Quick Answer: When an Israeli counterparty ignores your arbitration agreement and files a court claim, you can apply to the Israeli court to stay (pause) those proceedings and redirect the dispute to arbitration. Under Section 5 of the Israeli Arbitration Law 1968 and Article 8 of the 2024 International Commercial Arbitration Law, the court must grant the stay unless the arbitration agreement is null, void, or cannot be performed. Apply before submitting any defense on the merits; timing is critical.

You signed a commercial contract with an Israeli company. It contained a clear arbitration clause: all disputes to be resolved by the Israel Centre for Commercial Arbitration (ICCA), or by the ICC in Paris, or before a sole arbitrator in Tel Aviv. Then something goes wrong, the relationship breaks down, and instead of filing for arbitration, the Israeli party serves you with a court claim at the Tel Aviv District Court.

This is not unusual. Some parties file in court deliberately, hoping the foreign counterpart will miss the procedural window to object, or will find it cheaper to settle than to fight the jurisdiction question. Getting it right means the dispute goes back to the forum you agreed on. Getting it wrong means you are stuck in Israeli litigation you never signed up for.

1. What Is a Stay of Court Proceedings?

A "stay of proceedings" is a court order that suspends the active litigation without dismissing the case. The court does not decide who is right on the merits. It pauses everything and sends the parties to arbitration as their contract requires. If the arbitration ultimately fails to resolve the dispute (for example, if a jurisdictional issue later arises), the stayed case can theoretically be revived, though in practice this is rare.

The distinction between a stay and a dismissal matters. A dismissal would end the court case entirely, leaving the claimant to refile if arbitration does not work out. A stay keeps the court's file open as a safety net. Israeli courts prefer stays over outright dismissals, which gives both parties an orderly fallback if the arbitration process collapses.

From the perspective of a foreign respondent, the practical effect is the same: you get the dispute out of court and into the forum you chose when you signed the contract. You stop the Israeli party from benefiting from a jurisdiction you never agreed to.

In Practice: A stay application does not prevent the court from granting urgent interim measures (such as an asset attachment order under Section 74 of the Civil Procedure Regulations 2018) while arbitration is pending. Foreign creditors regularly obtain attachments on Israeli bank accounts or real property within days of filing, even where a stay application is simultaneously before the court.

Two separate statutes govern stay applications in Israel, and the one that applies depends on whether the arbitration is domestic or international.

The Arbitration Law (Chok HaBorur) 1968 — for domestic arbitration

Section 5 of the 1968 Arbitration Law is the cornerstone provision. Its language is mandatory: where a party applies for a stay before filing its first substantive statement, the court "shall" grant the stay unless it finds the arbitration agreement null and void, inoperative, or incapable of being performed. That word "shall" leaves the court almost no discretion. If the agreement is valid and the dispute is within its scope, the stay follows.

The 1968 Law applies to arbitrations that are primarily domestic in character: Israeli parties arbitrating under Israeli rules in Israel, for instance. It remains the most commonly invoked statute when Israeli companies try to sidestep their own arbitration clauses by filing in court first.

The International Commercial Arbitration Law (ICA Law) 2024 — for cross-border disputes

In February 2024, Israel enacted the International Commercial Arbitration Law, modelled closely on the UNCITRAL Model Law on International Commercial Arbitration. Article 8 of the ICA Law mirrors the Model Law's mandatory stay requirement: when a dispute subject to an international arbitration agreement is brought before an Israeli court, the court must refer the parties to arbitration on the application of any party, again provided the agreement is not null and void, inoperative, or incapable of being performed.

The ICA Law applies when at least one party has its place of business in a different state to the other at the time the agreement was concluded, or when the place of arbitration or the place of performance of the contract is outside Israel. For most foreign companies dealing with Israeli counterparts, the ICA Law will govern the stay application. Its enactment brought Israel into line with the international standard and removed several ambiguities that practitioners had navigated under the older 1968 Law.

In Practice: Under Article 8 of the ICA Law 2024, an Israeli court faced with a stay application must refer the parties to arbitration at the request of either party. The referral is not conditional on the party applying being the respondent; the claimant too can seek a referral if it changes its mind after filing. The Ministry of Justice published official commentary confirming that Article 8 is to be interpreted consistently with international practice under the UNCITRAL Model Law.

3. What Courts Examine Before Granting the Stay

Despite the mandatory language of both statutes, Israeli courts do carry out a threshold examination before granting the stay. The analysis has three parts.

