Quick Answer: Israeli arbitration is governed by the Arbitration Law 1968, broadly modelled on English law. Arbitration agreements are binding and enforceable. Israel is a signatory to the New York Convention. Domestic arbitral awards can be confirmed as court judgments; foreign awards can be recognised and enforced through the District Court.

1. Overview

Arbitration is a form of private dispute resolution in which parties agree to submit their dispute to one or more arbitrators — private individuals chosen by the parties — rather than to a state court. The arbitrators hear the case and issue a binding award, which is enforceable in the same way as a court judgment.

In Israel, arbitration is a well-established and widely used alternative to court litigation for commercial disputes. It is particularly prevalent in construction, real estate, corporate, and international trade disputes. The Israeli courts have consistently adopted a pro-arbitration stance, upholding arbitration agreements and confirming awards with minimal interference.

Israeli arbitration is governed by the Arbitration Law 1968 (Chok HaBorrerut). This law, modelled substantially on the English Arbitration Act 1950, establishes the basic framework for domestic arbitration:

  • The validity and enforceability of arbitration agreements
  • The appointment, qualifications, and removal of arbitrators
  • The powers and duties of arbitrators
  • The procedure to be followed in the absence of party agreement
  • The finality and enforcement of awards
  • The limited grounds for challenging awards

The 1968 law applies to domestic arbitrations — disputes between parties that are primarily Israeli or where the seat of arbitration is Israel. International commercial arbitration in Israel is also largely governed by this law, supplemented by the parties' agreement and institutional rules where applicable.

Israel has not yet adopted the UNCITRAL Model Law as a standalone international arbitration statute — unlike many jurisdictions that have enacted separate legislation for international commercial arbitration. This means that international arbitrations seated in Israel operate under the domestic framework, which is generally adequate but less modern than pure Model Law jurisdictions.

3. Advantages of Arbitration over Litigation

For commercial disputes, arbitration offers several advantages over Israeli court litigation:

  • Party autonomy: The parties choose their arbitrator(s) — selecting someone with relevant expertise in the subject matter of the dispute.
  • Confidentiality: Arbitration proceedings and awards are private by default, unlike court proceedings which are public record.
  • Speed: Well-managed arbitration is typically faster than Israeli court proceedings, which can take 1–3 years for a contested case. Arbitrators have more control over the timetable.
  • Finality: The very limited grounds for appeal mean that an arbitral award provides genuine finality — there is no risk of a prolonged appellate process.
  • International enforceability: Under the New York Convention, an Israeli arbitral award can be enforced in over 170 countries — far easier than enforcing an Israeli court judgment abroad.
  • Flexibility: The parties can agree on the procedure, rules of evidence, language, and applicable law — tailoring the process to their dispute.

A Canadian construction company that had contracted with an Israeli engineering firm for NIS 2.4 million in design work included a standard Israeli arbitration clause in their agreement, with a retired District Court judge as sole arbitrator. When a payment dispute arose over alleged design defects, the arbitration ran to a hearing within seven months — compared to an estimated three-to-four-year court timeline for the same dispute. The arbitrator, a specialist in commercial contracts, issued a reasoned award within six weeks of the closing hearing. The practical outcome was that the Canadian company could make a business decision about the relationship without tying up management attention in multi-year Israeli litigation.

4. Limitations of Arbitration

Arbitration is not suitable for every dispute. Key limitations include:

  • Cost: Arbitrators' fees are paid by the parties — unlike court judges, who are salaried. For smaller disputes, arbitration may be more expensive than court proceedings.
  • No precedent: Arbitral awards do not create binding precedent. Each case is decided on its own facts, without the predictability of an evolving body of case law.
  • Third-party joinder: Arbitration binds only the parties to the agreement. Adding third parties (guarantors, parent companies, related entities) to the proceedings requires their consent.
  • Non-arbitrable matters: Certain disputes cannot be arbitrated in Israel regardless of party agreement — including matters involving criminal law, personal status (marriage, divorce), and some regulatory matters.
  • Limited interim measures: Arbitrators' powers to grant interim relief (injunctions, asset attachments) are more limited than courts, and parties often need to go to court for emergency interim measures.

