The Other Victim of the “Sex for Judgeship” Scandal Is Arbitration

The Israeli daily Haaretz has published a piece by Eric Sherby under the above title,

The original text submitted to Haaretz was a bit longer (and was reduced to meet the newspaper’s space limitations).  Set forth below is the full version:

The Other Victim of the Naveh Scandal

© Eric S. Sherby 2019

The Israeli public at large and the legal community in particular were justifiably shocked by the news, leaked on January 16, that the president of the Israeli Bar Association, Efi Naveh, was the prime suspect in a sex-for-judicial appointment scandal.  Naveh’s decision to resign about 24 hours after the scandal broke was a sign to many that, despite the inappropriate leak of the investigation, the allegations against Naveh are wellgrounded in fact.

Why are we shocked by this news?  Because almost all of us had assumed that the process of judicial appointments is above board, and these revelations indicate that we were naïve.  Although the conventional wisdom has always been that protexia helps in the judicial selection process, most of us thought that even protexia has its bounds.

Much like the Moshe Katsav scandal, which tarnished the nation’s presidency, it is easy to envision the Naveh scandal tarnishing both the judiciary and the bar for many years to come.

But it is not only the judiciary and the bar that have been tarnished by the Naveh scandal, and so far few, if any, observers have taken note of this additional victim.  The “quiet” victim of the Naveh affair is arbitration.

Arbitration is, essentially, the process of having a civil dispute resolved privately – not through the court system.  Agreements to arbitrate are enforceable.  Although under the Arbitration Law (5728-1968), a district court may appoint an arbitrator when the contract is silent as to how the arbitrator will be appointed, if the contract states that the arbitrator is to be appointed by a third party – for example, by the president of the bar association – such a provision is enforceable.

As president of the Israeli Bar Association, Naveh repeatedly exercised the power to appoint arbitrators.

For decades, a common practice in Israel had been for agreements to provide that, in the event of a dispute, the president of the bar association would appoint an arbitrator to adjudicate the dispute.

Throughout the decades of the above-referenced practice, it was common knowledge that the president appointed his friends and political allies.  Similarly, it was commonly expected that, when the president of the bar association was up for reelection, those whom he had appointed as arbitrators would contribute (whether monetarily or otherwise) to his campaign.

This practice of having the president of the bar appoint an arbitrator continued through 2009.  In 2009, the then-president of the Israeli Bar Association, Yuri Guy Ron, made a dramatic change – Guy Ron established an arbitration institute under the auspices of the Israeli Bar Association.  The Israeli Bar Association’s Arbitration Institute functioned largely independently of the president.  The appointment of arbitrators by the arbitration institute was carried out not by the president of the bar but by the Chair of the Institute.

The establishment of the Israeli Bar Association’s Arbitration Institute was considered one of the greatest steps ever in democratizing the field of “alternative dispute resolution” in Israel.

In 2011, Guy Ron lost his bid for reelection as president of the bar association, and all eyes were on his successor, Doron Barzilay, to see whether he would maintain support for the Israeli Bar Association’s Arbitration Institute.  Barzilay did – throughout his four-year term.

(In the interest of full disclosure, I had been appointed by that institute both under Guy Ron and under Barzilay.)

When Naveh defeated Barzilay in 2015, one of Naveh’s first major acts of “reform” was to shut down the bar’s arbitration institute.  Naveh did so without consulting with the bar generally.  He did so without issuing any public explanation as to why closing the arbitration institute might be in the “public interest” or in the interest of the bar.

Everyone in the legal community who paid attention in 2015 to the prompt killing of the Israeli Bar Association’s Arbitration Institute understood precisely why Naveh disbanded the institute – Naveh wanted all of the power to appoint arbitrators to himself.

Fast forward to early 2019, when the public learns of the sex-for-judicial appointment scandal.  Given the long history whereby bar presidents (prior to 2009) used the power to appoint arbitrators to assist in their reelection efforts, and given the unilateral decision by Naveh in 2015 to kill the arbitration institute that thrived under two of his predecessors, does anyone believe that, when Naveh appointed arbitrators, he conducted himself under a higher ethical standard than he did when he took part in appointing judges?

Of course not.

In the judicial appointment process, Naveh did not exercise any powers by himself.  But in the arbitrator appointment process, Naveh alone was King.

It would be sheer speculation (based on what the public knows at this stage) to suggest that sexual favors played a role in any appointment of an arbitrator by Naveh.  But one need not use much imagination to assume that Naveh’s appointment of arbitrators was accompanied by a quid pro quo – perhaps a more extreme level of quid pro quo than had ever been used by bar presidents in the pre-2009 era.

Assuming that Naveh acted improperly in the appointment of (some) arbitrators – What is the remedy, if any, for parties to arbitration cases before arbitrators who were appointed by Naveh?  The answer is far from clear, but it is precisely such lack of clarity that suggests that arbitration as an institution has taken a great hit.

Under the Arbitration Law, an arbitrator can be removed for misconduct or if the court concludes that s/he is not worthy of the confidence of the parties.  It is unclear whether acceding to pressure from the person (official) who appointed the arbitrator would arise to the level of conduct that would cause a court to remove that arbitrator.

Of equal importance (and somewhat ironic) is that, in many cases, both sides to an arbitration would be hesitant to “rock the boat” – in other words, so long as neither party perceives the arbitrator as favoring the other party, there is little incentive to risk alienating the arbitrator by raising any issue related to disqualification.

At the same time, it is common for defendants in arbitration to look for excuses to derail the adjudication process, and for such defendants, the Naveh affair might be a Godsend.  It would come as no surprise if a defendant in an arbitration before a Naveh-appointed arbitrator were to file a motion with the district court for an order to stay the arbitration until after the police issue their report concerning their investigation of the scope of the Naveh affair.

