Quick Answer: Third-party funding (TPF) of arbitration is fully legal in Israel. Neither the Arbitration Law 5728-1968 nor the International Commercial Arbitration Law 5784-2024 restricts it, and several international funders are active in the Israeli market. Funders typically require a minimum claim of USD 1–2 million, a merits probability above 60%, and a recovery-to-cost ratio of at least 3:1. There is no mandatory disclosure rule for funded parties under Israeli domestic law, but international institutional rules increasingly require it — and failing to disclose a funder's interest can affect arbitrator impartiality challenges.

For foreign companies locked in a commercial dispute with an Israeli counterparty, the cost of arbitration can be prohibitive. Arbitrator fees, institutional charges, and legal counsel on both the Israeli and home-country sides can run to hundreds of thousands of dollars — money that has to be committed upfront, years before any award is paid. Third-party funding offers a way to pursue a valid claim without depleting working capital: a professional funder covers the legal costs in exchange for a portion of any recovery.

The question practitioners hear most often from international clients is whether this arrangement is even permitted in Israel. The answer is yes, and the legal framework is less complicated than in many other jurisdictions. What matters in practice is understanding how funders assess Israeli arbitration claims, what your disclosure obligations are under Israeli arbitration law, and how to structure the funding agreement so it does not inadvertently create problems with privilege, attorney conduct rules, or the enforceability of any award you win.

1. What Is Third-Party Funding in Arbitration?

In a third-party funded arbitration, a commercial financing company (the "funder") pays some or all of the claimant's legal and arbitration costs. In exchange, the funder receives a share of the proceeds if the claim succeeds, expressed either as a multiple of the investment (typically 2–4 times the funds deployed) or as a percentage of the final recovery (usually 20–40%, depending on claim size, risk, and duration).

Unlike a bank loan, the funder's investment is non-recourse: if the case is lost, the funded party owes nothing. The funder bears the full cost risk. That is what makes the arrangement useful for claimants who have a good case but cannot absorb the upfront cost. It is also why funders are selective. They are professional investors who only back claims they believe will produce a meaningful return.

Third-party funding can also be used defensively, though this is rarer in Israel. A respondent facing a large arbitration claim may seek funding for the costs of its defence, with the funder taking a share of any counterclaim proceeds or savings against the claimant's demand.

Israel has no statute specifically governing third-party funding of arbitration or litigation. The Arbitration Law 5728-1968, which governs domestic arbitrations, says nothing about who may finance a party's claim. The International Commercial Arbitration Law 5784-2024 (the ICA Law, based on the UNCITRAL Model Law) is equally silent on funding.

The common law doctrines of maintenance (supporting another person's litigation without legitimate interest) and champerty (sharing in litigation proceeds in exchange for financial support) were abolished in Israel's common law inheritance and have never operated as meaningful restrictions. Israeli courts have not held that TPF arrangements violate public policy under Section 30 of the Contracts (General Part) Law 5733-1973.

The one meaningful carve-out relates to class actions filed in Israeli courts. In August 2025, the Central District Court held in Class Action 28974-10-20 (*Pirit v. Monsanto Company*) that third-party funding of class actions is impermissible as a matter of public policy, given the unique dynamics of representative litigation where the funder's financial interest could conflict with the class members' interests. This ruling does not apply to arbitration, which is a bilateral private process between defined parties.

In Practice — Regulatory Snapshot: As of June 2026, no Israeli statute, Bar Association rule, or binding court precedent restricts third-party funding of arbitration. The Israel Bar Association's Rules of Professional Conduct require attorneys to represent their clients' interests, not a funder's, but this does not prohibit the funding arrangement itself. The Ministry of Justice has circulated draft discussion papers on regulation, but no formal proposal has been tabled in the Knesset. Parties can enter TPF arrangements today without any specific regulatory approval or disclosure to any Israeli authority.

