This article was featured in Jus Mundi‘s 2024 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHORS:
Lina Makhuli, Partner at Barnea Jaffa Lande & Co.
Ksenya Zemsckov, Senior Associate at AYR – Amar Reiter Jeanne Shochatovitch & Co.
Myriam Feinberg, Senior Associate at Gornitzky & Co.
Shay Lakhter, Associate at S. Horowitz & Co.
Introduction – Israeli Legislation on International Arbitral Award Enforcement
The year 2024 marked a significant year for International Arbitration (“IA”) in Israel, with several key developments that reinforced its position in the global dispute resolution landscape as an accessible and user-friendly forum for enforcing IA awards.
Almost a year passed since Israel adopted the UNCITRAL Model Law on International Commercial Arbitration (2006), by enacting a new International Commercial Arbitration Law, 5784-2024 (“ICAL”). To complement the ICAL, on 12 January 2025, the Israeli Ministry of Justice published draft Procedure Regulations on International Commercial Arbitration, 5785-2025, which intend to inter alia set clear guidelines for IA award enforcement.
While much anticipated by Israeli IA practitioners, the ICAL did not substantially alter the legal principles of IA award enforcement in Israel. Prior to the ICAL, the framework for IA award enforcement was governed by Article 29a of the Arbitration Law, 1968-5728 (“Arb.Law”), which provides that, when seeking to enforce an IA award, if Israel is a signatory to an international convention governing that award’s enforcement, the enforcement application must comply with the provisions of that convention. This left a vacuum where no convention existed.
The most significant modification of enforcement rules for IA awards in Israel lies within Article 45(a)(1) of the ICAL, which mirrors the closed list of grounds for refusing to recognize or enforce an IA award specified in Article 34 of the UNCITRAL Model Law, and aligned with Article V of the New York Convention (1958) (“NYConv”). This modification both places the NYConv grounds as the default enforcement rules for IA awards, and fills the vacuum identified above.
Notably, according to provision 3 of the ICAL, these grounds do not apply if an IA award is governed by another specific convention, which would take precedence. According to the ICAL’s Explanatory Notes No. 1651 (p. 1242), while this rule initially aimed to ensure Israel’s first and foremost commitment to NYConv, it was eventually formulated to resemble provision 29a of Arb.Law (referenced above), as a provision allowing easy implementation of any convention to which Israel is a party.
In parallel, Israel recently amended Article 103 of the Israeli Courts Law, 1984-5744, incorporating the United Nations Convention on International Settlement Agreements Resulting from Mediation (2019) (“Singapore Convention on Mediation”) into Israeli law. As a result, mediation settlements explicitly governed by the Singapore Convention are now enforceable by Israeli Courts.
These recent legislative developments have been complemented through recent rulings by Israeli Courts. Two of those are discussed below.
Israeli Case Law on the Enforcement of IA Awards is Consistent with Global Principles
Given that these legislative developments are recent, their practical implications have yet to be examined within the context of Israeli jurisprudence. Having said that, a recent District Court ruling has reaffirmed the Israeli judiciary’s consistent commitment to enforce IA awards in line with NYConv.
In CC 15299-03-24 Hilton Worldwide Manage Limited v. Michel Ohayon (25.10.2024), a British corporation, Hilton Worldwide Manage Limited (“Hilton”), sought to enforce a monetary award of approximately NIS 99 million, rendered by a tribunal under the rules of the International Chamber of Commerce, against Mr. Ohayon, a French national, thought to hold assets in Israel. The Court enforced the award and ordered Mr. Ohayon to pay Hilton’s costs at the remarkably high amount of NIS 265,303.
Since the proceedings were initiated prior to the enactment of the ICAL, the judgment was issued relying on the Arb.Law. The Court stated, however, in obiter, that the enactment of the ICAL did not alter or affect the enforcement framework analysis. First, because it did not change the substantive law applicable to foreign arbitration awards as defined by the Arb.Law. Second, and more importantly, because the provisions of the NYConv remained applicable.
On the merits of the enforcement proceedings, the Court considered that Mr. Ohayon had failed to properly object to the enforcement of the award, noting that he did not seek to substantiate any of the grounds set forth in Article V of the NYConv. Therefore the Court determined that Mr. Ohayon did not present (and hence did not prove) any valid argument set out in the NYConv (including inter alia the grounds listed in Article V(1), and grounds for refusal under Article V(2)).
Among other arguments, Mr. Ohayon maintained that the Court could not enforce the awards because Hilton did not initially seek recognition and enforcement at the seat of the arbitration in London, and because a parallel recognition and enforcement petition was being examined in France.
The Court again rejected Mr. Ohayon’s arguments, affirming that the NYConv does not require prior confirmation of an award at the seat, and that it permits parallel enforcement proceedings in multiple jurisdictions, as long as those proceedings do not result in double recovery.
This judgement still awaits the Supreme Court’s scrutiny, as Mr. Ohayon filed an appeal on 30 December 2024 (CA 71499-12-24).
