Encyclopedia of International Commercial Litigation<\/em><\/a>\u00a0(Israel Chapter)\u00a0\u00a7 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.\u00a0 (Another way of couching the issue is the extent to which courts attempt to use cost awards to \u201cpunish\u201d foot-dragging parties.)<\/p>\nFor purposes of this examination, our firm reviewed all of the published decisions from January 2015 through December 2016 (the \u201cTime Period<\/strong>\u201d) rendered by the three busiest Israeli districts courts \u2013 the Tel Aviv District Court, the Jerusalem District Court, and the Haifa District Court.<\/p>\nIn this post, we summarize noteworthy conclusions gleaned from decisions rendered by the Tel Aviv<\/em> District Court, which is the district wherein most of the country\u2019s international commercial disputes are litigated.<\/p>\nIn 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.<\/p>\n
Cost Orders Issued by the Tel Aviv District Court \u2013 The Numbers:<\/strong><\/p>\nDuring 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.\u00a0 All eleven of those decisions were rendered by the Honorable Yehudit Shevah.<\/p>\n
Because all<\/em> eleven<\/em><\/strong> 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<\/u><\/em> mere coincidences.<\/p>\nOf those eleven cases, three (3) times the court ordered the respondent to pay NIS 20,000 of costs to the applicant (movant).\u00a0 (The amount of NIS 20,000 is roughly equivalent to US$5,500.)<\/p>\n
The sum of NIS 20,000 was the maximum<\/em> amount that the Tel Aviv District Court ordered in any of the eleven cases during the Time Period.\u00a0 The average amount of costs awarded by the Tel Aviv District Court during the Time Period was approximately NIS 11,000.<\/p>\nIn none of the eleven decisions did the Tel Aviv District Court explain its reasoning for the amount of costs awarded.\u00a0 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.<\/p>\n
A Subset \u2013 Conditional Orders:<\/strong><\/p>\nThere 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.\u00a0 (These three cases are referred to as the \u201cConditional Cases<\/strong>.\u201d)\u00a0 In none<\/em> of the Conditional Cases was the award of costs near the \u201cmaximum\u201d level of NIS 20,000.\u00a0 Rather, in each such case, the award was between NIS 7,500 to 10,000.<\/p>\nThe three Conditional Cases share a common factor \u2013 one that distinguishes them from the other eight cases.\u00a0 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<\/u><\/em> 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.<\/p>\nRather, 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<\/u><\/em> of the applicant\u2019s filing with the court.\u00a0 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 \u201cmaximum\u201d costs of NIS 20,000. \u00a0Put 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.<\/p>\nAs indicated above, one or more of our future posts will address these issues regarding the Jerusalem District Court and the Haifa District Court. \u00a0(Here is a short sneak preview \u2013 the \u201cmaximum\u201d awards in those two districts are remarkably similar to those of Tel Aviv.)<\/p>\n
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\u00a9 2017 Sherby & Co., Advs. Israel is a pro-arbitration jurisdiction.\u00a0 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.\u00a0 If the agreement does not include a mechanism for the appointment of the arbitrator by a third<\/p>\n
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