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Arbitration

Must a party-appointed arbitrator in Israel be neutral?

Yes. Israeli law draws no distinction between an arbitrator nominated by one side and one chosen jointly or appointed by the court. Section 30 of the Arbitration Law 5728-1968 requires every arbitrator to act towards the parties in good faith, and the First Schedule, which applies unless the parties agree otherwise, requires the tribunal to hear both sides and decide on the evidence. A party-appointed arbitrator who behaves as an advocate for the side that nominated them can be removed by the court, and the resulting award is exposed to being set aside.

Where a contract calls for three arbitrators, the usual mechanism is that each side nominates one and the two nominees select a chair, with the court appointing under Section 8 if that process stalls. Once appointed, all three are on identical footing. Section 11 allows the District Court to remove an arbitrator who is shown to be unworthy of the parties' trust or who has conducted the proceedings improperly, and Section 24 lists the grounds on which an award may be set aside, including that a party was not given a proper opportunity to present its case. Disclosure obligations are continuous rather than a one-off box-ticking exercise at the start: a connection that emerges mid-case must be disclosed when it emerges.

Foreign parties frequently import the American convention of the non-neutral party-appointed arbitrator and assume it travels. In an Israel-seated arbitration it does not. Practical discipline follows from that: contact between a party and its nominee should end once the tribunal is constituted, apart from the appointment itself and, at most, a discussion about the chair. Record the impartiality standard and the disclosure regime in the terms of reference so there is no ambiguity later. If the opposing nominee starts acting as counsel, object in writing at the time and ask for the objection to be minuted. Israeli courts regularly reject complaints of partiality raised for the first time after a party has lost.

⚖ In Practice
  • Governing law: Sections 8, 11, 24 and 30, Arbitration Law 5728-1968; the First Schedule applies unless the parties agree otherwise
  • No neutral split: party-appointed, jointly appointed and court-appointed arbitrators carry identical impartiality and good faith duties
  • Removal: the District Court (Beit Mishpat Mechozi) may remove an arbitrator shown to be unworthy of the parties' trust under Section 11
  • Setting aside: Section 24 grounds include a party being denied a proper opportunity to present its case and improper conduct by the arbitrator
  • Deadline: an application to set aside an Israeli arbitral award must be filed within 45 days of the award being made known to the applicant
  • Preserve the objection: raise partiality in writing during the proceedings; complaints first made after an adverse award are commonly treated as waived

From the full guide: Appointing and Challenging an Arbitrator in Israel

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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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