ISRAEL Trends and Developments Contributed by: Zvi Bar-Nathan and Daphna Kapeliuk, Goldfarb Gross Seligman & Co
or may be submitted to arbitration only in accordance with the provisions of that law or the conditions pre - scribed thereunder. The ICA Law provides that an arbitration agreement shall be treated as independent of the other clauses of a contract, and the decision that the contract is null and void shall not affect ipso jure the validity of the arbitration agreement. The Courts There has not been any significant case law on the approach of courts in the enforcement of arbitration agreements under the ICA Law. It should be noted, however, that before the enactment of the ICA Law, the courts’ approach in the interpretation of Article II(3) of the New York Convention did not correspond to the wording of that Article. Despite broad interna - tional acceptance of the referral rule in Article II(3), Israeli courts have not fully recognised it. Although there are instances where a court’s rhetoric has sug - gested recognition of this principle, a close analysis of the case law reveals that Israeli courts have failed to follow a uniform discourse on the issue. In some cases concerning the enforcement of international arbitra - tion agreements, the courts applied rules regarding domestic arbitration, thereby increasing their discre - tion to deny a stay of proceedings. It is hoped that, as the ICA Law is now in force, the courts will follow the wording of the Article more strictly. Opportunities and Challenges in the Adoption of the ICA Law The adoption of the ICA Law has presented several opportunities for Israel and the Israeli legal system. First, the adoption of the ICA Law could make Israel a more attractive venue for foreign investors who are looking for a predictable and stable legal environ - ment aligned with international standards. By enact - ing the ICA Law, Israel has signalled its commitment to providing a reliable and efficient dispute resolution mechanism, which could boost investor confidence and encourage foreign direct investment. Second, it is hoped that adoption of the Model Law will promote legal certainty and stability by providing a clear and predictable legal framework for arbitration.
Parties entering into international contracts will have greater confidence in the dispute resolution process, knowing that the rules governing arbitration are well- established and recognised internationally. This legal certainty is crucial for fostering trust in international commercial transactions. Third, it is expected that by aligning its legislation with the Model Law, Israel could create a more predict - able and consistent legal environment for international arbitration. This could reduce the uncertainties asso - ciated with cross-border disputes, as parties can be assured that the rules governing their arbitration pro - ceedings will be similar, regardless of the jurisdiction. However, this all depends on the way the courts in Israel interpret and apply the ICA Law in practice. Fourth, it is hoped that the ICA Law will promote the efficiency of arbitration proceedings by emphasising party autonomy, minimising court intervention and providing clear guidelines on procedural matters. This would allow for a more streamlined arbitration processes, reducing the time and cost associated with resolving disputes. Additionally, the efficiency gained through the adoption of the ICA Law could make arbitration a more attractive option compared to traditional litigation. Fifth, as the text of the ICA Law provides a framework compatible with the New York Convention, it is hoped that it will enhance the enforceability of both arbitra - tion agreements and arbitral decisions. This facilita - tion of cross-border enforcement is a key benefit for parties engaged in international commerce. While the adoption of the ICA Law provides great opportunities to Israel, it also comes with challenges. First, one of the main challenges in adopting the ICA Law is the need to adapt it to the specific legal tradi - tions and practices of Israeli legal system. While the Law provides a general framework for international arbitration, it may not align perfectly with the legal culture and norms of the state. Second, the application of the ICA Law may encoun - ter resistance from legal professionals and the courts, who are accustomed to the existing legal practices
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