Given the unchartered waters of the Naveh affair, no one could guaranty at this stage that such a motion to stay would be considered frivolous.

The police are occupied investigating (perhaps as many as) 300 judges who were appointed during Naveh’s term – in order to determine the scope of the improper involvement by Naveh.  It is likely that, as far as the police are concerned, few resources would be available to investigate arbitrators who were appointed by Naveh.

That is where the Israeli Bar Association comes in.  Only the bar association has the full record of the number of arbitral appointments by Naveh.

The Bar should recognize immediately the cloud that the Naveh affair has put on arbitration as an institution.  The new president of the Israeli Bar Association should promptly appoint a commission to review the process by which each and every arbitrator was appointed by Naveh.

At the same time, the bar needs to be sensitive to the reality that some parties (usually the defendant) to arbitrations might have an interest in delaying the adjudication of their case.  In order to ensure that the bar is not perceived as “inviting” any parties to torpedo the progress of an arbitration, the review of the arbitrator-appointment process should (at least initially) be done without interviewing the parties to the arbitration cases.

If an arbitrator who was appointed by Naveh fails to cooperate with such review board, then the review board should consider (a) referring the matter to the police for them to consider within the overall scope of the Naveh investigation, and (b) notifying the parties to that specific arbitration.

The bar association should go one step further.  Every candidate for the bar presidency should commit that, throughout his/her term as president, s/he will appoint arbitrators under the oversight of an independent review board that will interview each candidate to ensure that the candidate is appointed on the grounds of merit – not political patronage.

The bar association created this mess.  The bar association needs to take the laboring oar in cleaning it up.  If not, the public’s already low opinion of the bar will only descend further.


The author, an American-Israeli lawyer, is a member of the panel of arbitrators of the Israeli Institute of Commercial Arbitration.


Belgian Int’l Business Court – A Serious Alternative?

© 2017 Sherby & Co., Advs.

Among international lawyers in Israel, Belgium often does not get the attention that it deserves.  Based on recent news reports indicating that the Belgian government is in the process of establishing a new court, to be known as the Brussels International Business Court (the “BIBC”), that situation might change.

This post explains why the establishment of the BIBC should be of interest to the many Israeli companies (and other non-Belgian companies) involved in business in Belgium.  For the reasons described in Part II, we do not recommend to Israeli clients that the BIBC be high on the list of dispute resolution options.

Part I – Overview

For starters (from an Israeli perspective), the level of commerce between Israel and Belgium is often underestimated.  In 2016, among EU Member States, Belgium was the second largest destination for export from Israel as well as the second largest source for import into Israel (following Germany).  See  The diamond industry is one – but only one – of the major sectors in such commerce.

And Israeli companies frequently find themselves involved in legal disputes in Belgium and/or with Belgian companies.

One of the reasons that the recent announcement of the creation of the BIBC has attracted attention is that the court will, according to press reports, operate in English.  If those reports are correct, the BIBC would be the first European court established outside the United Kingdom to adjudicate disputes and render judgments in English.

Another feature of the BIBC that has attracted much attention is that (according to reports), although the new Belgian tribunal will be called a “court,” judgments from the BIBC will not be appealable.

When focusing on the combination of these two features – adjudication in English and lack of appealability – it appears that the BIBC will be an “arbitration-like” tribunal.  In fact, according to one report, a Belgian official stated “If we are to make Brussels a hub for international business, those concerned must be able to resolve their legal disputes without going overseas or resorting to private arbitration.”

Another major issue concerning the newly-announced court is that of its jurisdiction scope.  Although several European law firms have reported on the announcement of the establishment of the BIBC, we have not seen any such firm raise the issue of the jurisdictional scope of the BIBC.  According to a Reuters report, parties will have to agree in advance to let the court adjudicate their differences.

If the Reuters report is accurate, the consent-only feature is another that will make the BIBC arbitration-like.

It should come as no surprise that Belgium wishes to compete in the field of international commercial dispute resolution, in this manner.  European business people know well that the two largest centers in Europe for international commercial arbitration are London and Paris, and smaller European countries have long had an interest in “spreading the wealth” in the field of international commercial DR.

One such country is Sweden, with a population smaller than that of Belgium and with a GNP that is also below that of Belgium.  But Sweden has long benefitted economically from cases before the Arbitration Institute of the Stockholm Chamber of Commerce, which has been a significant player in the European commercial dispute resolution field for many decades.

It is, therefore, natural for a country like Belgium to come up with a creative way to try to capture part of the market.  (Although many reports indicate that the genesis of the BIBC is a desire to resolve various conflicts generated by Brexit, our educated guess is that the idea of the BIBC would have, at one point or another, arisen even absent Brexit).

Part II – The (most noticeable) Problems

Determining the Applicable Law:

Given the nature of international commercial dispute resolution, it is not surprising that one or more announcements concerning the establishment of the BIBC addressed the issue of choice of law.  According to one of the reports,

The parties in a case in front of the BIBC will be free to choose the applicable law. The judges will be entitled to call on amicus curiae, i.e. an impartial adviser to a court of law in a particular case. These amicus curiae will provide legal advice and information regarding the case in order to assist and enlighten the judges. If the parties do not decide on the applicable law, the judges will be free to decide for them.

Under such a system, predictability seems elusive.  There would, of course, be easy cases – such as, for example, if the parties’ agreement provides expressly for New York law to govern their contract.  In such a case, presumably the BIBC would not allow either party to escape from that commitment, and the court would apply New York law.

However, what if the contract were to be silent as to applicable law?  Once a dispute arises, frequently the parties are unable to arrive at an agreement as to the applicable law.  Therefore, based on the above-quoted description of the BIBC, the issue of the applicable substantive law will be determined by that court.

