Legal Updates

An agreement defining relations between parties will prevail over a later agreement dealing with a specific matter

October 23, 2017

An Israeli company executed an exclusive distribution agreement of products of an Irish company in Israel, which agreement included an exclusive Israeli arbitration clause.  About two months later the two companies (both as one side) contracted a third party for distribution of a specific product with an arbitration clause in London, England.  About six years later the Israeli company filed a claim to the Tel Aviv Court against the Irish company who sold products directly to the third party in breach of the distribution agreement and the Irish company sought to cease the proceedings due to the arbitration clause in England.

The Court held, that the distribution agreement is the document defining the parties' relations and therefore, even if they later jointly entered into an agreement with a third party regarding a specific matter, the first agreement with the Israeli arbitration clause will prevail. The distribution agreement included an arbitration clause, but because the Irish company made it clear that it intends to open arbitration proceedings in England, while ignoring the arbitration clause in Israel, the Court will not honor its request to transfer the case to arbitration.