IsraelLawStep 1: Decide to Mediate
The first step is internal: deciding that mediation is worth attempting. This assessment should consider:
- Is the other party likely to engage? Mediation requires both parties to participate. If the other side has completely shut down communication or is acting in bad faith, mediation may be premature.
- What is your BATNA? Your Best Alternative To a Negotiated Agreement — usually litigation or arbitration — determines your baseline. Mediation is most attractive when your BATNA is costly, slow, or uncertain.
- What are the non-monetary interests at stake? Preserving a business relationship, avoiding publicity, achieving a creative solution (apology, revised commercial terms, restructured arrangement) — these interests are often better served by mediation than adjudication.
- Is there a contractual obligation to mediate? Many commercial contracts include a pre-arbitration mediation requirement. If yours does, check whether the trigger conditions have been met (e.g., written notice of dispute, expiry of negotiation period).
Even if mediation fails, attempting it costs relatively little, demonstrates good faith, and often provides valuable intelligence about the other side's position. There is very little downside to trying.
Step 2: Propose Mediation to the Other Side
Send a written proposal to the other party. Keep it non-confrontational and focused on the benefits of resolution rather than fault. A typical letter:
"Without prejudice to our rights, we write to propose that the parties attempt to resolve the dispute through mediation before [ICCA / a mutually agreed mediator]. We believe a mediated settlement would be in both parties' interests and would avoid the time and expense of [arbitration/litigation]. Please let us know by [date] whether you are willing to proceed with mediation, and if so, your proposals for a suitable mediator."
The "without prejudice" label should be used on any settlement communication in Israel to protect it from disclosure in subsequent proceedings. If the other party rejects mediation, you have a record of your good-faith attempt — which may be relevant to costs in later proceedings.
Court-Based Mediation
If court proceedings are already underway, the judge can refer the parties to mediation at any hearing. You can also write to the court proactively requesting a mediation referral. Many Israeli judges respond positively to such requests, particularly at the early stages of proceedings.
Step 3: Select a Mediator
Mediator selection is one of the most consequential decisions in the mediation process. Key considerations:
- Domain expertise. Does the dispute involve specialised knowledge (construction defects, technology licensing, financial products)? If so, a mediator with relevant industry expertise can add significant value.
- Legal experience. A mediator with a litigation or arbitration background can provide "reality testing" — helping parties understand what a court or arbitrator would realistically decide — which is often the key to closing the gap between positions.
- Style. Mediators range from facilitative (helping parties communicate and reach their own solution) to evaluative (giving opinions on the merits and nudging parties toward what the mediator sees as a fair result). Choose a style appropriate to your dispute.
- Language. In cross-border disputes, ensure the mediator is comfortable in the language(s) needed.
- Neutrality. Check for any previous relationship between the proposed mediator and either party or their lawyers.
Sources for finding mediators in Israel include the ICCA mediator roster, the Israel Bar Association ADR committee, and private referrals from experienced commercial litigators. Court-referred mediations draw from the relevant court's accredited mediator list.
Step 4: Sign the Mediation Agreement
Before mediation begins, the parties and mediator should sign a Mediation Agreement . This document sets out:
- The parties to the mediation and the dispute to be mediated
- The identity of the mediator and confirmation of neutrality
- The mediator's fee and the payment arrangement (usually split equally)
- Confidentiality obligations (binding all parties, their lawyers, and the mediator)
- Agreement that the mediator cannot be called as a witness in any subsequent proceedings
- The format and location of the mediation session(s)
- Acknowledgment that participation is voluntary and any settlement requires written agreement
The mediation agreement is a prerequisite — signing it formalises the process and ensures confidentiality protection applies from the outset.
Step 5: Prepare for the Mediation
Preparation makes the difference between a mediation that reaches settlement and one that stalls. Key preparation steps:
Prepare a Position Paper
Most mediators request a short (3–10 page) position paper (memorandum) from each party in advance. This should explain: the factual background, your legal position, the relief you are seeking, and — importantly — what a resolution that you could accept would look like. The paper is submitted to the mediator (and, if agreed, exchanged with the other party).
Identify Your Settlement Range
Before arriving, your client should have a clear, pre-authorised settlement range — a minimum acceptable outcome and an opening position. This allows real-time decisions at the table without the embarrassing need to "check with the client." Ensure the person attending has full authority to settle.
Understand the Other Side's Position
What are the other side's real interests — not just their stated position? What pressures are they under (cash flow, time, relationship concerns)? The mediator will help explore this, but your own analysis in advance makes you a more effective negotiator.
Prepare Supporting Documents
Bring copies of key documents — the contract, relevant correspondence, invoices, expert reports — in an organised binder. The mediator and the other party may need to refer to them during the session.
Step 6: Opening Session
The mediation begins with an opening session attended by all parties, their lawyers (if represented), and the mediator. Typically:
- The mediator introduces the process and confirms the ground rules (confidentiality, voluntary participation, mediator's role).
- Each party makes an opening statement — a brief, non-adversarial explanation of its perspective on the dispute and what it is hoping to achieve from the mediation. This is not a formal legal argument.
- The mediator may ask clarifying questions and begin to identify the key issues.
Opening statements should be constructive, not inflammatory. Attacking the other party in the opening rarely helps — it puts them on the defensive and makes early settlement harder. Focus on your interests and what you need to move forward.
Step 7: Joint Sessions and Private Caucuses
After the opening, the mediator has flexibility to move between joint sessions (all parties together) and private caucuses (each party separately with the mediator). In Israeli commercial mediation practice, skilled mediators use both:
- Joint sessions are valuable for: reality-testing, allowing parties to hear each other's perspectives, and addressing factual misunderstandings. Sometimes a party simply needs to hear directly from the other why they feel wronged.
