What happens if I file a defense before applying for a stay in Israel?

Under Section 5 of the Arbitration Law 1968, a stay application must be made before you submit your first statement on the substance of the dispute. If you file a defense on the merits first, Israeli courts will treat that as a waiver of your right to arbitrate, and the stay application will almost certainly be refused.

This is one of the most consequential procedural traps in Israeli arbitration law, and it is why you must instruct Israeli counsel the moment you learn of the court proceedings.

For more detail, see Stay of Court Proceedings in Favour of Arbitration Under Israeli Law.