Of course, national courts routinely determine the law applicable to commercial disputes before them.  But unlike the typical court, the decisions of the BIBC will not be appealable.  In other words, non-Belgian business people who might become involved in litigation before the BIBC need to realize that a court that is not subject to any judicial review will be determining the applicable law.  Although the “risk” inherent in having such a determination made by a tribunal from which there is no appeal is similar to the risk in having such a determination made by an arbitrator, at least in the context of institutional arbitration, there are written rules concerning choice of law.  (For example, the rules of the Israeli Institute of Commercial Arbitration require the issue of choice of law to be raised as early in the case as possible.)

And in this context, it is noteworthy that none of the reports that we have seen indicate whether Belgian choice-of-law principles will form the “default” principles for the BIBC’s determining choice of law.

Although we are not admitted to practice in Belgium, it is our understanding that Belgian principles of choice-of-law in the commercial setting can differ significantly from what Israeli clients (and, for that matter, most clients who are more at home in common law jurisdiction) are used to.


In evaluating any potential forum for dispute resolution, the issue of cross-border enforceability (whether of a court judgment or of an arbitral award) needs to be considered.  On this issue, it is not clear whether the BIBC would be better or worse than arbitration.

Arbitral awards can be recognized and enforced pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (also known as the “New York Convention“).  Approximately 150 countries are parties to the New York Convention.  Although Belgian court judgments can be enforced in many European countries, Belgium is not (to our knowledge) a party to any bilateral treaty concerning enforcement with any non-European country.  Therefore, taking the hypothetical case in which an Israeli company and an Indian company agree to resolve disputes before the BIBC, if the Israeli company obtains a judgment from that court against the Indian company, it is far from clear that enforcing such judgment in India would be clear sailing.


The choice-of-law issue and enforceability issue are not minor concerns.  Therefore, for the foreseeable future, to the extent that the BIBC is proposed as a dispute resolution option, our advice to Israeli diamond dealers as well as to other companies involved in business in Belgium or with Belgium entities would be to proceed with caution.


מתדיינים בניו-יורק? היכונו בשלב מוקדם לגישור (או בוררות)

© 2017 Sherby & Co., Advs.

תופעת ה-ADR  (יישוב סכסוכים באמצעות בוררות או גישור) התחילה בארה”ב בשנות השמונים, ורק לאחר כעשור אומצה בישראל. ישנם עורכי-דין ישראלים שטוענים שמדיניות ה- ADR בארץ הפכה לחזון נפרץ – אולי נפרץ מידי – בבתי משפט בישראל (ובמיוחד בתל-אביב).  מזה שנים רבות יריית הפתיחה בישיבת קדם המשפט הראשונה בכל תיק אזרחי מלווה בשאלה — “נעשו מאמצים לפשרה?

אולם למרות ששופטים ישראלים מורגלים להעלות את נושא הפשרה כבר בישיבת קדם משפט הראשונה בכל תיק אזרחי (ראה פרק ז’1 לתקסד”א הישראלית, הנקרא “פגישת מהו”ת לבחינת האפשרות ליישוב התובענה בגישור”), בדרך כלל הדברים נאמרים מחוץ לפרוטוקול.

בימים אלו, המערכת המשפטית במדינת ניו-יורק (המחלקה המסחרית) לוקחת את התופעה צעד אחד קדימה. החל מיום 01.01.18, תקנה חדשה לתקנות סדר הדין של מדינת ניו-יורק תחייב את בא כוחו של כל צד לאשר לבית המשפט, בכתב, שהוא שוחח עם מרשו אודות האפשרויות להעביר את הסכסוך ל-ADR.  על פי התקנה הנ”ל, על האישור להימסר לא יאוחר מישיבת קדם המשפט הראשונה בתיק. ככל שעורך-דין (או משרד) מייצג מספר בעלי דין באותו תיק, עליו להגיש אישור נפרד עבור כל בעל-דין שהוא מייצג.

כל שנה עשרות חברות ישראליות (או חברות בת שלהן) מעורבות בהליכים משפטיים בבתי משפט בניו-יורק.

יש מדינות רבות בארה”ב שהקימו בעשור האחרון בתי משפט מיוחדים עבור סכסוכים מסחריים. בקהיליית בתי המשפט הללו, בתי המשפט במחלקה המסחרית במדינת בניו-יורק נחשבים מהמובלים בתחומם. לכן סביר להניח כי זה רק עניין של זמן עד שהתקנה הנ”ל — המחייבת לעלות את נושא ה-ADR , על הכתב, בתחילת התיק — תאומץ במדינות אמריקאיות נוספות.

ההוריקן הבא יכול להיות משפטי – איך בעלי עסקים ישראלים צריכים להתכונן לפשיטות הרגל בארה”ב

© 2017 Sherby & Co., Advs.

כל מי שהאזין לחדשות שמגיעות מארה”ב בחודש שעבר התוודע לטרגדיה האנושית שהוריקן הארווי הביאה עימה, ואף נראה כי הטרגדיה מהוריקן אירמה עלולה להתעלות על קודמתה. עשרות אנשים נהרגו, אלפי בתים נהרסו ומשפחות רבות נותרו ללא קורת גג.

אבל בנוסף לטרגדיה האנושית – וככל שנשפוט על-פי ההיסטוריה – ההשפעה על העסקים במדינות טקסס ופלורידה (והמדינות השכנות) תקבל ביטוייה שנים רבות לאחר חלוף הסערה.

בשנים שלאחר הוריקן קטרינה, חלה עלייה של כ-50% בבקשות שהוגשו לפשיטת רגל במדינת לואיזיאנה, ובמדינות השכנות לה, עלייה של כ-20%. בהתבסס על העלייה במספר הבקשות לפשיטות הרגל לאחר הוריקן קטרינה, סביר להניח שתחול עלייה ניכרת במספר הבקשות לפשיטת רגל בחברות בטקסס, פלורידה והמדינות השכנות.