- Private caucuses are essential for: exploring settlement parameters that a party is not ready to disclose publicly, testing proposals, addressing emotional dynamics in confidence, and providing frank assessment of the legal merits. What is said in caucus remains confidential unless the party authorises the mediator to relay it.
Many experienced mediators in Israel favour a predominantly caucus-based approach for commercial disputes, spending the majority of the mediation in private sessions shuttling between the parties. This allows more candid exploration of settlement options.
Step 8: The Negotiation Phase
As the mediation progresses, the mediator assists the parties in narrowing the gap between their positions and identifying potential settlement terms. Techniques the mediator may use include:
- Reality testing: "If this goes to arbitration, what do you think your realistic chance of winning is? What does that cost? What's the earliest it would be resolved?"
- Reframing: Translating positional statements ("I won't accept less than NIS 1 million") into interest-based language ("What is it you need NIS 1 million to achieve?").
- Bridging proposals: Suggesting settlement structures that meet the underlying interests of both parties — not just splitting the difference, but finding creative solutions (payment plans, ongoing commercial arrangements, non-monetary elements).
- Using the risk of litigation: Reminding both parties of the cost, uncertainty, and delay of the alternative.
Negotiations in mediation are confidential. Nothing said — including any offers made — can be used in subsequent proceedings. This allows genuine exploration of settlement options without risk.
Step 9: Reaching a Settlement
When the parties reach agreement, the terms must be reduced to writing before the mediation session ends. Do not let the parties leave on a handshake — verbal agreements in mediation are legally binding in principle but enormously difficult to enforce if one party subsequently has second thoughts.
Term Sheet
If full contract documentation cannot be completed on the day, draft a signed Heads of Terms or Term Sheet setting out all material terms of the settlement. This document should be clear, specific, and complete enough to be enforceable as a stand-alone agreement, even if a more formal settlement agreement will follow within a specified period (typically 7–14 days).
Full Settlement Agreement
The settlement agreement should cover: the amount and payment schedule; any non-monetary obligations (apology letters, reference letters, ongoing commercial terms, confidentiality provisions); mutual releases; and the process for dismissing any pending legal proceedings.
Lawyer's Role at Settlement
If a party's lawyer is present, they should review the draft terms and ensure their client understands the legal implications. Lawyers can participate in drafting the settlement agreement on the day of mediation — having draft settlement templates prepared in advance is good practice.
Step 10: Enforcing the Settlement
A signed settlement agreement is a binding contract. If a party defaults on its obligations, the other party can sue for breach of contract in the usual way.
For stronger enforcement — avoiding the need to litigate again — the parties should consider:
- Judgment by consent. If court proceedings are pending, submit the settlement to the court as a consent judgment. This gives the settlement the immediate force of a court judgment enforceable through the Execution Office.
- Post-dated cheque or bank guarantee. For cash payment obligations, requiring post-dated cheques or a bank guarantee as security provides direct recourse if the payer defaults.
- Registration on title. If a real estate obligation is included in the settlement, consider whether a caution or other notation on the Land Registry is appropriate to protect the beneficiary's interest.
An Irish technology company brought a NIS 2,400,000 licensing dispute to mediation after 14 months of pre-litigation correspondence produced no movement; the mediator used a predominantly caucus-based approach, spending six separate private sessions with each side over the course of a single day. During the Irish party's fourth caucus, the mediator surfaced a specific concern the Israeli licensee had never articulated in writing — a fear that the Irish company's parent was planning to exit the Israeli market entirely, rendering any ongoing licence worthless — and once that concern was addressed directly, the Israeli side's settlement floor dropped by NIS 380,000. The parties signed a full settlement agreement with a structured payment schedule before leaving the building at 8:00 pm, avoiding what their attorneys estimated would have been at least 18 months of ICCA arbitration.
If Mediation Fails
Not every mediation ends in settlement. If an impasse is reached, the mediator formally closes the mediation. Key points about failed mediation:
- Nothing that happened in the mediation — offers made, concessions discussed, factual admissions — may be used as evidence in subsequent arbitration or litigation proceedings.
- The parties revert to their pre-mediation dispute resolution options (arbitration or court proceedings) with their rights fully preserved.
- A failed mediation is not wasted: it often clarifies the issues in dispute, reveals the other side's real bottom line, and may set the stage for a settlement later in the arbitration or litigation process.
- Even after a failed mediation, consider whether a further mediation attempt might be worthwhile after more evidence has been exchanged in subsequent proceedings.
Tips for a Successful Commercial Mediation
- Send the decision-maker. The person attending must have authority to settle. Sending a representative who must "check with the boss" kills momentum. If the CEO or board needs to approve, brief them in advance and get pre-authorisation for a settlement range.
- Be open to non-monetary solutions. A creative solution — restructured commercial terms, a supply agreement, a joint statement — may be worth more to both parties than the disputed cash.
- Listen actively. You will learn things about the other party's position and interests in mediation that you would not learn in months of litigation. Use this information constructively.
- Be candid with the mediator in caucus. The mediator's value is greatest when they have an honest picture of your real position and flexibility. The confidentiality protection means this candour carries no risk.
- Avoid relitigating the past. Mediation is about reaching a future solution, not winning the argument about who was right. Focus on "where do we go from here" rather than "who caused this."
- Be ready to make the first reasonable offer. In Israel, as in most cultures, a party that shows flexibility first tends to get more credit and goodwill in the negotiation than one that waits passively.
Frequently Asked Questions