Is there a valid arbitration agreement?

The court checks that the agreement to arbitrate exists in writing and covers the parties to the dispute. Israeli law requires arbitration agreements to be in writing (Section 2 of the 1968 Arbitration Law; Article 7 of the ICA Law). An unsigned draft, an unsigned email exchange, or a clause contained in general terms and conditions that were never specifically drawn to the other party's attention can all be challenged at this stage. The court applies a summary examination (no full trial on this point), but if there is a serious, credible challenge to the agreement's existence, it may order limited evidence before ruling.

Is the dispute within the scope of the clause?

Arbitration clauses that say "disputes arising from this Agreement" will be read broadly. Courts apply a presumption in favour of arbitrability: if there is any doubt about whether a particular claim falls within or outside the clause, it is sent to arbitration. Clauses that carve out specific categories (intellectual property claims, injunctive relief, regulatory matters) require the court to check whether the claim in question falls within one of those exceptions.

Is the agreement null, void, inoperative, or incapable of being performed?

This is where challenges usually focus. Courts have found agreements inoperative where one party validly terminated the contract before the dispute arose and the arbitration clause did not survive termination, where one party was under a legal incapacity, or where the clause was so vague that no arbitration could practically be constituted. The bar is high. Mere inconvenience, expense, or the passage of time does not make an agreement inoperative.

In Practice: Israeli District Courts and Magistrates' Courts (the Beit Mishpat HaShalom, handling claims below approximately NIS 2.5 million) both have jurisdiction to hear stay applications. The application is typically filed as an interlocutory motion (baqashat binaim) alongside a written response to the original claim. Court filing fees for interlocutory motions range from approximately NIS 800 to NIS 2,500 depending on the type of relief and court level. The application must be supported by a sworn affidavit and a copy of the arbitration agreement.

4. How to Apply for a Stay: Procedural Steps

The procedural window is narrow. Miss it and you may lose the right to arbitrate entirely.

Step 1 — Identify the court and the deadline

As soon as you receive the court summons, calculate your deadline for filing a first statement. Under the Israeli Civil Procedure Regulations 2018, a respondent served through international channels typically has between 60 and 90 days to respond, depending on the country of service. You must file the stay application before that deadline, and certainly before you file any response on the merits of the claim.

Step 2 — Instruct Israeli counsel immediately

A stay application must be filed by an Israeli attorney admitted to practice in Israel (*erokh din* licensed under the Bar Association Law 1961). Foreign counsel cannot appear directly. Appoint an Israeli attorney within days of receiving the summons, not weeks, because your counsel will need time to review the contract, prepare the affidavit, and translate any documents that are not in Hebrew.

Step 3 — File the motion before any substantive response

The motion is filed in the same court where the main claim is pending. It should include: a copy of the contract containing the arbitration clause (and a certified Hebrew translation if the contract is in English or another language), an affidavit setting out the facts, and a legal brief arguing that all conditions for a stay are met. You can (and often should) simultaneously file a preliminary objection to jurisdiction alongside the stay application to preserve all procedural rights.

Step 4 — Attend the hearing or await a decision on the papers

Many stay applications are decided without an oral hearing when the clause is clear and the other side's opposition is weak. If the other party contests the application, the court will schedule a hearing, typically within four to eight weeks. At the hearing, both sides present their arguments; the court does not hear witnesses at this stage.

Step 5 — Proceed to arbitration

Once the stay is granted, you initiate arbitration under the agreed rules. If the clause designates the ICCA (Israel Centre for Commercial Arbitration) based in Tel Aviv, you file a Notice of Arbitration with the ICCA and pay the registration fee (which varies by claim size; for claims up to NIS 500,000 the administration fee is currently in the range of NIS 3,000–8,000). For ICC arbitration, the filing fee for international claims starts at around USD 5,000.

In Practice: If you are served with a claim at an Israeli court while located abroad, the clock is running even if the summons has not yet been formally delivered to you in your home country. Once you are aware of the proceeding (through informal notice, an email from the other party's lawyer, or by any other means), act immediately. Israeli courts have declined stay applications where the respondent had actual knowledge of the proceeding but waited until the formal service deadline to instruct counsel, treating the delay as evidence of an intention to participate in the litigation.

5. When Israeli Courts Refuse the Stay

The mandatory language of Section 5 and Article 8 still leaves room for refusal. These are the circumstances where it happens.