5. Domestic vs. International Arbitration

Domestic arbitration: Proceedings between Israeli parties, seated in Israel, conducted in Hebrew. The most common form — used for construction disputes, shareholder disputes, commercial contracts, and professional services.

International commercial arbitration: Where at least one party is foreign, or the dispute has an international element. Parties may choose a foreign seat (London, Paris, New York, Geneva, Singapore) or an Israeli seat, and may use institutional rules (ICC, LCIA, AAA, SIAC) or ad hoc rules (UNCITRAL).

For contracts with Israeli parties, specifying a foreign institutional arbitration seat (particularly ICC or LCIA) is common in international commercial contracts and provides a neutral, internationally recognised forum.

6. The New York Convention

Israel ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 in 1959 — among the earliest signatories. The Convention obliges Israel to recognise and enforce arbitral awards made in other contracting states (now over 170 countries) subject only to narrow grounds for refusal.

For foreign creditors with an arbitral award against an Israeli party, the New York Convention provides a direct route to enforcement in Israel: apply to the Israeli District Court for recognition and enforcement, producing the award and the arbitration agreement. The court confirms the award as an enforceable Israeli judgment, which can then be sent to the Execution Office for collection.

Conversely, an Israeli arbitral award can be enforced in any of the 170+ contracting states of the Convention — an enormous advantage over trying to enforce an Israeli court judgment internationally.

7. The Arbitrators

Parties to an Israeli arbitration can appoint any person as arbitrator — there is no requirement for the arbitrator to be a lawyer or to have any formal qualification. In practice, Israeli arbitrators are typically:

  • Retired judges (a very common choice for commercial disputes — providing judicial expertise and authority)
  • Senior practicing lawyers with expertise in the relevant field
  • Industry experts (engineers, accountants, valuers) for technical disputes
  • Academics specialising in the relevant area of law

Single-arbitrator panels are common for smaller disputes. Three-person panels (two party-appointed arbitrators plus a chairman) are used for larger or more complex matters. Institutional rules (ICCA, ICC) provide default appointment mechanisms if parties cannot agree.

8. The Role of the Courts in Israeli Arbitration

Israeli courts play a supporting but limited role in arbitration:

  • Staying court proceedings: If a party to an arbitration agreement commences court proceedings instead, the other party can apply to stay those proceedings and refer the dispute to arbitration.
  • Appointing arbitrators: If parties cannot agree on an arbitrator, the court can appoint one.
  • Interim relief: Courts can grant interim orders (asset attachments, injunctions) in support of arbitration proceedings.
  • Confirming awards: A party can apply to the court to confirm an award as a court judgment, making it enforceable through the Execution Office.
  • Challenging awards: The very limited grounds for setting aside an award are adjudicated by the court — but courts are reluctant to interfere with properly conducted arbitral proceedings.
In Practice: Award confirmation under Section 28 of the Arbitration Law 1968 requires a separate District Court application — the winning party has no access to the Execution Office until confirmation is granted, which typically takes 2–4 months. Apply for an interim asset attachment order simultaneously with your confirmation application to freeze the respondent's assets during this window; a debtor who is solvent today may have moved funds abroad before the confirmation judgment issues.
In Practice: Israel ratified the New York Convention in 1959, among the first wave of signatories. An Israeli-seated arbitral award is enforceable as of right in 170+ Convention countries, making it fundamentally more portable than an Israeli court judgment — which requires bilateral reciprocity and is available only against a handful of countries. For clients who may need to collect against assets in multiple jurisdictions, this distinction alone can justify choosing Israeli-seated arbitration over Israeli court litigation from the outset.