Can a foreign supplier and its Israeli commercial agent agree to arbitrate outside Israel?

Israel is a New York Convention jurisdiction and its courts respect party autonomy on seat, institution and governing law. A clause sending disputes to arbitration in London, Zurich or New York will normally be honoured, and a party who sues in Israel instead will find the claim stayed. The complication is that the Commercial Agency Law was enacted to correct the bargaining imbalance between foreign principals and local agents, and its core entitlements are cast as mandatory rather than default terms. Section 3 of the Arbitration Law reinforces the point in the arbitral context: an arbitration agreement has no effect in a matter that the parties could not lawfully settle by agreement between themselves.

In practice the risk surfaces at the enforcement stage rather than at the clause-drafting stage. If the tribunal applies a foreign law that recognises no termination compensation and the principal then seeks to enforce in Israel against local assets, the agent can invoke Section 24(9) of the Arbitration Law, which permits an award to be set aside where its content is contrary to public policy, and the corresponding refusal grounds for foreign awards. There is a second threshold question worth resolving early: the Law protects an agent, who solicits orders for the principal's goods, and not a distributor who buys stock and resells on its own account. Characterising the relationship correctly at the outset usually matters more than the seat. See the guide to agency and distribution arbitration in Israel.

From the full guide: Distribution and Agency Agreement Disputes in Israel: A Complete Arbitration Guide

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