In 2014, a company entered into an agreement to distribute Huawei products in Israel and the Palestinian Authority, which included a clause stipulating arbitration in Italy. In 2016, the controlling shareholders of the company formulated agreements with Huawei on distribution terms, including minimum quantities, but a new agreement was not signed. When Huawei terminated the agreement due to non-compliance with the minimum quantities, a claim was filed against it in Israel despite the arbitration clause.
The Supreme Court held that the dispute will be heard in Israel. An arbitration agreement obligates only the parties thereto and not their shareholders, even if they hold all the shares of a party to the arbitration agreement. An exception to the rule, which is not applicable in this case, is when the interpretation of the arbitration agreement and the contractual relationship between the parties indicates the existence of consent to be part of the arbitration process; cases involving a person to whom the right or obligation of a party to an arbitration agreement has been assigned; as well as cases in which an agreement on arbitration exists but a party attempts to evade it under procedural pretenses.