Another recent judgment rendered after the enactment of the ICAL involves the very first discussion held by Israeli Courts on the matter of an ICSID award enforcement. In CC 11552-02-23 Sun-Flower and others v. Spain (ongoing), Sun-Flower filed for enforcement of an ICSID award, in which a tribunal found that Spain’s regulatory changes in the renewable energy sector breached the Energy Charter Treaty (1994) (“ECT”), and awarded Sun-Flower and others EUR 49 million worth of damages. Although a subsequent application for the annulment of the ICSID award (filed by Spain in accordance with Article 52 of the ICSID Convention), was dismissed by the ad hoc Committee, Spain has yet to comply with the award, prompting Sun-Flower to apply for the enforcement of the award inter alia in Israel.
Although the enforcement proceedings are still ongoing, a ruling of the Supreme Court in CA 5544/24 Sun-Flower Olmeda GMBH & Co. KG v. Kingdom of Spain (23.7.2024) (“Sun-Flower”), on security to guarantee payment of the award, offers an insight into the parties’ arguments related to enforcement.
The Supreme Court’s decision reveals that Sun-Flower might face hurdles in enforcing the award. Spain is resisting the enforcement of the award, asserting inter alia that there was no valid arbitration agreement; that it enjoys sovereign immunity under the Israeli Foreign States Immunity Law, 5769-2008; that although Israel has ratified the ICSID Convention, it has not incorporated the Convention into its domestic legal framework; and that enforcement of the award would violate European Union law.
Spain’s objection to the enforcement of the award in Israel represents the latest chapter in its ongoing resistance to complying with intra-EU awards, which served grounds for the European Commission’s request to join the enforcement proceedings before the District Court. While Spain succeeded in its efforts to block enforcement in Sweden, it has been unsuccessful so far in convincing Courts outside the EU, notably in Australia and the United Kingdom. It remains to be seen which approach the Israeli Courts will take in this context.
Security to Guarantee Payment of the Award
Requests to enforce IA awards are sometimes accompanied by parallel applications for security to guarantee payment of the award. Israeli Courts have taken a strict approach in granting such security, as illustrated by the aforementioned cases and discussed below.
In the Hilton case, the District Court confirmed that it has the authority to order security in enforcement proceedings, and that it may choose to delay reviewing an objection to enforcement until such security is posted. The Court similarly rejected Mr. Ohayon’s argument that the Court’s power to order security is limited solely to set-aside proceedings.
Despite its authority to order security, the Court denied Hilton’s request for granting security, asserting that, once an award is enforced, as in this case, there is no need to grant security as a condition for reviewing an objection to enforcement, since enforcement has already been granted. The Court also denied Hilton’s assertion that security is required to ensure compliance with the enforced award, stating that once an award is enforced, it should be executed. The Court also expressed concern that requiring security after confirmation of the award could create the false impression that the posting of the security, rather than the actual compliance with the award, would satisfy the payment obligation. Given this, the Court concluded that there was no need to order security.
In the Sun-Flower case, the Israeli District Court similarly denied Sun-Flower’s application for security (a decision later upheld by the Supreme Court). The District Court concluded that Sun-Flower had failed to meet the necessary requirements for granting interim relief, including security. Specifically, it found that Sun-Flower did not establish that the chances of enforcement were high and that the “balance of convenience” leaned towards it. In other words, the Court determined that the potential harm to Sun-Flower from denying security would not outweigh the harm from granting it. A key argument against Sun-Flower was its assertion that the amount of the award was “insignificant” for Spain, which the Court interpreted as an admission that security was unnecessary.
Conclusion
Current legislative developments, along with recent judicial rulings, establish Israel’s position as a favorable jurisdiction regarding enforcement of IA awards, in matters governed by conventions signed and implemented by Israel, such as the NYConv. Looking ahead to 2025, and considering the complex nature of international disputes, there remains some uncertainty related to how the Courts will choose to implement the provisions of ICAL and how it will co-exist with well-established practice of the Arb.Law.
ABOUT THE AUTHORS
Lina Makhuli is a Partner in international arbitration and litigation at Barnea Jaffa Lande & Co. She has completed her LL.M at Columbia University in the City of New York, and she has vast experience in all kinds of dispute resolution proceedings that involve civil, commercial, administrative, and international law. Lina is a co-founder and a member of the Executive Committee of IL VYAP.
Ksenya Zemsckov is a Senior Associate at AYR – Amar Reiter Jeanne Shochatovitch & Co. with a decade of experience before Israeli Courts and international arbitration institutions, specializing in complex and high-profile commercial and construction disputes, award enforcement and urgent interims. Ksenya is one of the few practitioners specializing in international delay disputes with emphasis on project scheduling and critical path management disputes. Ksenya is a frequent article publisher on Jus Mundi and a co-founder and member of the IL VYAP Executive Committee.
Dr. Myriam Feinberg is a Senior Associate in international arbitration at Gornitzky & Co. Myriam has experience in both commercial and investment arbitration and acts as tribunal secretary. She has a PhD in international law and has published extensively on issues of counter-terrorism and human rights law. Myriam is a co-founder and a member of the Executive Committee of IL VYAP. Myriam was ranked as Rising Star in the Legal 500 EMEA Rankings for 2024 in International Arbitration.
Shay Lakhter is an Associate in the Public International Law and International Arbitration departments of S. Horowitz & Co. where he specializes in international dispute resolution, commercial and investment arbitration conducted under various arbitration rules (ICC, LCIA, UNCITRAL and ICSID). Prior to joining S. Horowitz & Co., Shay worked for three years in one of the case management teams of ICSID.
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