Arbitrator or Judge – Which is Preferrable and When Legal Proceedings in Civil Courts or Arbitration?

Background

Civil disputes can be resolved through a court of law. The panel that sorts out the dispute between the parties may be a court judge or an arbitrator in the framework of a private procedure of arbitration.

A condition for the existence of arbitration is the existence of written consent from the parties, regarding a decision within this framework. Consent can be reached in advance within the framework of the contractual engagement between the parties, or consent can even be given after the outbreak of the dispute. Furthermore, in some cases, with the consent of the litigants, a case can be transferred from court and be conducted with an arbitrator.

Under the Arbitration Act, there are no specific qualifications that constitute a condition of an arbitrator’s tenure; allegedly, anyone may serve as an arbitrator. At the same time, it is clear that there is a pronounced advantage to proficiency in the law in the areas of the dispute (commercial, engineering, or others). The parties can agree among themselves on the identity of the arbitrator, and in the absence of consent, they can authorize an institution to choose the identity of the arbitrator. In the absence of agreement on this, the court will appoint a specific arbitrator to arbitrate the dispute.

Advantages and Disadvantages

Duration of the Procedure

 In general, the most prominent advantage of arbitration management is the time dimension. Whereas a proceeding in an Israeli court may take years, by virtue of the arbitration being private, it is quicker and more efficient. There are many disputes that are not very complex from a factual or legal aspect, and there is no need for more than one hearing before the arbitrator to listen to the dispute and reach a decision. This, while the procedure in court is standard and usually cannot be shortened. Additional advantages to an arbitration procedure over a court are the confidentiality of the procedure, which is not public and is not published on any databases, as well as the atmosphere, which is defined as less rigid and less formal.

The Cost of the Procedure

 Another difference exists in the cost of conducting the procedure. The arbitrator’s fee is paid by the parties, whereas in legal proceedings that are conducted in a court of law, the cost amounts to court fees, which are a function of the financial scope of the dispute (usually). Thus, the smaller the financial scope of the dispute and, accordingly, the lower the court fee, the element of the arbitrator’s fee to the relevant parties is larger.

The Law Selected

 The parties may select the manner in which the arbitration is conducted, in terms of the scope of the arbitrator’s authority, how the arbitration is conducted in terms of the rules of procedure and the rules of evidence, the law that will apply to the arbitration (Israeli law or foreign law), the scope of discretion granted to the arbitrator and of course, the right to appeal the arbitrator’s decision and the manner in which the appeal is carried out. In contrast, in a court of law, the flexibility granted to a judge is considerably smaller.

Authority

 An additional difference between a decision of arbitration and a court ruling is that the arbitration decision only applies to the parties that appointed the arbitrator and has no validity for other parties.

Unlike a judge, whose decision authority is prescribed by the Courts of Law Act, the arbitrator’s authority is forever a result of the authority granted to him by the parties to the arbitration agreement, and he is not allowed to exceed it. The arbitrator does not have the authority to issue temporary orders towards third parties and/or government authorities, such as a Stay of Exit Order or Foreclosure Orders. The arbitrator is also not authorized to issue subpoenas for witnesses who do not agree to testify willingly. In order to issue orders such as these, he must apply to a court of law and be assisted by a judge’s order.

The Appeal

The legal proceedings at a court of law end with the ruling of a judge, years after the procedure was put into motion. The party who lost in the procedure has the right to appeal before a higher court. Thus, the legal process continues on for longer.

In the arbitration process, the default is that the arbitrator’s decision is final and there is no appeal. At the same time, the parties have the option to specify in the arbitration agreement that the arbitrator’s decision may be appealed, and in this case, they must choose between two appellate options.

The first option – appealing to an arbitrator (in accordance with Section 21a to the Arbitration Act). In this case, the appeal takes place before a different arbitrator, and this is in contrast to the appellate procedure in a court of law, which is conducted before a panel of three judges (in most cases). The prerequisite for submitting an appeal with this option, is that the possibility of an appeal to an arbitrator be anchored by the parties under the arbitration agreement that they have signed. They must specify the time period granted to the parties in which to appeal, the manner of submitting an appeal, the manner of conducting the appeal and the date on which the ruling of the appeal must be given. In addition, they must determine that the arbitrator must explain and justify his decision and document the arbitration meetings.

The second option – Appeal with permission to a court of law. This option has two cumulative prerequisites, and they are consent to the right to apply to a court of law to appeal with permission, in the event that there is a fundamental error that may cause a miscarriage of justice as well as consent that the arbitration meetings be documented, the arbitrator rules according to the essential law and explains and justifies his ruling.

The Issuance of the Arbitrator’s Decision

Arbitration ends with the arbitrator’s decision. Unless the losing side does not fulfill its obligations, enforcement of sanctions cannot be applied against him immediately. The winner of the judgement must perform an advance process of confirmation of the arbitrator’s ruling in a court of law, and only after the arbitrator’s decision is confirmed, it can be enforced in execution proceedings and subject to the parties not having consented to appellate proceedings as stated.

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