ישנן עשרות (ואולי מאות) חברות ישראליות אשר להן מספר ניכר של לקוחות או שותפים עסקיים בטקסס ובפלורידה.

בדומה לשאר החברות שממוקמות מחוץ לאזורי הסערה, חברות ישראליות צריכות לנקוט במספר צעדים כדי להבטיח את זכויותיהן המשפטיות.

להלן סקירה קצרה אודות הפעולות שעל כל חברה ישראלית מן הסוג האמור לנקוט.

פיקוח על המצב הפיננסי של השותפים העסקיים
בטקסס, פלורידה והמדינות השכנות

אל תחכו לרגע שהחברה האמריקנית שחייבת כסף לחברה שלכם תגיש בקשה לפשיטת רגל.

ברוב המקרים, חברות המכריזות על חדלות פירעון לא מצאו את עצמן במצב הפיננסי הירוד בין רגע. לעיתים קרובות, המצב הכספי מדרדר בהדרגתיות, ונושה שמפקח על המצב יכול למזער את הסיכון ל-“total loss“.

לדוגמא, אם שותף אמריקאי מפר חוזה שותפות עם החברה שלכם, במקום לשלוח הודעה המסיימת את מערכת היחסים החוזיים – פעולה שעלולה לתרום להידרדרות המצב הפיננסי של השותף האמריקאי ולכן להגדיל את הסיכוי להגשת בקשה לפשיטת רגל – יהיה במקרים רבים עדיף לדרוש מהחברה האמריקאית לספק ערובה בנקאית או ערבות ביצוע מתמשכת בידי צד שלישי אחר. בעוד שדרישה לקבלת ערובה נוספת אפשרית בטרם נכנסה החברה להליכי חדלות פירעון, הניסיון לנקוט בדרך פעולה זו לאחר פתיחת הליך לפשיטת רגל הוא לא ישים (בלשון המעטה). במידה ותצליחו לקבל ערובה שכזאת, הדבר ייצור לחברה שלכם מקור נוסף ממנו תוכלו לגבות את החוב, במקרה שהחברה אמריקאית תיכנס להליכי פשיטת רגל.

יש להקפיד על תשומת-לב מרבית בעת העיון
בהודעות שמתקבלות מהחברה האמריקאית
שנמצאת בהליכי פשיטת רגל:

במידה וחברה אמריקאית עימה החברה שלכם מקיימת עסקים מגישה בקשה לפשיטת רגל, עליכם להיות ערים ולעקוב אחר ההתפתחויות בתיק זה. במידה והחברה האמריקאית רואה בחברה שלכם כנושה, ייתכן שהיא תרשום את החברה שלכם ברשימת הנושים (schedule of creditors) שהיא תגיש יחד עם הבקשה לפשיטת רגל.

אולם ציון החברה שלכם כ”נושה” אינו בהכרח מהווה אינדיקציה שהגעתם ל”נחלה” הואיל וקיימים מקרים שבהם תצטרכו לשמור על האינטרסים שלכם. לפעמים החברה שמגישה את הבקשה לפשיטת רגל תודיע לבית המשפט כי סכום התביעה שלכם הוא פחות מהסכום המוערך על ידכם. או לחלופין החברה האמריקאית יכולה לציין כי תביעתכם היא “שנויה במחלוקת” (‘disputed”) או “תלויה” (“contingent”).  במרבית המקרים מהסוג הנ”ל, יהיה הנושה מעוניין להגיש תביעת חוב (שידועה גם כהוכחת חוב) לבית המשפט לענייני פשיטת רגל על-מנת להסביר (לפי העניין) מדוע אין מחלוקת אודות קיומה של עילת התביעה או מדוע אין התביעה תלויה. וכמובן במידה והחברה בפשיטת רגל מעריכה את תביעתכם בשווי שהוא פחות מהערכתכם, תרצו להגיש תביעת חוב על-מנת להסביר את כל שווי התביעה.

רצוי לקחת חלק פעיל בהליך בחירת
עורכי-הדין מטעם “ועד” הנושים:

ברוב התיקים של פשיטת רגל בארה”ב, אחד מהצעדים הראשונים עבור נושים שאינם מובטחים הינו למנות עורכי-דין לייצג את ה”ועד” של אותם נושים. אפילו לנושה הממוקם מחוץ לארה”ב קיימת אפשרות לקחת חלק פעיל בבחירה זו. בכפוף לשוויה של תביעתכם, יש לשקול לקיחת חלק פעיל בבחירת עורכי-הדין עבור ועד הנושים הלא מובטחים.

שמור על ערנות מוגברת בכל ערוצי
התקשרות עם החברה האמריקאית:

אחת המטרות של דיני פשיטת רגל היא להתייחס לכל הנושים (מאותו הסוג) באופן שווה. לאחר הגשת בקשה לפשיטת רגל מצד החברה האמריקאית, אין זה נדיר כי נושה (או ה-US Trustee) יבקש ל”בטל” תשלומים מסוימים ששולמו על-ידי החברה לנושים אחרים בסמוך לתאריך הבקשה לפשיטת רגל — בטענה שתשלומים אלו שולמו לנושים “מועדפים“. נשאלת השאלה:  כיצד ניתן להוכיח שבוצע תשלום לנושה מועדף?  לעיתים הראייה נובעת מאמירות של החברה האמריקאית בקונוטציה של “הכול בסדר” או ” אין צורך לדאוג אודות מצבנו הפיננסי“. ככל שהחברה שהגישה בקשה לפשיטת רגל הציגה מצג אופטימי לנושיה ובאותו הזמן שילמה לחלק מנושיה — אך לא לכולם — ובמידה והבקשה לפשיטת רגל הוגשה זמן קצר לאחר מכן, אזי אותו מצג שווא יכול לבסס נימוק לנאמן לבצע חקירה שתוביל להגשת בקשה לבטל תשלומים מסוימים.

