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Turning Theory into Practice: The Struggle for Mandatory Arbitration in Israel

The Israeli judicial system has for many years been overburdened by the volume of cases that it has to hear. Statistics produced by the courts' management in 2016 stated that by the end of 2015, the average volume of cases per judge, per year in the Magistrate Court was 1,650 (a bench of 411 judges). In the District Court, it was 350 (a bench of 179 judges). This problem is accentuated by the fact that many cases can be extremely lengthy, often stretching over many years. This reality has negatively affected the rights of all parties involved in court proceedings as well as damaging the reputation of the court. Thus, there is a pressing need to reform the system to ensure the courts have sufficient resources and time to deal satisfactory with all cases.

Commentators agree that the most efficient and productive solution to this problem would be to promote the use of “alternative dispute resolution” (ADR). ADR involves disputes being resolved outside of court by one or more experts – known as arbitrators (usually a former judge or lawyer) – and is finalized by an “arbitral award," which is legally binding on both sides and enforceable by the courts. To be binding, and effective, arbitration must either be agreed upon voluntarily by contract or mandatorily enforced by statute. Since, in many cases, parties are not willing to enter into arbitration, statutory intervention is often necessary to enforce its use.

Concerns that the workload of the courts was increasing disproportionately to what they could realistically handle started to emerge around a decade ago. This led to a bill being proposed in 2011 that aimed to amend the Courts Law (1984) and impose mandatory arbitration on parties involved in new civil cases submitted to the Magistrate Court as well as cases waiting for their hearing.

According to the outline proposed in the bill, the president of the court and the president’s deputy would have the right, without the prior consent of the parties involved, to forward civil cases to arbitration proceedings. Several categories of civil claims, including tort cases would be excluded from the bill, and the Minister of Justice would have the right to further limit the categories of claims to which mandatory arbitration applies.

A special committee would select the arbitrators and recommend them to the Minister of Justice. The committee would have the power to disqualify arbitrators where appropriate. The potential arbitrator would be a retired judge or lawyer who met the required conditions to be appointed as a district judge, having no criminal past or disciplinary record, and most importantly, having no conflict of interest in any case in which he or she would be involved. Decisions by arbitrators would be open to public review, unless otherwise decided by the court. The bill also determined that the court's fees would pay the arbitrator's remuneration with the balance being paid by the State Treasury.

The bill was met by stiff opposition, including from former Supreme Court President Dorit Benisch who argued that the requested change amounted to a privatization of the judicial system, which would blur the gap between the public sector and private sector. Furthermore, opponents to the bill argued that the right of every individual to have access to the court must not be infringed upon as this ensures that cases are conducted in a pre-defined, fair and egalitarian way that prevents arbitrariness, which would not be guaranteed in arbitration proceedings. In view of these objections and the then-forthcoming elections, the bill was put on hold.

Between 2011 and 2016, MK Yariv Levin initiated an additional bill to amend the Arbitration Law (1968) and the Courts Law (1984) to include mandatory arbitration that focused on claims relating to construction defects and property damage caused by road accidents. Similar to the previous bill, the main motive behind this bill was to streamline court hearings and reduce the heavy burden placed on them.

Due to the 2008 amendment to the Arbitration Law (1968), which enabled parties to appeal an arbitral award, MK Yariv Levin highlighted that the arbitration procedure would become more comfortable and risk-free for the parties involved. In addition, procedures would be shortened, costs reduced and the overall experience would become more pleasant for those involved. Another advantage of the proposed bill would be to reduce the common situation of one party (usually the defendant), avoiding settling the dispute, knowing that legal proceedings in court take an average of up to four years to be resolved. This tactic often unfairly disadvantages the plaintiff. By implementing a mandatory arbitration system, the opportunity to engage in this practice would be reduced. However, this bill was also put on hold.

Another failed attempt to establish a mandatory arbitration system was a 2016 initiative of MK Moshe Kahlon (Minister of Finance) and the Commissioner of the Capital Markets Insurance and Savings Division in Israel. They attempted to introduce a bill establishing a mandatory arbitration institution to make it easier for insurance policyholders to deal with unnecessary postponements of their claims by insurance companies. The background of this initiative was the fivefold increase in the number of claims the insurance companies had rejected over the years. The aim was to bring forward a statutory arbitration system, financed by the insurance companies that would include independent professionals to decide whether a rejection was justified. Due to pressure from powerful insurance companies that stood to lose from this law, the Minister of Justice declined to introduce the bill into the statute book.

In addition to efforts to impose mandatory arbitration as an alternative to court proceedings, attempts have been made to introduce mandatory arbitration for other kinds of disputes, especially between employees and employers in the public sector. At the end of 2011, MK Aryeh Eldad proposed a bill to amend the Settlement of Labor Disputes Law (1957) and enforce mandatory arbitration in cases of labor disagreements in the public sector. The initiative for the bill emerged from an ongoing dispute between employees and employers in the health system in Israel and aimed to balance the essential right of employees to strike and to safeguard against abuses by employers on issues such as wage reductions and safety conditions.

Subsequently, numerous MKs have submitted similar bills attempting to reduce strikes by public sector workers for essential services by imposing mandatory arbitration, but with limited success.

More recently, mandatory arbitration in this field has gained support from Prime Minister Binyamin Netanyahu, who sees imposing mandatory arbitration into Israeli law as a top priority. However, even his attempts in the current coalition to promote the enactment of such a bill to amend the Settlement of Labor Disputes Law (1957) have so far failed due to firm opposition by MK Moshe Kahlon and others.

In conclusion, having witnessed so many failed attempts to introduce legislation imposing mandatory arbitration, one is inclined to remain skeptical about the possibility of it being successfully introduced in the near future. In light of this, one may suggest it would be best to concentrate efforts on other ways of reducing the courts’ workload, such as improving the efficiency of the judicial system and decreasing the number of lawyers (data stated that at the end of 2015, for every 100,000 citizens there were 900 lawyers and eight judges). However, although these objectives are commendable, it still holds true that in the long term, the best way to create a sustainable and efficient judicial system in the long term is to find a system of mandatory arbitration procedures attractive to the public, politicians and industry leaders alike that will position arbitration as an integral parallel procedure alongside the Israeli courts.

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