledgment too. An admission made together with a prescription plea does not count.

For a foreign creditor in slow negotiations this is the one lever that works without filing. An email from the debtor confirming the balance, a signed payment plan, or a part payment can each restart the seven years. A phone call saying "we will sort it out" cannot, because you have nothing to show the arbitrator. Keep any written acknowledgment with the contract and count your deadline from it.

6. Changing the period by contract

Section 19 lets the parties agree a different period, but only in a separate written contract. They may agree on a longer period for any claim. For claims not concerning land they may also agree on a shorter one, but not shorter than six months. A shortened period in a standard-form contract or a consumer contract can also be attacked under the laws on unfair terms.

The arbitration clause and the limitation period are separate questions. A contract with an arbitration clause and nothing about prescription leaves the statutory seven years in place. If you want a longer runway, for example for warranty or indemnity claims that may surface years after closing, agree it in writing at the drafting stage. Once a dispute starts, the party who benefits from the deadline has no reason to extend it.

One more drafting point. Under the 1968 law's First Schedule, unless the parties agree otherwise the arbitrator is not bound by substantive law, the rules of evidence or court procedure. Do not read that as a way around prescription. Section 1 of the Prescription Law brings arbitrators within its scope expressly, and a respondent holding a good limitation defence will insist on it. In an international arbitration under the 2024 law, Section 37 requires the tribunal to decide according to the law the parties chose, and it may decide on fairness alone only if the parties expressly authorised it.

7. When time is running out

  1. Fix the start date. Work out with Israeli counsel when each part of the claim arose, and whether any acknowledgment or part payment restarted the clock.
  2. Identify the governing arbitration law. International commercial arbitration seated in Israel and commenced from 14 February 2024 falls under the 2024 law, with its clear Section 30 trigger. A domestic arbitration falls under the 1968 law.
  3. Commence, do not threaten. Send the request for arbitration, or the Section 8(b) notice and statement of claim, in the form the clause requires, and keep dated proof of receipt.
  4. Consider a protective court claim. Filing a claim in an Israeli court stops prescription on the filing date. If the respondent then asks the court to stay the action in favour of arbitration under Section 5 of the 1968 law, the court action is stayed rather than dismissed. Discuss this route with counsel, because it costs court fees and can lead to a procedural fight.
  5. Plan the enforcement. An award in a domestic arbitration binds the parties under Section 21 of the 1968 law and is enforced after the court confirms it under Section 23. A party has 45 days from receiving the award to apply to set it aside under Section 27. Under the 2024 law, the period for a set-aside application is 90 days.