ככל שקיים בסיס לדאגה לפיה החברה האמריקאית שמבקשת הגנה בהתאם לחוקי חדלות פירעון עלולה לבצע תשלום לנושה “מועדף”, יש לתעד כל דרך התקשרות שתבחר לקיים עם אותה חברה (ואף רצוי לנהל אותה באמצעות עורך-דין).

קחו ברצינות את הצו האוטומטי לעיכוב הליכים:

על-פי הדין האמריקאי, עצם הגשת הבקשה לפשיטת רגל יוביל לצו עיכוב אוטומטי (בכפוף למספר מוגבל של יוצאי מן הכלל). עם זאת, מספר לא מבוטל של נושים ישראלים נוטים להסיק ששלב העיכוב האוטומטי לא תקף להליכים משפטיים בישראל. מסקנה זו שגויה מיסודה. ככל שלבית המשפט האמריקאי לענייני פשיטת רגל יש סמכות שיפוטית על החברה שלכם (בזמן הווה או בעתיד), הווי אומר שלבית המשפט האמריקאי יש (או לכל הפחות בעתיד תהיה) סמכות שיפוטית לאכוף את צו העיכוב האוטומטי נגד החברה שלכם. לכן יש להניח שכל הליך משפטי שמתקיים מחוץ לארה”ב נגד אותה חברה שהגישה בקשה לפשיטת רגל ייחשב כפעולה שמפרה את צו העיכוב האוטומטי.

הפרה של צו העיכוב האוטומטי עלולה להוביל להטלה של קביעת פיצויים עונשיים.


“אכיפה בארה”ב של פס”ד ישראלי – לפעמים “נו-בריינר

© 2017 Sherby & Co., Advs.

לאחרונה בית משפט מדינתי בעיר ניו-יורק (בתיק 655213/2016) אכף פסק-דין ישראלי בסך של 16 מיליון ₪ שניתן כנגד תושב ניו-יורקי.

הפסק הישראלי ניתן בהקשר של סכסוך בנוגע לבעלות בנכסי נדל”ן בארה”ב.  בנוסף למתן פסק לפיו על הנתבע לשלם 16 מיליון ₪, נקבע ע”י בית המשפט המחוזי במחוז המרכז (לוד) כי על התובעים להעביר לנתבע את החלק שלהם בבעלות בנכס הנ”ל.

בפני בית המשפט הניו-יורקי העלה הנתבע מספר טענות כנגד אכיפת הפסק הישראלי, והשופט הניו-יורקי דחה את כולן.

הנתבע טען בצורה כללית שטעה השופט הישראלי בהכרעתו. השופט הניו-יורקי כלל לא התייחס לטענה זו.

טענותיו העיקריות של הנתבע בפני בית המשפט בניו-יורק היו (א) שהפסק הישראלי הושג במרמה, ו-(ב) שאכיפת הפסק הישראלי סותרת את תקנת הציבור. גם לגבי טענות אלו, ההתייחסות של השופט האמריקאי היתה מצומצמת. השופט הניו-יורקי קבע שהפסק הישראלי הינו סופי, מוחלט, ובר אכיפה. הוא קבע שאכיפתו של הפסק אינה סותרת את תקנת הציבור של מדינת ניו-יורק.

ואמנם הנתבע העלה טענה יצירתית בפני בית המשפט האמריקאי – טענה המבוססת דווקא על הדין הישראלי. חוק אכיפת פסקי-חוץ של ישראל שונה מהחוק האמריקאי בהיבט אחד – הואיל ואסור לשופט ישראלי להכריז על פסק חוץ כאכיף כל עוד שבמדינה הזרה מתקיים הליך של ערעור אודות אותו פסק, אין מניעה מקבילה לפי החוק האמריקאי. למרות זאת טען הנתבע בפני בית המשפט בניו-יורק כי הדוקטרינה של comity (כיבוד הדדי בין מדינות) מחייבת את בית המשפט האמריקאי לעכב את הכרעתו בבקשה לאכיפה ולהמתין עד לסיום ההליכים בישראל בנוגע לערעור לבית המשפט העליון על הפסק המחוזי.

בית המשפט בניו-יורק לא נתן החלטה שמתייחסת במפורש לטענתו זו (טענת “המתן לערעור הישראלי”) אך בית המשפט הניו-יורקי בחר כן להמתין לסיום הליכי הערעור הישראלי. תוך ימים בודדים לאחר סיום הליך הערעור בישראל, נתן בית המשפט האמריקאי את פסק-הדין שאכף את הפסק הישראלי.

הפסק הניו-יורקי הנ”ל מעיד על גישה פרו-אכיפה בבתי משפט אמריקאיים, והוא גם מעיד על נטייה להניח שהליכים משפטיים שהתנהלו בישראל היו כנים והגונים.

The Cost(s) Of Noncompliance with an Arbitration Agreement (Part One)

© 2017 Sherby & Co., Advs.

Israel is a pro-arbitration jurisdiction.  But even in a pro-arbitration jurisdiction, when a dispute arises between parties to an arbitration agreement, sometimes one party attempts to avoid its contractual commitment to arbitrate.  If the agreement does not include a mechanism for the appointment of the arbitrator by a third party (such as an arbitral institution), then when one contracting party wishes to commence arbitration but the other contracting party refuses to cooperate in the appointment/selection of the arbitrator, the first party will usually have no choice but to file a motion (application) with a court for the appointment of an arbitrator.

Israel’s Arbitration Law (1968) provides expressly (section 8) that a court may order the appointment of an arbitrator under such circumstances.

