Everyone familiar with the Israeli justice system knows that it is extremely
One public official who has made a serious proposal to do
something about that backload is Justice Minister Yaakov Neeman, who proposed,
back in February, a law to authorize Magistrates Courts to send cases to
What is arbitration? Arbitration is, essentially,
private judging. Traditionally, retired judges or experienced lawyers serve as
In some industries, it is common to select an arbitrator who
is experienced in his field, even if that person has no legal
Arbitrators generally are not required to apply the rules of
evidence that apply in courts of law, and, almost always, the parties to the
dispute are required to pay the arbitrator’s fees.
It has been more than
half a year since Neeman published his proposal. So far it has been met with
little enthusiasm – from the Bar Association, from the president of the supreme
court, and from leading Knesset members.
In a nutshell, Neeman proposes
that, in order to solve the severe backlog in Israel’s courts, (a) Magistrates
Courts be authorized (in most civil cases) to compel litigants to submit their
disputes to arbitration – regardless of whether the litigants consent to
arbitration, and (b) the State would pay the fees of the
Under the current Arbitration Law (and as is the case in
most western countries), a court may require a litigant to arbitrate only if
that litigant had expressly agreed to do so (usually in an agreement before any
Everyone agrees that something must be done to solve the
backlog in our courts.
Therefore, we might have expected the Neeman
proposal to be well received. That has not been the case.
Why not? The
main objection voiced to the Neeman proposal is that it would be
unconstitutional to take away a litigant’s access to the court system without
that litigant’s actual expressed consent.
But there is another reason why
the Neeman proposal has not received much support – too many people in Israel
simply do not trust arbitration.
In Israel – as in most of the world – an
arbitral award is almost never appealable. To a large extent, that feature of
arbitration is considered a good thing. After all, arbitration is supposed to
bring a dispute to a final resolution more quickly than proceedings in court.
Yet at the same time, many people shy away from arbitration because they loath
giving up the right to take their case to an appellate court.
But in most
of the western world, the use of arbitration is on the rise – at least in the
business context. For example, in the United States, the American Arbitration
Association and Judicial Arbitration & Mediation Services (JAMS) have, year
after year, reported steady increases in the number of cases filed. The same
goes for the International Chamber of Commerce, the World Intellectual Property
Organization and the London Court of International Arbitration.
Israel buck the trend? Perhaps because, in Israel, there has not been a
tradition of institutional arbitration – arbitration conducted under the
auspices of an institution that exists primarily for the purpose of conducting
arbitrations (or mediations). (We do have two well respected arbitral
institutions – the Israeli Institute of Commercial Arbitration, and the Israeli
Bar Association’s Arbitral Institution.) The main advantage of institutional
arbitration is that, in contrast to ad hoc arbitration, the institution appoints
the arbitrator and, to some extent, oversees his/her handling of the case – in
particular, the speed with which the case gets resolved.
The lack of a
tradition of institutional arbitration has contributed to the perception among
Israelis that arbitration is no more efficient than litigation in
The Knesset should try to change that perception, and it can start
by taking one of Neeman’s ideas and using it to encourage businesses to select
Because Neeman’s proposal includes having the State pay the
fees of arbitrators, it is safe to assume that he conferred with the Treasury
and calculated how much it would cost to funds dozens (if not hundreds) of
I am not privy to those calculations, so I cannot know
how much the Treasury expects to have to spend if the Neeman proposal were to be
enacted. But the minister knows those calculations (at least in general terms),
and whatever those numbers are, they can be converted into a tax break to
incentivize businesses to arbitrate.
Here’s how it would work: • Every
year, when a company pays its annual corporation fee, it would have the option
to “check a box” to declare that it agrees to submit any business dispute [i.e.,
one to which the adverse party is another business (a corporation or a
partnership)] that arises over the next year to institutional
• A company that “checks the arbitration box” will
automatically receive a tax reduction (Minister Neeman and the Treasury know,
more or less, the amount) for the next twelve-month period.
• When and if
such a company is involved in a legal dispute with another business over the
next year, the “checking of the box” would constitute an agreement to arbitrate,
and the court may send the parties to institutional arbitration without any
further consent by the parties.
• Unlike in the Neeman proposal, the
state would not pay the fees of the arbitrator.
Rather, the parties would
pay those fees – because the state already paid its part of the program via the
Will this proposal make a difference? Undoubtedly yes. Most of
the cases that tie up the court system are not “slip-and-fall” cases or medical
malpractice cases. The cases that take years to resolve are, by and large, those
that involve huge sums of money, multiple witnesses, and tons of documentation –
in other words, business litigation.
If we succeed in moving a
significant number of business disputes out of the court system, the system will
feel the difference – very quickly.The author specializes in
international litigation and arbitration at the law firm that he founded in
2004, Sherby & Co., Advs., in Ramat Gan.