Parties to an agreement agree that a specific person is to serve as an arbitrator in any future disputes between them. Upon a conflict, the parties turn to such person, but he refuses to take upon himself the position. By refusing to serve as an arbitrator has the arbitration clause expired?
An arbitration agreement is a written agreement determining that existing or future dispute will be resolved in arbitration proceeding, whether the agreed arbitrator is named in the agreement or not. The Israeli Arbitration Law states that if the position of an arbitrator has been vacated, whether due to resignation, death or dismissal, the Court may appoint a substitute arbitrator absent "other intention" implied from the arbitration agreement.
In a particular case in which the parties agreed on a specific person to serve as the "exclusive arbitrator in any dispute between the parties" the Court held that becuase the parties expressly named the arbitrator and reffered to it as an "exclusive arbitrator,” if the arbitrator refuses the nomination one may not appoint another arbitrator .
By contrast, in many cases parties do not agree on a specific person to serve as an "exclusive arbitrator” or that non-acceptance of the appointment or a failure to serve as an arbitrator for any reason will inevitably lead to the expiration of the arbitration agreement. In such case the Court is to interpret the original intention of the parties.
For example, in a case where the parties specificlly named the agreed arbitrator the Court held that the mere fact that the parties stated the arbitrator’s name does not, by itself, mean that they intended to appoint that, and only that, specific arbitrator. The Court held that if the original intent of the parties was that an arbitrator's refusal will lead to expiration of the arbitration agreement, they had to explicitly so write .
The parties may expressly intend to a particular arbitrator. For example, if the arbitrator has unique characteristics that are important to the parties more than the actual arbitration proceeding. However, because the Court's tendency when it comes to arbitration agreements is to enforce the agreement between the parties it will be difficult to convince the Court that the arbitration agreement expired.
Because the parties often chooses arbitration over Court usually there are good reasons for this (for example, relatively quick proceedings, the ability to conduct proceedings in language other than Hebrew or the intest to choose a person with expertise in business instead of a judge who does not have the practical experience in that field), it is important to take preventive measures and, as any agreement, it is important to consult with a lawyer specializing in the field prior to signing an agreement that includes an arbitration clause, to avoid future unwanted situations.