Because the general rule under Israeli law is for the court to award some level of “legal costs” against the losing party (see Encyclopedia of International Commercial Litigation (Israel Chapter) § A10.7), our firm decided to examine the extent to which Israeli courts use cost orders to incentivize parties to arbitration agreements to cooperate in the selection of an arbitrator when and if a dispute arises.  (Another way of couching the issue is the extent to which courts attempt to use cost awards to “punish” foot-dragging parties.)

For purposes of this examination, our firm reviewed all of the published decisions from January 2015 through December 2016 (the “Time Period”) rendered by the three busiest Israeli districts courts – the Tel Aviv District Court, the Jerusalem District Court, and the Haifa District Court.

In this post, we summarize noteworthy conclusions gleaned from decisions rendered by the Tel Aviv District Court, which is the district wherein most of the country’s international commercial disputes are litigated.

In subsequent posts, we will report on similar findings concerning Jerusalem and Haifa, and we will also report on points of interest regarding the profile(s) of arbitrators appointed by those three district courts.

Cost Orders Issued by the Tel Aviv District Court – The Numbers:

During the Time Period, there were eleven (11) cases in which (a) a party to an arbitration agreement filed a motion (application) with the Tel Aviv District Court for the appointment of an arbitrator, and (b) the court granted such motion.  All eleven of those decisions were rendered by the Honorable Yehudit Shevah.

Because all eleven decisions from Tel Aviv during the Time Period were rendered by the same judge (which was not the case in Haifa), any similarities in the analysis are likely not mere coincidences.

Of those eleven cases, three (3) times the court ordered the respondent to pay NIS 20,000 of costs to the applicant (movant).  (The amount of NIS 20,000 is roughly equivalent to US$5,500.)

The sum of NIS 20,000 was the maximum amount that the Tel Aviv District Court ordered in any of the eleven cases during the Time Period.  The average amount of costs awarded by the Tel Aviv District Court during the Time Period was approximately NIS 11,000.

In none of the eleven decisions did the Tel Aviv District Court explain its reasoning for the amount of costs awarded.  Yet in the three cases in which the award of costs was NIS 20,000, the court seemed to have formed the view that the applicant had a strong case on the merits.

A Subset – Conditional Orders:

There were three (3) cases in which the Tel Aviv District Court issued an order stating that it would appoint an arbitrator but that first the parties would be given several days (anywhere from seven to twenty) to attempt to come to an agreement on their own as to the specific arbitrator.  (These three cases are referred to as the “Conditional Cases.”)  In none of the Conditional Cases was the award of costs near the “maximum” level of NIS 20,000.  Rather, in each such case, the award was between NIS 7,500 to 10,000.

The three Conditional Cases share a common factor – one that distinguishes them from the other eight cases.  Whereas in the other eight cases, there was at least some clear indication that the failure to arrive at an agreement as to the appointment of an arbitrator (prior to the court filing by the applicant) was the result of foot-dragging by the defendant, in the three Conditional Cases, it does not appear that the lack of agreement (pre-filing) on the issue of selection of the arbitrator was caused primarily by foot-dragging on the part of the defendant.

Rather, in the three Conditional Cases, there was some indication as to a good faith disagreement between the parties as to either (a) the identity of the arbitrator or (b) the propriety of the timing of the applicant’s filing with the court.  It appears that the existence of a good faith disagreement as to one or both of these issues renders it less likely that the Tel Aviv court would impose the “maximum” costs of NIS 20,000.  Put slightly differently, absent a showing by the respondent of a good faith reason for disagreement on these (or similar) issues, the greater the risk to that respondent that the court will impose costs of up to NIS 20,000.

As indicated above, one or more of our future posts will address these issues regarding the Jerusalem District Court and the Haifa District Court.  (Here is a short sneak preview – the “maximum” awards in those two districts are remarkably similar to those of Tel Aviv.)


חשיבותו של סעיף שיפוט – דעותיהם של המשרדים המובילים

לאחרונה לשכת עורכי-הדין של ארה”ב הוציאה לאור ספר הנקרא  International Aspects of U.S. Litigation, ראה

שני פרקים בספר הנ”ל נכתבו על-ידי עו”ד אריק שרבי – אחד מהם הינו הפרק על תניות שיפוט בהסכמים בינלאומיים.

לרגל הוצאה לאור של הספר הנ”ל, ראינו לנכון לאסוף ציטוטים מהמשרדים הגדולים ביותר בתחום הבינלאומי אודות החשיבות של תניית שיפוט בהסכמים בינלאומיים.

בספר הנקרא International Contracts and National Economic Regulation:  Dispute Resolution Through International Commercial Arbitration,  כתב המחבר בגהרי כי תניית שיפוט יכולה להיות הסעיף הכי חשוב בכל ההסכם.  באמירה זו, מפנה המחבר לאמירה מאת שותף בכיר במשרד ווילמר הייל (וושינגטון);

משרד די. אל. אי. פייפר כתב (בשנת 2014) כי, בהסכם בינלאומי, עניין השיפוט הינו אחד הנושאים הכי חשובים.  ראה

DLA Piper

משרד בייקר אנד מקנזי כתב (גם בשנת 2014) כי הסכם בינלאומי תמיד צריך לכלול תניית שיפוט.  ראה


משרד גודווין פרוקטור כתב (אף זה בשנת 2014) כי תניית שיפוט הינה קריטית בכל הסכם וקל וחומר בהסכם בינלאומי.  ראה


משרד בראדלי כתב (אף הוא בשנת 2014) כי כדאי להשקיע את הזמן הנדרש בתניית השיפוט מכיוון שבמקרים רבים לסעיף הזה תהיה השפעה רבה בנוגע לכל סכסוך.  ראה


Israeli Supreme Court: Enforcing Even an “Imperfect” Foreign Judgment

© 2017 Sherby & Co., Advs.

