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Ramifications of Supreme Court Ruling for Israeli Arbitration Clauses in Cross-Border Agreements

The Supreme Court recently held in a precedent-setting appellate judgment in Leave to Appeal 1739/17 that Civil Procedure Rule 500, which sets forth the types of complaints that can be served outside of Israel on a foreign defendant, does not permit service outside of Israel on a foreign defendant of an application filed with an Israeli court for confirmation of an arbitral award issued in Israel (a "Confirmation Motion"). Therefore, the Supreme Court held that our foreign client could not be served outside of Israel with an application filed in Israeli court to confirm what the respondent in the appeal claimed was an arbitral award issued in Israel against our client.

The court's ruling means that unless the successful plaintiff in an arbitration held in Israel against a foreign defendant is able to serve the Confirmation Motion on the foreign defendant in Israel, either in person or via a local agent for service of process, the plaintiff will not be able to have the arbitral award confirmed by an Israeli court as a judgment and the plaintiff consequently will not be able to initiate execution proceedings against any assets the foreign defendant may have in Israel. The successful plaintiff will thus be limited to enforcement of the arbitral award against the foreign defendant outside of Israel, to the extent that such enforcement is possible.

In light of the far-reaching consequences of this ruling, parties contemplating entering into a cross-border agreement that contains an Israeli arbitration clause should consult with litigation counsel regarding the wording of the arbitration clause. 

 
We are at your disposal should you have any questions regarding the foregoing.
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The content in this Update is provided for informational purposes only, and does not serve to replace professional legal advice required on a case by case basis. The Firm does not undertake to update the information in this Update, or its recipients, about any normative, legal, or other changes that may impact the subject matter of this Update.
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Should you have any questions or need additional information regarding this matter, please feel free to contact Adv. Hagit Blaiberg, Partner, Head of the Corporate, Administrative and Class Action Litigation Department: hagit.blaiberg@goldfarb.com, or Adv. Jeremy Benjamin, Partner and Deputy Head of the Corporate, Administrative and Class Action Litigation Department: jeremy.benjamin@goldfarb.com, or at: 03-6089803.