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Arbitration

Can an Israeli arbitrator award interest on an unpaid debt, and how is the rate calculated?

Yes. Section 30 of the Arbitration Law 5728-1968 expressly grants an arbitral tribunal the power to award interest on any amount it finds due, unless the arbitration agreement restricts this power. The default rate follows the Adjudication of Interest and Linkage Law 5721-1961: the principal is linked to the Consumer Price Index (CPI) to preserve its real value, and interest accrues at the rate prescribed by regulation — approximately 4% per annum above the Bank of Israel prime rate for 2026. Compound interest is not automatically awarded; the arbitrator must specifically order it, and courts have approved compound interest awards in appropriate commercial cases.

Israeli arbitration awards on debt claims routinely include two components in addition to the principal: CPI linkage (*hatzmadat madad*) and interest (*ribbit*). CPI linkage adjusts the NIS principal from the date the debt fell due to the date of payment, compensating the creditor for inflation. Interest then runs on the CPI-linked principal at the rate set under the Adjudication of Interest and Linkage Law 5721-1961, as updated periodically by ministerial regulation. For 2026, the prescribed rate is the Bank of Israel prime rate plus approximately 4% per annum — giving a combined nominal annual return that keeps the creditor whole in real terms. An arbitrator adjudicating an NIS-denominated debt will typically apply these statutory defaults unless the underlying contract specifies a different interest rate. Israeli commercial arbitration practice closely mirrors the approach taken by Israeli courts on the same issue.

For foreign currency debts — common in international commercial contracts — the interest calculation differs. The arbitrator applies the relevant foreign currency interest rate, typically the rate prescribed for that currency under Israeli law or the contractual rate, and CPI linkage to the Israeli index does not apply to a USD or EUR debt. Parties to international arbitrations seated in Israel, or governed by the International Commercial Arbitration Law 2024, should address the interest currency and rate in their arbitration clause or in the agreed procedural rules to avoid ambiguity. The start date for interest also matters: arbitrators may award interest from the date of breach, the date proceedings commenced, or the date of the award — and each choice can materially affect the total recovery on a large long-running debt. Claimants should address this expressly in their submissions.

⚖ In Practice
  • Governing law: Section 30, Arbitration Law 5728-1968; Adjudication of Interest and Linkage Law 5721-1961 (*Chok Psokim Ribbit VeHatzmadat Madad*)
  • Default rate (2026): Bank of Israel prime rate (currently approximately 4.5%) plus 4% per annum — approximately 8.5% total nominal annual rate on NIS debts
  • CPI linkage: applies automatically on NIS-denominated debts from the date the debt fell due unless the arbitrator orders otherwise
  • Compound interest: not awarded by default — must be specifically requested and justified; Israeli courts have upheld compound interest awards in commercial disputes involving sophisticated parties
  • Start date: arbitrator has discretion — date of breach, date of demand letter, or date of award; specify in submissions to avoid the least favorable default

From the full guide: The Arbitration Process in Israel: From Clause to Award

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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