This is our third (and presumably final) post regarding the Israeli Supreme Court’s decision in JSC VTB Bank v. Margolis (Civil Appeal 1948/15, March 6, 2017).  Our first post dealt primarily with the Russia-related issues from the JSC case, and our second post dealt with the Court’s express holding that, for purposes of determining whether a non-Israeli court properly exercised jurisdiction over a judgment-debtor, consent to the jurisdiction of that court may include implied consent.

This post discusses the availability of the defense, under Israel’s Enforcement of Foreign Judgments Law (1958), that the respondent (defendant before the foreign court) did not receive a “reasonable opportunity” to present his defense in the proceedings before the foreign court (the “Lack of Reasonable Opportunity Defense”).

Summary of Facts:

The JSC case arose from multiple guaranties executed by Yevgeny Margolis, a dual Russian-Israeli citizen, in favor of Russian banks that had given loans to corporations that he controlled.

In each of the guaranties that Margolis signed, he (a) listed an address in Moscow as his address for purposes of receiving notices concerning the guaranties (the “Contractual Address”), and (b) committed to notify the bank in the event of a change of his address.

However, at the time of execution of those guaranties, Margolis in fact was not residing at the Contractual Address (even though his daughter and ex-wife were living there).  It was also undisputed that, although the notice provision did not accurately set forth Margolis’s address, he never notified JSC of any change of address.

In October 2008, Margolis left Russia for Israel, and a mere two months later (December 2008), liquidation proceedings against his companies began.

Because the corporate borrowers (as noted, entities under the control of Margolis) defaulted on the loans, JSC sued Margolis – in Moscow, based on the guaranty agreements.

As noted above, even though Margolis was not residing at the Contractual Address, his former wife and his daughter were living there.  (Para. 15)

JSC served court papers at that address and then filed, with the Moscow court, documents purporting to be confirmations of service.  JSC subsequently obtained default judgments against Margolis in the total amount of approximately US$14 million.

When JSC commenced proceedings in Israel to enforce the Russian judgments, Margolis asserted that (a) he was never served with court papers concerning the Russian proceedings against him, (b) he did not know of those proceedings, and (c) he could not have known of them.  (Para. 10)  Margolis argued that, on these grounds, he proved the Lack of Reasonable Opportunity Defense and that, therefore, the Russian judgments should not be enforced in Israel.

Israeli Supreme Court’s Analysis:

The Israeli Supreme Court largely sidestepped the question of whether service of papers at the Contractual Address complied entirely with Russian procedure.  The Court concluded that the answer to that question was not dispositive on the issue of proof of the Lack of Reasonable Opportunity Defense – for more than one reason, as described below.

First, the Supreme Court observed that the Moscow court apparently was convinced that the evidence of service of process upon Margolis, consistent with Russian law, was sufficient.  Therefore, as far as Israeli law is concerned, any contention by Margolis that service under Russian law was inadequate should have been raised in an appeal in the Russian court system.  (Para. 15)

Second, the Israeli Supreme Court appeared to be convinced that some documentation related to the lawsuit(s) brought by JSC was in fact served at the Contractual Address, noting in particular that Margolis’s daughter and his former wife resided at that address at the relevant time.  (Paras. 15-16)  The Supreme Court went so far as to conclude that it is “logical” that the signatures on the confirmations of service were affixed by someone who lives at that address – namely, either Margolis’s daughter or his ex-wife.  (Para. 16).  The Court further observed that Margolis could have presented testimony from his ex-wife or from his daughter on this issue and that his failure to present such evidence should be held against him.  (Id.)

In so holding, the Supreme Court in JSC essentially ruled that, once the judgment-creditor presents at least some evidence that service of process was carried out at an address reasonably associated with the defendant (judgment-creditor), the burden is upon that defendant to present evidence that such service was insufficient to put him on notice of the proceedings.

As for the default nature of the Russian judgments, the Supreme Court did not consider that to be a grounds for holding that Margolis met his burden of proof as to the Lack of Reasonable Opportunity Defense:

… more than once it has been held that the fact that the foreign judgment was given by default, ex parte, does not in and of itself constitute the defense under section 6(a)(2) of the [Enforcement of Foreign Judgments] Law. . ., and this is (among other things) because of the concern that defendants will refrain from participating in the foreign proceedings for the very reason that they wish to prevent the enforcement of the judgment in another country.  . . .  For a similar reason, it has been held that the test is not whether the defendant knew of the proceedings, but whether service of process was reasonable in the eyes of the court.  . . .  The emphasis is on the question of whether the defendant had a reasonable opportunity to bring his matter before the foreign court prior to judgment being rendered against him, and the answer to this question will not necessarily be negative if the service was not 100% consistent with the procedural rules practiced before the foreign court, or if the hearing in the case was not the pursuant to these rules.  The issue [of reasonable opportunity] is determined through Israeli eyes, based upon the view of an Israeli court as to whether there was a fair hearing.

(Para. 14)

The Supreme Court concluded that, under these circumstances – in particular, where (a) (some form of) service was carried out at the Contractual Address, and (b) the defendant failed to comply with his contractual obligation to notify the lender of his actual/updated address – if an Israeli court were to accept the Lack of Reasonable Opportunity Defense, doing so would encourage similar attempts (by debtors) to evade their legal obligations.  (Para. 15)

The Supreme Court largely saw the case against Margolis as one of estoppel:

  • Because the court papers were sent to the address that the defendant provided to the bank as his address for receiving notices, the defendant is estopped from asserting that he did not know about the proceedings;
  • In order to determine whether the Lack of Reasonable Opportunity Defense could apply, the “procedural fairness” of the foreign proceeding must be examined;
  • There is no defect in a legal proceeding that is commenced by sending court documents to the address that the defendant himself provided in his contract with the bank; and
  • It is not for the Israeli court to engage in a meticulous and detailed examination as to whether each and every confirmation of service complied with the law of the country in which the judgment was rendered.