3. Funders Active in Israeli Disputes

The Israeli arbitration market has attracted both international funders and locally-aware financing specialists. The major global players with documented activity in Israeli commercial claims include:

  • Burford Capital — the world's largest litigation funder, listed on the NYSE and LSE, has funded claims in ICC and LCIA proceedings involving Israeli parties and Israeli-law-governed contracts. It runs a formal intake process for claims above USD 2 million.
  • Bentham IMF (now part of Omni Bridgeway) — active in Israeli construction, technology, and IP disputes. Omni Bridgeway has a dedicated Israel team and has funded ICCA (Israel Centre for Commercial Arbitration) proceedings as well as ICCA-governed real estate disputes.
  • Litigation Capital Management (LCM) — a smaller but growing funder that will consider Israeli commercial claims from USD 750,000. It is particularly active in tech-IP and contract disputes where the factual record is strong and the legal issues are discrete.
  • Stonward and other European mid-market funders — several European funders based in the Netherlands and UK have funded Israeli commercial claims presented through Israeli law firms with international referral relationships.

No Israeli-domiciled litigation funding company currently operates at scale. The market is served by international funders who treat Israeli claims as part of their global portfolio. Israeli law firms with strong international arbitration practices — including Herzog Fox & Neeman, Yigal Arnon, Goldfarb & Seligman, and Shibolet — have established relationships with major funders and can make introductions as part of case preparation.

4. How Funders Evaluate Israeli Arbitration Claims

A funder's assessment of an Israeli arbitration claim follows a consistent framework, regardless of which funder you approach. Understanding these criteria in advance lets you pre-screen your own case before spending time on applications that are unlikely to succeed.

Minimum quantum

Most commercial funders require a minimum claim value of USD 1–2 million (approximately NIS 3.6–7.2 million at mid-2026 exchange rates). Below this level, the funder's due diligence costs — which can run to USD 30,000–80,000 even before any capital is deployed — cannot be justified against the expected return. Some specialist funders will consider smaller Israeli claims in the NIS 1.5–3.5 million range if the legal issues are clear and the evidence is strong, but they are the exception.

Recovery ratio

Funders look for a minimum recovery-to-cost ratio of 3:1. If estimated total costs (legal fees, ICCA or ICC institutional fees, arbitrator remuneration, expert witnesses) come to NIS 500,000, the realistic recovery must be at least NIS 1.5 million for a funder to engage. In practice, funders prefer a 5:1 or higher ratio to absorb downside risk. A strong case with a NIS 5 million claim and NIS 400,000 in estimated costs is a more attractive proposition than a NIS 5 million claim with NIS 1.5 million in expected costs.

Merits probability

Funders conduct independent legal due diligence and typically will not invest unless they assess the probability of success at 60% or above. For Israeli arbitrations, this means the funder will want to review the underlying contract (including any Israeli-law governing clause or arbitration agreement), key correspondence, and a detailed legal opinion from Israeli counsel on the merits. If your claim depends on a novel or unsettled point of Israeli law, expect the funder's internal team to probe that point closely.

Enforceability

A funder only profits if the award can be collected. For Israeli arbitrations, this means the funder will assess whether the respondent has seizable assets in Israel or in a New York Convention country. If the respondent is a company with significant Israeli real estate, a bank account at Bank Hapoalim or Bank Leumi, or Israeli Securities Authority (ISA)-regulated assets, collection is straightforward through the Execution Office (*Hotzaa LaPoal*). If the respondent's only assets are in a non-Convention jurisdiction or hidden behind complex corporate structures, funders will price in — or decline — the collection risk.

In Practice — Funder Intake Process: A typical funder intake for an Israeli ICCA arbitration follows four stages: (1) a 2–3 page executive summary from your Israeli counsel (no privileged materials) sent to the funder's intake team; (2) a scoping call where the funder assesses quantum, enforceability, and procedure before committing to a full review; (3) a formal due diligence phase lasting 4–8 weeks during which the funder's legal team reviews the full claim file under a non-disclosure agreement; and (4) an investment committee decision. Funders routinely reject 90%+ of applications at stage 1. Preparing a tight, factual, financial executive summary — showing claim value, evidence base, respondent assets, and estimated costs — is the most important step a claimant can take before any formal approach.

5. Disclosure Obligations Under Israeli Arbitration Law

Disclosure of third-party funding is an area where Israeli law and international institutional practice point in different directions, and the gap matters.

Under the Arbitration Law 1968 (domestic arbitrations)

The Arbitration Law 5728-1968 imposes no disclosure obligation on funded parties. A claimant in an ICCA-administered domestic arbitration is under no statutory duty to tell the tribunal or the respondent that a third party is financing the case. The law was drafted before commercial litigation funding became a recognised industry, and no amendment has been introduced to address it.

