IsraelLawOverview: Finality and Judicial Review
One of arbitration's cardinal advantages over litigation is the finality of the award. Parties choose arbitration precisely because they want a binding, final determination that cannot be relitigated through layers of appeal. Israeli law honours this principle: the Arbitration Law, 1968 is designed to make arbitral awards final and enforceable, with court review limited to a narrow set of procedural and public-policy grounds.
However, finality is not absolute. The law recognises that an award that was obtained through fraud, that violates basic procedural fairness, or that addresses matters outside the arbitration agreement must be subject to judicial oversight. Sections 24–29 of the Arbitration Law balance these interests by providing limited but specific grounds for challenging an award.
It is critical to understand what these grounds do not cover: courts will not review the arbitrator's findings of fact or legal conclusions on the merits. An award that you believe is "wrong" — that misapplied the law or misjudged the evidence — is generally not challengeable, provided the arbitrator acted within the scope of the agreement and the basic procedural guarantees were respected.
Setting Aside an Award: Section 24
Section 24 of the Arbitration Law, 1968 provides the main mechanism for challenging an award. A party may apply to the District Court to set aside the award in whole or in part on the following grounds:
- The award was obtained by fraud or corruption.
- The arbitrator failed to allow a party to properly present its case (right to be heard).
- The arbitrator decided a dispute not submitted to arbitration under the agreement.
- The arbitrator failed to decide all the matters submitted to arbitration.
- The arbitration agreement is void, expired, or inapplicable to the dispute.
- The arbitrator was not properly appointed under the agreement.
- The award was obtained in circumstances giving rise to a reasonable apprehension of bias on the part of the arbitrator.
- The award is contrary to public policy .
- The arbitrator violated the obligation to decide in accordance with the law, where the agreement required decision according to law (as opposed to granting discretion to decide in equity).
The Grounds in Detail
1. Fraud or Corruption
This ground covers both fraud in the procurement of the award (e.g., false evidence presented to the arbitrator, bribery of the arbitrator) and fraud in the conduct of the proceedings. The standard is high — the challenging party must prove actual fraud, not merely suspicious circumstances.
2. Denial of Right to Be Heard (Natural Justice)
This is one of the most frequently invoked grounds. It covers situations where a party was not given an adequate opportunity to present its case — for example, where the arbitrator decided an issue without giving a party notice or an opportunity to address it, where important evidence was excluded without justification, or where a party was not given sufficient time to prepare. Courts take this ground seriously but apply it to cases of real procedural prejudice, not technical irregularities.
3. Award Outside the Scope of Submission
The arbitrator's authority is bounded by the arbitration agreement. If the arbitrator decided issues that were not submitted to arbitration — either because they were outside the clause's scope or because they were not raised by either party — the award may be set aside in respect of those issues. Where only part of the award exceeds the arbitrator's mandate, courts will set aside only that part.
4. Failure to Decide All Submitted Matters
If the arbitrator failed to address a claim that was properly before them, this ground applies. The remedy is typically remission back to the arbitrator to complete the award rather than full setting aside.
5. Invalid Arbitration Agreement
If the arbitration agreement was void from the outset (e.g., the parties lacked capacity, the subject matter was non-arbitrable, or there was no valid agreement at all), the arbitrator had no jurisdiction and the award cannot stand.
6. Improper Arbitrator Appointment
If the arbitrator was not appointed in accordance with the parties' agreement or the Arbitration Law, the appointment — and therefore the award — may be flawed. This ground is less commonly successful because parties who participate in arbitration without challenging the appointment are generally treated as having waived any procedural objection.
7. Reasonable Apprehension of Bias
Israeli courts apply the standard of whether a fair-minded observer, aware of the relevant facts, would conclude that there was a real possibility that the arbitrator was biased. Undisclosed connections between the arbitrator and a party (financial, personal, or professional) may satisfy this test. The objecting party must generally have raised the bias issue promptly after discovering the relevant facts — delayed objections may be treated as waiver.
8. Public Policy
This residual ground captures awards that, if enforced, would violate fundamental principles of Israeli law, morality, or justice. Examples include awards requiring a party to perform an illegal act, awards violating fundamental constitutional rights, or awards based on a contract that Israeli courts would void as against public policy. This ground is interpreted narrowly — courts are reluctant to allow public policy to become a back door for merits review.
9. Violation of Obligation to Decide According to Law
This ground applies only where the parties' agreement expressly required the arbitrator to decide according to the applicable law (rather than granting discretion to decide in equity or as an amiable compositeur). If the arbitrator demonstrably departed from the applicable law in circumstances where the contract required legal decision-making, the award may be set aside. This is a narrow ground — the court must find a clear and substantial legal error, not merely a debatable application of the law.
Key Point: Merits Review Is Excluded
None of the section 24 grounds permit the court to substitute its view for the arbitrator's on the facts or the law. Even if the court believes the award is wrong on the merits, that is not a ground for setting aside. This principle — often called non-review on the merits — is consistently applied by Israeli courts at all levels, including the Supreme Court.
