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Arbitration

Can an Israeli arbitration be paused while criminal proceedings against a party are pending?

There is no automatic pause. The Arbitration Law 5728-1968 contains no provision suspending an arbitration because a party is under criminal investigation or indictment, and the tribunal keeps control of its own timetable. An arbitrator can still adjourn on ordinary procedural grounds, and often will where the same facts are in issue and a party would otherwise be forced to answer questions that could incriminate them. Where an adjournment pushes the case past the period for making the award, the parties or the arbitrator can ask the court to extend it under Section 19 of the Arbitration Law.

Israeli arbitration procedure is deliberately loose. Unless the parties agreed otherwise, the First Schedule to the Arbitration Law releases the arbitrator from the rules of evidence and procedure that bind a court, which is exactly what gives the tribunal room to set, move and stagger hearing dates. Two legal points shape how that discretion is used when a criminal file is open on the same facts. First, Section 47 of the Evidence Ordinance [New Version] 5731-1971 lets a witness refuse to answer a question whose answer might expose them to a criminal charge, so pressing on can leave a central witness effectively silent. Second, Section 42A makes a final conviction admissible in later civil proceedings, so waiting can hand one side a decisive piece of evidence rather than merely delaying the case.

Foreign parties should treat a stay application as a commercial question, not only a procedural one. Criminal files in Israel can run for years, and an open-ended suspension can quietly convert a fast arbitration into a dead one, which is often the point of the request. Israeli arbitrators typically respond by granting a defined adjournment with a review date instead of an indefinite stay, by carving out issues untouched by the criminal allegations and deciding them in a partial award, and sometimes by requiring security. A claimant worried about dissipation of assets during a long adjournment should also remember that the court can grant attachment and other interim relief in support of an arbitration. See the full guide to the arbitration process in Israel.

⚖ In Practice
  • Governing law: Arbitration Law 5728-1968 and its First Schedule; Sections 42A and 47 of the Evidence Ordinance [New Version] 5731-1971
  • Competent authorities: the arbitral tribunal decides the adjournment; the District Court (Beit Mishpat Mechozi) extends the award period and grants interim relief
  • No automatic stay: an investigation or indictment does not suspend an Israeli arbitration by operation of law
  • Default award period: the First Schedule sets three months for the award where the parties agreed nothing else, extendable by agreement or by the court under Section 19
  • Typical outcome: a fixed adjournment with a review date, often combined with a partial award on issues unaffected by the criminal file
  • Later evidential effect: a final conviction is admissible under Section 42A, which is why a short wait can be worth more than an immediate hearing

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

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