Under the ICA Law 2024 (international commercial arbitrations)

The International Commercial Arbitration Law 5784-2024 adopts the UNCITRAL Model Law framework, including Article 12 on arbitrator impartiality and independence. While the ICA Law itself does not require parties to disclose funding, Article 12(1) requires each arbitrator to disclose, before appointment, any circumstances likely to give rise to justifiable doubts about their impartiality. This creates an indirect disclosure pressure: if the funder has a prior relationship with any proposed arbitrator or the arbitrator's law firm, that connection must be disclosed — but only by the arbitrator, not necessarily by the funded party.

In practice, the ICCA Rules (the most commonly used institutional framework for Israeli international arbitrations) now include a best-practice recommendation that parties disclose the existence and identity of any third-party funder at the commencement of proceedings. This is not a hard rule under the current ICCA Rules, but refusal to disclose when a funder is involved can complicate arbitrator challenge applications later — particularly if the respondent discovers the funding mid-proceeding and argues that the arbitrator should have been asked about any potential conflict of interest with the funder.

In Practice — ICCA Disclosure Mechanics: Under the Israeli Centre for Commercial Arbitration (ICCA) Rules as currently applied, a claimant with a third-party funder should (a) disclose the funder's name to the ICCA administrator at the time of filing; (b) ask the administrator to circulate the funder's name to all nominated arbitrators for their conflict-of-interest check under Section 11 of the ICCA Rules; and (c) record the disclosure in the first procedural order. This takes five minutes and eliminates the most common post-award challenge avenue available to a respondent who later discovers the funding. Funders universally cooperate with this disclosure because an undisclosed interest that later voids an award is their worst possible outcome.

6. How Funding Affects Privilege and Confidentiality

Attorney-client privilege under the Evidence Ordinance (New Version) 5731-1971 protects communications between a licensed Israeli attorney and their client from disclosure. The ordinance does not address what happens when those communications are shared with a third-party funder during due diligence.

Israeli courts have not yet ruled directly on whether disclosure to a funder waives attorney-client privilege in subsequent proceedings. The issue matters practically because if a funded arbitration later goes to court — for enforcement, set-aside, or parallel litigation — the opposing party may argue that materials shared with the funder lost their privileged status and must be produced.

The most conservative approach is to share only non-privileged materials during initial funder due diligence: the underlying contract, publicly available information about the dispute, financial statements, and a factual chronology. Privileged legal opinions and strategy documents should be held back until a non-disclosure agreement is in place and the funder has progressed to a serious evaluation stage. At that point, many practitioners structure the sharing of privileged materials under a "common interest" umbrella — the argument being that the funder and the claimant share a common legal interest in the success of the claim.

The confidentiality of the arbitration itself is a separate question. Under the Arbitration Law 1968, Israeli arbitration proceedings are private but not automatically confidential — there is no blanket statutory obligation on the parties or the tribunal to keep proceedings secret (unlike, for example, the explicit confidentiality obligations in Section 17A of the English Arbitration Act). The 2024 ICA Law does not add a general confidentiality obligation either, though parties can and regularly do agree to specific confidentiality terms in the arbitral procedure order. A TPF agreement should include explicit confidentiality provisions matching whatever regime the parties have adopted in the arbitration itself.

7. What to Check in a Funding Agreement

A funding agreement is a bespoke commercial contract and no standard form exists. Before signing, your Israeli counsel should work through the following provisions:

  • Scope of funding: Exactly which costs are covered: ICCA registration fees, ICCA administration fees, arbitrator advances (which can run to NIS 100,000–400,000 before the first hearing), expert witness fees, legal fees for Israeli counsel, and foreign co-counsel fees. Any item not listed is your cost, not the funder's.
  • Return structure: Whether the funder takes a multiple of invested capital (e.g., 2.5× on recovery within 24 months, stepping up to 3.0× thereafter) or a percentage of recovery (typically 25–35%). Understand which is cheaper at different recovery levels — the multiple structure can be cheaper on a large, quick recovery; the percentage structure can be cheaper on a slow or partial one.
  • Settlement control: The funder should have no unilateral right to force a settlement. The funded party should retain full control over whether and on what terms to settle, subject at most to a right by the funder to terminate its funding if the funded party rejects a settlement offer above a specific threshold. This aligns with Israeli Bar Association rules on client autonomy.
  • Termination rights: Funders reserve the right to terminate funding if the case materially changes — for example, if a new defence is raised that significantly reduces the merits assessment. Understand precisely what "material adverse change" means in the agreement and whether it gives the funder an exit on reasonable notice or immediately.
  • Waterfall on recovery: When money comes in from the award or settlement, who gets paid first and in what sequence. Typically: (1) the funder recovers its invested capital, (2) the funder receives its agreed return, (3) the funded party receives the balance. Make sure the waterfall is explicit and that any adverse cost order does not come out of the funded party's share before the funder is repaid.
  • Governing law and jurisdiction: Most funders' standard agreements are governed by English or New York law. Check whether the dispute resolution clause would subject you to English courts if you are an Israeli company; a dispute with your funder over the funding terms could otherwise drag you into expensive parallel litigation abroad.
Common Mistake: Claimants sometimes sign funding agreements without reading the "adverse costs" clause carefully. If the arbitral tribunal awards costs against you — either because you lose outright, or because a counterclaim succeeds — most funding agreements impose those adverse costs on the funded party personally, not on the funder. The funder's capital is at risk only for the costs it agreed to fund, not for costs awarded to the other side. Before entering any funding arrangement for an Israeli arbitration, model the worst-case scenario: what do you owe the respondent in adverse costs under ICCA or ICC rules if you lose? That exposure is yours alone.

8. How to Approach a Funder for Your Israeli Dispute

Getting organized before you reach out makes a real difference, both in how many funders engage and in the terms they offer.

Step 1: Pre-screen your own claim

Before approaching any funder, test your claim against the criteria above. Is the claim above USD 1 million? Does the recovery-to-cost ratio exceed 3:1? Are the respondent's assets traceable and seizable? Is there a written arbitration agreement? Resolve any uncertainty on these points before sending applications. Funders form a first impression quickly, and a poorly prepared application with obvious gaps damages credibility even when the underlying claim is solid.

Step 2: Prepare a funding memorandum

Have your Israeli counsel prepare a 5–10 page funding memorandum covering: (a) the parties and the relationship giving rise to the dispute; (b) the factual chronology; (c) the claims and legal basis under Israeli law (or the governing law of the contract); (d) the amount claimed and how it is calculated; (e) key evidence and documents; (f) estimated procedural timetable and costs for ICCA or ICC proceedings; (g) the respondent's financial position and asset profile in Israel; and (h) the proposed arbitration seat and institution. This memorandum is not a privileged document — treat it as a business prospectus that will be shared widely.

Step 3: Approach multiple funders simultaneously

Send the funding memorandum to three to five funders simultaneously. There is no prohibition on running a competitive funding process, and doing so improves your negotiating position on the return structure and settlement control provisions. Funders know this is common practice and will not decline to evaluate simply because you are speaking to competitors.

Step 4: Due diligence and negotiation

For any funder that advances past the intake stage, sign an NDA that specifically addresses Israeli law privilege concerns before sharing privileged materials. If the funder requests a legal opinion from your Israeli counsel, agree on the scope beforehand: a general opinion on Israeli law and the merits of the claim is standard; an opinion covering every contested legal point is excessive and expensive.

Step 5: Disclose to the tribunal at the outset

Once funding is secured, disclose the funder's name (though not the funding terms) to the ICCA or ICC administrator as part of the first case management communication. Ask for it to be circulated to the arbitrator for conflict-of-interest purposes. Record the disclosure in the first procedural order. This takes one paragraph and eliminates the most serious post-award challenge risk associated with funded proceedings.

In Practice — Timing: The optimal time to approach funders is before filing — ideally 3–6 months before the intended arbitration filing date. Funders' due diligence takes 4–8 weeks, and closing and drawing down the funding agreement takes another 2–4 weeks. Approaching a funder after proceedings have already begun is possible (and funders do fund mid-case), but costs already incurred are typically excluded from coverage, and funders are warier about cases where the claimant ran out of money. If you are filing under ICCA Rules, the filing fees at the ICCA Secretariat run from NIS 1,500 (for claims up to NIS 100,000) to a percentage-based fee for larger claims — budget for this independently of the funder's commitment, which almost never covers the first application fees.