Procedure for Challenging an Award
Time Limit
Under section 27 of the Arbitration Law, an application to set aside an award must be filed within 45 days of the date the award was delivered to the applicant. This is a strict deadline — courts have very limited discretion to extend it. Missing the 45-day window will ordinarily be fatal to a challenge.
Where to File
The application is filed in the District Court that has territorial jurisdiction over the arbitration. Where no specific court is indicated, the application is typically filed in the District Court for the district where the arbitration took place or where the respondent is located.
The Application
The application is a civil motion accompanied by:
- A copy of the arbitration agreement
- A copy of the award
- A legal memorandum specifying the section 24 ground(s) relied upon and the supporting facts
- Any supporting evidence (witness declarations, documents)
Court Hearing
The court sets a hearing at which both parties may present legal arguments. The court does not re-hear the arbitration evidence — it reviews the award and the procedural record to determine whether any of the section 24 grounds are established.
Outcome
If the application succeeds, the court may:
- Set aside the award in whole;
- Set aside the award in part (where only some issues are affected);
- Remit the award back to the arbitrator to reconsider or complete.
If the application fails, the award stands and may be confirmed and enforced in the usual way.
Partial Setting Aside
Where a ground for setting aside affects only part of the award, the court has discretion to set aside only that part and leave the remainder intact. This is particularly relevant where the arbitrator decided matters outside the submission (ground 3) or failed to decide all submitted matters (ground 4). Partial setting aside avoids wasting the valid parts of an otherwise sound arbitral process.
Agreed Right of Appeal on Law
By default, Israeli arbitral awards are not subject to appeal on the merits of the legal questions. However, under section 29B of the Arbitration Law, the parties may contractually agree to grant a right of appeal on questions of law to the District Court. This is an opt-in — parties who want the extra layer of review (at the cost of finality) must expressly include this in their arbitration agreement.
Where parties have agreed to such an appeal right, the District Court reviews the legal questions as if it were a court of first appeal. This is a broader review than the section 24 challenge but is still limited to legal questions — the court will not re-examine findings of fact.
Stay of Enforcement Pending Challenge
Filing an application to set aside the award does not automatically stay its enforcement. The winning party may apply to confirm the award and commence enforcement at the Execution Office while the challenge is pending. To protect against this, the challenging party should simultaneously apply for a stay of enforcement pending the outcome of the challenge proceedings.
Courts will grant a stay of enforcement if:
- The challenge application raises a serious, arguable ground;
- The balance of convenience favours a stay (e.g., enforcement would cause irreversible harm if the challenge ultimately succeeds); and
- The challenging party provides adequate security for the award amount (or demonstrates it is unnecessary).
A German construction company received an arbitral award against it for NIS 4,200,000 following a dispute with an Israeli subcontractor over a hotel renovation in Tel Aviv. The company's local counsel missed the 45-day challenge window under Section 27 of the Arbitration Law 1968 by eleven days — the award had been emailed to German headquarters, not to counsel, and no one flagged the delivery date until the other side filed for enforcement. When the challenge application was finally filed, the District Court dismissed it as time-barred without reaching the merits, even though the substantive ground — that the arbitrator had decided a consequential damages claim that both parties had expressly agreed was out of scope — was, on the face of it, a valid Section 24(3) argument. The lesson: the 45-day period runs from when the award is received by any party or their representative, not from when legal counsel first reviews it, and no internal communication delay stops the clock.
The Courts' Approach to Award Challenges
Israeli courts at all levels — District Courts, the Court of Appeal, and the Supreme Court — have consistently affirmed the principle of minimal interference with arbitral awards. Key features of the judicial approach:
- Presumption of validity. The burden is on the challenging party to establish a section 24 ground; courts do not assume the award is flawed.
- Narrow reading of grounds. Each section 24 ground is read narrowly to avoid indirect merits review.
- Waiver of procedural objections. A party that participated in the arbitration without raising a procedural objection at the time (e.g., bias, improper appointment) may be treated as having waived that objection and cannot raise it for the first time in the challenge proceedings.
- Reluctance to disturb reasoned awards. Where the arbitrator provided detailed reasons, courts are especially reluctant to second-guess the conclusions, even if they might have reached a different result.
The success rate of section 24 challenges in Israeli courts is relatively low. Challenges based on fraud and bias succeed occasionally; challenges based on alleged legal errors are almost never successful because courts refuse to re-examine the merits.
Challenging Foreign Awards
When a foreign arbitral award is presented for recognition in Israel, the respondent may raise objections based on the grounds in Article V of the New York Convention, which are substantively equivalent to (and narrower than) the section 24 grounds. The respondent cannot raise section 24 grounds in foreign award enforcement proceedings — only Article V grounds apply. For more detail, see our guide on enforcing foreign arbitral awards in Israel.
Frequently Asked Questions
