Disputes

Courts and tribunals

Are there any specialised tribunals that are dedicated to resolving construction disputes?

There is no specific construction court in Israel. Litigious disputes are resolved either in court or in arbitration proceedings.

Dispute review boards

Are dispute review boards (DRBs) used? Are their decisions treated as mandatory, advisory, final or interim?

There are no mandatory or statutory bodies that are permanently retained to function as DRBs. Parties may, in the framework of their agreements, require the appointment of a DRB to function as a preliminary stage prior to approaching an arbitrator or arbitrational tribunal. In such an instance, the parties will determine the powers of the DRB, the extent to which and in what respect its decisions will be binding and any appeal procedures that emanate from it.

Mediation

Has the practice of voluntary participation in professionally organised mediation gained acceptance and, if so, how prevalent is the practice and where are the mediators coming from? If not, why not?

Mediation is usually absent from major construction contracts as an option that has to be extinguished prior to initiating arbitration proceedings. Notwithstanding the inclusion of clauses that support amicable settlement between parties prior to commencing litigation in certain contracts, mediation is not necessarily specified as the mandatory route for achieving this goal. However, mediation is frequently used in Israel, and construction cases are not exceptions in this regard. As courts find these kinds of cases difficult to decide, they encourage parties to conduct mediation proceedings.

With regard to the origin of the mediators, in most instances in Israel, the mediators will be Israeli lawyers or retired judges who are familiar with the field of construction. It is essential that the mediator is familiar with Israeli law, as this is the basis on which an accurate assessment of the parties’ risks will be determined. In complicated engineering cases, it is not unusual that the mediator will be assisted by an engineer with the relevant expertise.

Confidentiality in mediation

Are statements made in mediation confidential?

Yes. In accordance with the Courts Regulations (Mediation) 1993, all material and statements made within mediation proceedings are strictly confidential and parties are not allowed to use them outside the proceedings.

Arbitration of private disputes

What is the prevailing attitude towards arbitration of construction disputes? Is it preferred over litigation in the local courts?

In construction disputes – especially regarding megaprojects and even more so when the project includes international clients – arbitration is preferable as the parties have a greater ability to be involved in the selection of the arbitrators (including the option to select engineers as arbitrators), the venue, the schedule and the language in which the arbitration proceedings will be conducted.

Arbitration proceedings are usually more efficient when compared with court proceedings – an advantage that is crucial to the field of construction. Additionally, the decision handed down by the arbitrator carries the same authority as an order of court and can be made an order of court officially should the parties require it.

Governing law and arbitration providers

If a foreign contractor wanted to pursue work and insisted by contract upon international arbitration as the dispute resolution mechanism, which of the customary international arbitration providers is preferred and why?

No preference is mandated with respect to international arbitration providers. The parties are entitled to agree on a specific provider by subscribing to the particular rules set by it or, alternatively, adopt a universal set of rules, such as the UNCITRAL Arbitration Rules, for the dispute in question. In the former instance, the choice of the international arbitration provider will often come as a result of accessibility for the parties determined by their proximity to the provider. Accordingly, the International Chamber of Commerce would be an acceptable provider in these circumstances.

The parties also have the discretion to select the law governing the arbitration proceedings. Accordingly, it is possible that the parties will select a governing law that may differ from the national law of the county in which the arbitration is being held. While this affects the application of that country’s substantial law, the proceedings will remain subject to the procedural law of that country and, therefore, will continue to be governed thereby for the duration of the proceedings.

Dispute resolution with government entities

May government agencies participate in private arbitration and be bound by the arbitrators’ award?

If the government agency has entered into an arbitration agreement, it will be bound by the arbitrator’s award or any appeal procedures contained therein, or both.

Arbitral award

Is there any basis upon which an arbitral award issued by a foreign or international tribunal may be rejected by your local courts?

Whether an arbitral award issued by a foreign or international tribunal may be rejected by local courts will be determined in accordance with the state in which the arbitral award was given. If the relevant state is a party to an international convention to which Israel is also a party, the rules of the relevant convention will be applied (eg, the New York Convention was incorporated into Israeli law through the Regulations for the Execution of the New York Convention 5738–1978).

According to section 29A of the Arbitration Law 1968, an Israeli court may, on application, reject a foreign arbitration award to which an international convention applies and to which Israel is a party in accordance with the provisions of the relevant convention. By way of illustration, in accordance with article V(2) of the New York Convention, the recognition and enforcement of an arbitral award may be refused by an Israeli court if it believes that the differences between the parties cannot be settled by arbitration under the law of a particular country or the recognition or enforcement of the award would be contrary to the public policy of Israel.

Limitation periods

Are there any statutory limitation periods within which lawsuits must be commenced for construction work or design services and are there any statutory preconditions for commencing or maintaining such proceedings?

As a general rule, the statute of limitations for a civil claim not based upon a right in land is seven years. Specific laws that provide for shorter limitation periods exist, but these are not relevant to construction disputes. The time for the statute of limitations begins to run on the date on which the cause of action arises. There are several exceptions to this rule that are primarily caused by a lack of knowledge (and inability to reasonably obtain the knowledge) on the part of the claimant as to when the action arose.

Published in Lexology