The Jerusalem Arbitration Center: “Merchants of Peace” in the Middle East

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E667E303-E527-42B7-8852-817CC3184CCBDecember 5, 2013

On 18 November 2013, a momentous event in the history of international commercial arbitration took place: a first-of-its-kind arbitration institution designed to resolve commercial disputes between Israeli and Palestinian businesses was launched in East Jerusalem.

The Jerusalem Arbitration Center (“JAC”) is a private initiative supported by the Paris-based International Chamber of Commerce (“ICC”) and its renowned International Court of Arbitration, and led by the Israeli and Palestinian ICC National Committees. It is intended to increase trade and investment across this troubled border and strengthen economic integration in the region by providing neutral, efficient, and effective dispute resolution services to Israeli and Palestinians businesses.

The JAC has adopted the tried and true ICC arbitration model, adjusting it to local conditions. The JAC Rules resemble the ICC Rules in many respects, including the method for nominating and appointing arbitrators, the use of Terms of References, and the scrutiny of arbitral awards by the JAC Court. The Rules were adapted, however, to reflect regional particularities and the type of disputes the JAC is expected to administer. For instance, the fees and expenses associated with JAC arbitrations were significantly reduced from those of the ICC, and the default seat of arbitration was fixed as a ‘virtual’ Paris seat (i.e., excluding parties’ ability to apply to the French courts to set aside arbitral awards, in accordance with Article 1522 of the French Code of Civil Procedure), unless the parties agree otherwise.

Moreover, in addition to adopting the jurisdictional threshold familiar from ICC practice, which requires that a JAC arbitration agreement exist prima facie, the JAC Court must also confirm three additional jurisdictional requirements under the JAC Rules before a case can be admitted. First, the amount in dispute as stated in the Request for Arbitration must not exceed $7 million; second, the dispute must be a business dispute; and third, the dispute must relate to Israel, the West Bank and the Gaza Strip, including East Jerusalem. In the event that the JAC Court finds that one or more of these conditions is not met, the dispute will be transferred to the ICC Court and be administered in accordance with the latter’s Rules of Arbitration, unless the claimant withdraws its claims or the parties agree otherwise. In special circumstances, the JAC Court may seek the approval of the ICC Court to administer a case even if one of the above conditions is not met.

To ensure neutrality, professionalism, and international presence and support, the JAC Court is comprised of nine arbitration experts, with an international President (Mr. Yves Derains), an international Vice-President (Mr. Eduardo Silva Romero), two Court Members appointed by each of ICC Israel and ICC Palestine, and three international Court Members. The Secretariat is headed by an international Secretary General (Ms. Nadia Darwazeh) and includes an Israeli and a Palestinian Deputy Secretary Generals.

In addition to efficiency and impartiality, another important hallmark of the JAC is the enforceability of its awards in Israel and Palestine. Although mechanisms for reciprocal enforcement of court decisions were included in the Oslo Accords, these have proven ineffective as Israeli court decisions are difficult to enforce in Palestine and Israelis generally cannot appear before Palestinian courts. This, in turn, has led to inefficient commercial relations between the two sides, and bilateral trade has suffered as a result. The enforcement of JAC arbitral awards, on the other hand, has been coordinated with the appropriate judicial authorities in both jurisdictions, and such awards will be enforced in accordance with Israel’s and Palestine’s respective arbitration laws.

In times of diplomatic uncertainty in a region that is known for conflict rather than its resolution, the JAC presents an innovative use of a time-tested mechanism. The introduction of an impartial, professional, and enforceable procedure for resolving commercial disputes in an otherwise hostile environment represents both a new era in Israeli-Palestinian trade relations and a new frontier for international commercial arbitration.

Source: IntLaw GRRLS

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