The Arbitral Elephant in the Room

(c) 2024 Eric S. Sherby

In January and February of this year, I posted a number of pieces on this blog regarding Israel’s adoption of the UNCITRAL Model Arbitration Law.  One of the primary criticisms that I expressed of the new law is that it sets a default number of three (3) arbitrators (whereas under Israel’s 1968 Arbitration Law, the default number of arbitrators is one).

The blog posts from January and February pointed out that the cost of an arbitration before three arbitrators is often at least three times the cost of an arbitration before a sole arbitrator.

At a recent arbitration conference in Tel Aviv, the speakers included some who, months earlier, advocated strongly for the new law.  Some of them remarked that the new law puts Israeli law “on par” with the law of other Western nations.

At the conference, I happen to be sitting next to a retired judge whom I have known for many years, and after we heard from about 12 speakers, he turned to me and said “not a single one of the speakers has addressed the issue of costs in international arbitration.”

That retired judge hit the nail on the head.

The elephant in the room in most conferences on international arbitration (at least in Israel) is the issue of costs.  The recent Tel Aviv conference was no exception.

When the new law was enacted, many of its advocates argued that it would usher in a new era of high tech companies choosing Israel as the location for international dispute resolution.  The conference was sans even of anecdotal evidence of any such increase.

Admittedly, the security situation must be taken into account when evaluating the effect of any new legal development on dispute resolution in Israel.

Yet even many months after enactment of the new law, we hear little if any “early reports” regarding the increased agreement by parties, at the contracting stage, to designate Israel as the pace for arbitration of future disputes.

We will continue to keep our ears open.