Arbitration

Does an Israeli arbitration clause cover tort claims like fraud or negligence?

Q: Does an Israeli arbitration clause cover tort claims like fraud or negligence?

It depends on how the clause is written. Israeli courts read the scope of an arbitration clause by its wording, so a broad clause covering any dispute arising from or in connection with the contract will usually capture related tort claims such as fraud, negligence, or misrepresentation, not only breach. A narrow clause limited to disputes under the contract or about its interpretation may leave tort claims for the courts. Because arbitration agreements are treated as separable, an allegation of fraud does not automatically knock out the clause itself.

      It depends on how the clause is written. Israeli courts read the scope of an arbitration clause by its wording, so a broad clause covering any dispute arising from or in connection with the contract will usually capture related tort claims such as fraud, negligence, or misrepresentation, not only breach. A narrow clause limited to disputes under the contract or about its interpretation may leave tort claims for the courts. Because arbitration agreements are treated as separable, an allegation of fraud does not automatically knock out the clause itself.
    

Scope is a question of construing the parties' agreement under the Arbitration Law 5728-1968. When a party asks the court to stay a lawsuit under Section 5, the court will send the matter to arbitration only if the dispute falls within the arbitration agreement, which turns on the clause's language. Israeli courts generally lean toward giving effect to arbitration clauses and read broad wording generously, so a claim dressed up as a tort but factually rooted in the contract is usually arbitrable. The separability principle means a challenge to the contract's validity does not by itself defeat the arbitration clause.

The drafting lesson is to be explicit. A wide formula, such as any dispute, controversy, or claim arising out of or in connection with this agreement, including its validity, breach, or any related tort or statutory claim, will pull in most connected claims. A party that wants to escape arbitration will often frame its case as a tort, and courts look at the substance rather than the label. If you intend to exclude tort or statutory claims, say so, and align the arbitration clause with the governing-law and jurisdiction clauses to avoid splitting one dispute across two forums. Our guide to drafting an arbitration clause has model wording.

⚖ In Practice

Governing law: Arbitration Law 5728-1968; Section 5 (stay of court proceedings for matters within the agreement)
Deciding bodies: the arbitral tribunal on its own jurisdiction, and the Magistrate or District Court on a stay application
Broad wording ("arising out of or in connection with"): usually captures related tort and fraud claims
Narrow wording ("under or regarding this contract"): may leave tort claims in court
Drafting tip: state expressly whether tort, statutory, and pre-contract claims are included

From the full guide: Drafting an Arbitration Clause for Israeli Contracts

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Does an Israeli arbitration clause cover tort claims like fraud or negligence?

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