Waiver by participation in the litigation

This is the most common ground for refusal. If you file a defense on the merits (even a short one) before moving for a stay, you signal to the court that you are willing to litigate. Israeli courts have consistently held that filing any substantive response waives the right to compel arbitration. Some courts have also found waiver where a respondent participated in preliminary hearings on the merits without raising the arbitration clause.

The agreement is null or void

An arbitration clause in a contract void ab initio (from the outset) can be refused a stay. Common examples: the contract was induced by fraud, or the signatory lacked authority to bind the company. Note that this requires the entire agreement, or at least the arbitration clause itself, to be void. A voidable contract (one that can be rescinded but has not been) still supports a stay.

The clause is incapable of performance

A clause that refers disputes to "an arbitration body to be agreed by the parties" with no fallback mechanism, or to an institution that no longer exists, may be found incapable of performance. Courts apply this exception narrowly. Where the ICA Law's default provisions or court-assisted appointment procedures under Section 8 of the 1968 Law can fill a gap in the clause, the court will do so rather than refuse the stay.

Non-arbitrable subject matter

Certain Israeli law disputes cannot be arbitrated regardless of what the contract says. Criminal liability, immigration status, and certain family law matters (specifically those within the exclusive jurisdiction of the Rabbinical Courts or Family Courts under mandatory statute) cannot be referred to arbitration. Commercial and civil disputes between companies and individuals are almost universally arbitrable. See the companion article on arbitrability in Israel for a full breakdown.

In Practice: Israeli courts have refused stays in cases where the contract was governed by a mandatory consumer protection statute and the arbitration clause effectively deprived the consumer of access to the court's small claims track. The Consumer Protection Law 1981 and its regulations restrict the use of arbitration clauses in standard-form consumer contracts. Business-to-business contracts between sophisticated commercial parties are not subject to these restrictions, and courts will not second-guess the bargain the parties made.

6. Practical Strategy for Foreign Parties

The statutes make the stay mandatory, but a few practical factors determine whether you get one quickly and cleanly.

Draft the clause precisely before you sign

The easiest stay applications to win are those where the arbitration clause names a recognised institution, specifies the number of arbitrators, identifies the seat of arbitration, and provides a governing law for the arbitration agreement itself. Clauses that do these four things give the opposing party almost no room to argue the clause is inoperative. Vague clauses ("disputes to be resolved by arbitration in Israel" with no institution named) are technically valid but invite expensive threshold arguments. See the guide on drafting arbitration clauses for Israeli contracts for model language.

Appoint Israeli counsel before the dispute arises

Foreign businesses with ongoing Israeli commercial relationships should identify Israeli litigation and arbitration counsel before a dispute materialises. When a court summons arrives, losing two weeks finding a lawyer can cost you the stay application entirely.

Consider seeking interim relief at the same time

Applying for a stay does not mean abandoning all court tools. You can (and often should) file a simultaneous application for an asset preservation order (*tzav ikul*) or an injunction if there is a real risk the other party will dissipate assets or destroy evidence before the arbitration concludes. Israeli District Courts have jurisdiction under Article 9 of the ICA Law 2024 to grant interim measures in support of arbitration regardless of where the arbitral seat is located.

Consider an anti-suit approach if proceedings are filed abroad

If your Israeli counterpart files proceedings in a third country (not Israel) while you have an Israeli arbitration clause, the question becomes more complex. You may need to seek an anti-suit injunction from the Israeli court or from the court of the seat, depending on the governing law. This falls outside the standard stay mechanism but follows the same underlying principle: parties should be held to the dispute resolution forum they agreed.

Monitor the arbitration timeline carefully after the stay

A granted stay does not mean the court proceeding disappears. If you obtain the stay but then fail to initiate arbitration within a reasonable time, the other party can apply to lift the stay and resume the court proceedings. Under Israeli practice, courts expect arbitration to be initiated within 60 to 90 days of the stay being granted. File your Notice of Arbitration with the ICCA, ICC, or other agreed institution promptly.

In Practice: Where both parties are foreign nationals (neither based in Israel) but the dispute involves Israeli assets or an Israeli law contract, the same rules apply. An Israeli court is obliged under Article 8 of the ICA Law 2024 to stay its own proceedings if the arbitration agreement covers the dispute, even if neither party is an Israeli resident or citizen. The ICCA, housed at the Israel Bar Association building in Tel Aviv, administers arbitrations with no Israeli party requirement; it is formally accredited by the Ministry of Justice as an arbitration institution under the ICA Law.