(Para. 18)

Take-Aways from JSC v. Margolis:

JSC was not the first case in which Israel’s Supreme Court gave its blessing to enforcing a foreign default judgment.  But in JSC, the Court expressed a relatively low level of interest (for the reasons described above) as to whether the Russian procedures for carrying out service of process were fully complied with.  In this respect, JSC is one of the most pro-enforcement decisions ever rendered by Israel’s Supreme Court.

The JSC decision is good news for banks and other entities that place importance in “boilerplate” clauses such as “notice” provisions.  No lender would agree to make a loan when the primary obligor is a flight-risk, and a notice provision – coupled with the obligation to update – is routinely relied upon by lenders to minimize such risk.  In JSC v. Margolis, the Supreme Court essentially told lenders that Israeli law respects their need to rely upon such contractual provisions and that, in the event that a default judgment were to be rendered in favor of the lender, the default nature of the judgment (in and of itself) would not be an obstacle to enforcement.



Israeli Court Curbs Runaway Arbitrator [bilingual post]

© 2017 Sherby & Co., Advs.

When an arbitrator acts improperly, the ADR community can either lament such conduct or – if it is stopped by a court – praise the court’s action.

Or possibly both.

In Case No. 9294-05-1 (Feb. 2, 2017), the District Court of Jerusalem recently rejected a claim brought by an arbitrator (we will call him “Oliver”) for the payment of arbitrator fees.  The court also required the arbitrator to refund fees that had been paid to him by the parties.

The underlying dispute was one between a land developer and a purchaser.  The arbitrator, Oliver, was not a lawyer but rather an engineer and real estate appraiser.

The arbitrator asserted that he devoted more than 1,000 hours to the case.  In the Court’s brief discussion of the issue, it suggested that 1,000 hours was excessive.  But the clear-cut error was that the arbitrator ignored a March 15, 2016 joint (presumably written) notification by the parties (the litigants before him) that they were not interested in his continuing in his position as an arbitrator.  In fairness to Oliver, the notification from the parties was arguably ambiguous — there is a difference between saying “we settled our dispute” and saying “we do not want you to continue.”

But despite the joint notification’s ambiguity, it was clear enough to have put the arbitrator on notice either to stop his work on the case or at least seek clarification from the parties.  Instead, the arbitrator issued an arbitral award on April 10, 2016 – more than three weeks after receipt of the parties’ joint notification — and requested over $120,000 in arbitral fees.

Because an arbitrator owes a fiduciary duty to the parties before him, if the kind of conduct described in Oliver’s case had been carried out by a lawyer, it is likely that the District Court would have referred this matter for disciplinary action by the Israeli Bar Association.  (There is no indication in the Court’s decision that the Court would be referring Oliver to disciplinary action by any licensing authority in his field(s).)

There are some in the Israeli ADR community who have been very vocal in their view that a non-lawyer should never be appointed as an arbitrator.  This decision will probably add fuel to that fire.


בית משפט ישראלי מרסן את הבורר הבורח

כאשר בורר פועל בצורה לא נאותה, קהיליית יישוב הסכסוכים אלטרנטיביים (ADR) יכולה לגנות התנהלות שכזו, או — אם תופסק על-ידי בית המשפט — לשבח את פעולת בית המשפט.

או אולי גם וגם.

בתיק הפ”ב 9294-05-16 דחה בית המשפט המחוזי בירושלים לאחרונה תביעה שהגיש בורר (נקרא לו “אוליבר”) לתשלום שכ”ט. בית המשפט גם דרש מהבורר להחזיר את הכספים ששולמו לו על ידי הצדדים (בעלי-הדין לשעבר).

הסכסוך במקרה דנן היה בין יזם נדל”ן לבין רוכש. הבורר, אוליבר, אינו עורך-דין אלא מהנדס ושמאי מקרקעין.

בתביעתו בפני בית המשפט, טען הבורר כי הקדיש יותר מ-1,000 שעות לתיק. בדיון הקצר של בית המשפט בנושא זה, רמז בית המשפט כי 1,000 שעות הינה כמות מוגזמת. אך ההתנהגות הבלתי-מקובלת והברורה ביותר היתה שהבורר התעלם לחלוטין מההודעה המשותפת (שכנראה הייתה בכתב) מאת הצדדים (בעלי-הדין לפניו) כי לא היו מעוניינים בהמשך תפקידו כבורר. למען ההגינות כלפי אוליבר, ניתן לומר כי ההודעה של הצדדים היתה עמומה — יש הבדל בין לומר “יישבנו את הסכסוך בינינו” לבין “אנחנו לא רוצים שתמשיך”.

אך למרות עמימות ההודעה המשותפת, היא הייתה מספיק ברורה כדי שהבורר יפסיק את עבודתו או לכל הפחות יבקש הבהרה מן הצדדים. במקום זאת, הוציא הבורר פסק בוררות ביום 10.04.16 — יותר משלושה שבועות לאחר קבלת ההודעה המשותפת של הצדדים — וביקש שכ”ט מעל 120,000 דולר.

מאחר שלבורר חובת נאמנות כלפי בעלי-הדין לפניו, אם ההתנהלות המתוארת במקרה של אוליבר הייתה נעשית על-ידי עורך-דין, סביר להניח שבית המשפט המחוזי היה מפנה את העניין לוועדת  המשמעת של לשכת עורכי-הדין הישראלית . (אין כל אינדיקציה בהחלטת בית המשפט כי הוא יפנה את אוליבר להליך משמעתי אצל גורם מוסמך כלשהו בתחום(ים) שלו.)

בקהיליית יישוב הסכסוכים אלטרנטיביים הישראלית, ישנם שהיו מאוד ווקאלים בדעתם, כי אין למנות כבורר אדם שאינו עורך-דין. ייתכן כי ההחלטה הנ”ל תחזק עמדה זו.