Legal Updates

An arbitration clause in a uniform consumer contract is valid as long as it does not grant the service provider an unfair advantage over the client

May 18, 2021

A customer and a provider of services in the field of surrogacy got into a conflict and the service provider demands that the dispute be referred to arbitration due to the existence of an arbitration clause in the agreement.

The Court held that the arbitration clause does not constitute a discriminatory clause in a contract of adhesion. The Israeli Contracts of Adhesion Act enables the cancellation of a clause in an adhesive contract if it discriminates against the client and stipulates that an arbitration clause is discriminatory when it is grants the service provider greater power to affect the arbitration than to the client such as the right to determine the venue of the arbitration or the arbitrator’s identity. It is not sufficient, therefore, that the arbitration clause is part of an adhesive contract, but it is necessary to examine the totality of the circumstances and whether the clause gives the service provider an unfair advantage that may deprive the customer. When the terms of the proposed arrangement are acceptable and reasonable, they do not eliminate the client's ability to appeal to the Courts or restrict it, and therefore the clause is not deemed discriminatory. Here, the provisions of the contract provided that the identity of the arbitrator shall be set by consent of the parties or through a neutral third party. The language of the arbitration clause did not give the service provider a significant advantage over the client, and there is no apprehension that the language of the clause will deter the client from taking legal action. Therefore, the arbitration clause is not a discriminatory clause in an adhesive contract and the case was transferred to arbitration.