Free Consultation
Arbitration

Can a dispute with an Israeli government ministry or state-owned company be referred to arbitration?

Yes for contractual and commercial disputes, no for the exercise of public power. The Arbitration Law 5728-1968 contains no exemption for the State, so a ministry or government company that signs an arbitration agreement is bound by it like any other party. Section 3 of that Law marks the boundary: an arbitration agreement is invalid in a matter that cannot be the subject of an agreement between the parties, which rules out challenges to administrative discretion, tender decisions and regulatory acts. Those belong to the Administrative Affairs Court or the High Court of Justice.

In practice the State rarely agrees to arbitrate once a dispute has already crystallised. Israeli government legal policy requires the responsible ministry to obtain approval before committing the State to arbitration, so the clause is normally negotiated into the contract at signature rather than bolted on afterwards. Government construction and infrastructure contracts are the main exception, where arbitration or a staged engineer-then-arbitrator mechanism is standard. Government companies constituted under the Government Companies Law 5735-1975 are separate legal entities and contract more freely, though the Government Companies Authority supervises them. Where the contract emerged from a public tender, the operative dispute clause often sits in the tender documents rather than in the later signed agreement.

A foreign contractor should read the dispute clause before pricing the work. The State's standard forms tend to specify Israeli law, Hebrew as the language of the proceedings and a seat in Israel, and they sometimes give one side the right to select the arbitrator from a closed list. All of that is negotiable at tender stage and effectively fixed afterwards. Enforcement is the easier half of the story: an award is confirmed by the District Court under Section 23 of the Arbitration Law, and the State pays confirmed awards rather than forcing execution, which matters because attaching state assets is not a realistic route. Our step-by-step guide to the arbitration process in Israel covers the mechanics.

⚖ In Practice
  • Governing law: Arbitration Law 5728-1968, notably Section 3 on non-arbitrable matters and Section 23 on confirmation of an award; Government Companies Law 5735-1975
  • Not arbitrable: tender decisions, licensing and regulatory acts, and any challenge to the exercise of administrative discretion, which go to the Administrative Affairs Court or the High Court of Justice
  • Competent authority for confirmation: District Court (Beit Mishpat Mechozi) with jurisdiction over the seat of the arbitration
  • Approval requirement: the State's agreement to arbitrate normally needs prior clearance from government legal advisers, so a clause offered mid-dispute can take months to authorise
  • Deadline: an application to set aside an Israeli award must be filed within 45 days of receipt, and the State is held to the same deadline as any other party
  • Negotiation window: dispute-resolution terms in public procurement are effectively fixed once the tender closes, so raise language, seat and arbitrator selection before bid submission

From the full guide: The Arbitration Process in Israel: Step by Step

Related Questions

Related Guides

Need legal help with this topic?
Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

← Browse all Q&A