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Arbitration

What is the difference between an arbitrator and an agreed expert in an Israeli contract?

The label in the contract does not decide it, the process does. An arbitrator resolves a dispute in a quasi-judicial way, and the result is an award governed by the Arbitration Law 5728-1968, which brings court confirmation, a 45-day window to apply to set aside, and enforcement abroad under the New York Convention. An agreed expert, often called a mumche machria, decides a valuation or technical question using their own professional knowledge, and that determination binds only as a matter of contract. Israeli courts look for whether the parties intended a hearing of both sides and a reasoned decision.

The Arbitration Law applies only where the parties agreed to refer a dispute to arbitration, and Israeli courts read that requirement substantively rather than by the wording used. The markers that point to arbitration are an existing dispute rather than a routine valuation, an obligation to hear both parties, the taking of evidence, and a duty to give reasons. The markers that point to expert determination are a narrow factual or numerical question, a decision-maker chosen for professional expertise, and freedom to reach a conclusion from their own inspection without a hearing. The classification is not cosmetic, because the supervisory machinery in Sections 23 to 28 of the Arbitration Law switches on or off with it.

For a foreign party the enforcement consequence is the one that bites. An arbitral award seated in Israel travels abroad under the New York Convention, which Israel ratified in 1959, while an expert determination is only a contractual finding and has to be converted into a judgment by suing on the contract first. There is also no set-aside route, so a determination can be attacked only on contract grounds such as fraud, a decision outside the agreed mandate, or a material departure from the agreed procedure. If a contract sends valuation questions to an appraiser and everything else to arbitration, say so explicitly and state that the Arbitration Law governs the arbitration limb.

⚖ In Practice
  • Governing law: Sections 1, 23, 24 and 27, Arbitration Law 5728-1968; an expert determination is governed by ordinary contract law
  • Competent authority: Magistrates Court or District Court, according to value, for confirming or setting aside an award; an expert determination requires a fresh civil claim to enforce
  • Set-aside deadline: 45 days from the date the party received the award (Section 27); no equivalent route exists against an expert determination
  • Cross-border enforcement: only an arbitral award falls within the New York Convention 1958, in force for Israel since 1959
  • Drafting test: name the Arbitration Law, require the decision-maker to hear both parties and give written reasons, and set a timetable, if arbitration is what you intend
  • Liability: an expert can face a professional negligence claim, whereas an arbitrator’s exposure is considerably narrower under established Israeli practice

From the full guide: Introduction to Israeli Arbitration Law

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