Investor–State Arbitration 2025 Comparisons

Israel is generally supportive of investor-state arbitration and investor-state dispute settlement (ISDS), and has consistently sought to expand its network of investment agreements, which contain standing consent to arbitration on the part of the state. Reflecting this commitment, the Israeli Ministry of Justice participated in the process to amend the ICSID Rules and Regulations, and it continues to represent the State of Israel in the UNCITRAL Working Group III discussions on possible reforms to ISDS. To date, Israel has given no indication of any intention to terminate its existing investment treaties, and only a very limited number of these have in fact been terminated, mostly in favour of revised successor agreements.

Israel is a party to both the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”). Israel signed the New York Convention on 10 June 1958, and the Convention entered into force in respect of Israel on 7 June 1959. Israel signed the ICSID Convention on 16 June 1980 and deposited its instrument of ratification on 22 June 1983, and the Convention entered into force in respect of Israel on 22 July 1983.

To date, Israel has not been named as a respondent state in any investor-state arbitration proceedings, which may be attributable, at least in part, to the reliability of its judiciary. By contrast, publicly available information indicates that Israeli investors have directly initiated approximately ten investment arbitration proceedings, with further proceedings brought by foreign corporations controlled by Israeli nationals.

Since Israel has not been named as a respondent state in any investor-state arbitration proceedings, data on industry-specific activity is correspondingly limited. Most proceedings initiated by Israeli investors have involved construction and real estate projects, with further cases in the mining and energy sectors.

Two of the most legally significant investor-state arbitrations involving Israeli parties are Phoenix Action Ltd. v Czech Republic (ICSID Case No ARB/06/5) and Metal-Tech Ltd. v Republic of Uzbekistan (ICSID Case No ARB/10/3).

In Phoenix Action v Czech Republic, Mr Vladimír Beňo was under criminal investigation in the Czech Republic for tax and customs duty evasion. Shortly after the investigation began, he fled to Israel and incorporated Phoenix Action Ltd. (“Phoenix Action”), which subsequently acquired two companies from his family members for a nominal sum. One of these companies was already embroiled in a dispute with Czech authorities concerning the freezing of assets and the seizure of documents connected to the criminal investigation.

Phoenix Action initiated arbitration against the Czech Republic under the Israel–Czech Republic bilateral investment treaty (BIT). The Czech Republic objected to jurisdiction, arguing that Phoenix Action held no protected “investment”, characterising it as nothing more than an ex post facto creation of a sham Israeli entity engineered by a Czech fugitive from justice to manufacture diversity of nationality.

The tribunal upheld the Czech Republic’s objection, in the course of which it elaborated on the definition of “investment” under the ICSID Convention. Applying the Salini criteria – contribution of money or other assets, a certain duration, an element of risk and an operation undertaken to develop an economic activity in the host state – the tribunal added two further conditions:

• that the investment be made in accordance with the host State’s laws, a condition it considered implicit even where not expressly stated in the BIT; and
• that the investment be made in good faith.

Having regard to the timing, substance and purpose of the transaction, the tribunal concluded that the operation was an artificial arrangement structured solely to secure access to ICSID jurisdiction, and characterised the claim accordingly as an abuse of process.

Turning to Metal-Tech Ltd. v Republic of Uzbekistan, this case marked only the second instance in which an ICSID tribunal declined jurisdiction on grounds of corruption, and the first in which such a finding rested on circumstantial evidence, identified through a series of “red flags”.

Metal-Tech Ltd., an Israeli company, entered into a joint venture with two Uzbek state-owned enterprises to modernise Uzbekistan’s molybdenum industry. The project, valued at approximately USD19.4 million, was financed through loans from Metal-Tech and an Israeli bank. Operations commenced in 2002, but relations between Metal-Tech and its Uzbek partners had deteriorated by 2006, culminating in bankruptcy proceedings and the transfer of assets to the Uzbek partners.

In 2010, Metal-Tech initiated ICSID arbitration under the Israel–Uzbekistan BIT, seeking USD174 million in compensation. Uzbekistan objected to jurisdiction, contending that the investment was tainted by corruption and therefore fell outside the BIT’s protection, which required investments to be made “in accordance with the laws” of the host state.

The tribunal construed the BIT’s legality requirement as applying to the establishment of the investment rather than to its subsequent operation, and found substantial evidence of corruption at that formative stage. Between 2000 and 2005, Metal-Tech paid USD3.5 million to three Uzbek consultants and USD900,000 to a further individual – sums the tribunal deemed disproportionate to the scale of the project. The consulting agreements lacked evidence of services rendered, permitted payment irrespective of performance and involved consultants possessing no relevant qualifications but significant ties to the Uzbek officials responsible for approving the investment. Payments were, moreover, routed through offshore companies, raising further transparency concerns. The tribunal concluded that these payments constituted bribery under Uzbek law. The investment accordingly failed to satisfy the BIT’s legality requirement, depriving the tribunal of jurisdiction.

As no awards are publicly known to have been rendered against Israel, there is correspondingly little practice on the enforcement of awards against the state.

Israel currently has 36 bilateral investment treaties in force, concluded with Albania, Argentina, Armenia, Azerbaijan, Belarus, Bulgaria, China, Croatia, Cyprus, the Czech Republic, El Salvador, Estonia, Ethiopia, Georgia, Guatemala, Japan, Kazakhstan, Latvia, Lithuania, Moldova, Mongolia, Montenegro, Myanmar, the Philippines, Poland, Romania, Serbia, Slovakia, Slovenia, Thailand, Türkiye, Turkmenistan, Ukraine, the United Arab Emirates, Uruguay and Uzbekistan. In addition, Israel signed an investment agreement with India in 2025, which has yet to enter into force.

Israel remains committed to expanding its network of investment treaties and continues actively to pursue new agreements while seeking to modernise those already in force.

While Israel adopted a Model BIT in 2003, its recent practice appears to reflect a shift away from that model. Israel’s newer investment agreements incorporate more contemporary provisions, departing from the original 2003 template. Notably, these agreements extend protection to the pre-establishment phase of investment and include updated commitments such as provisions on the appointment of senior management and board members, together with a prohibition on performance requirements.

Israel currently has six free trade agreements in force, concluded with Colombia, the European Free Trade Association, the Republic of Korea, Vietnam, Türkiye and the United States of America. In addition, Israel is party to an association agreement with the EU and a trade and partnership agreement with the United Kingdom, both of which are also in force.

Three of these agreements – with Colombia, the Republic of Korea and Vietnam – contain investment chapters that afford substantive protections comparable to those typically found in bilateral investment treaties, including fair and equitable treatment, full protection and security, national treatment and protection against expropriation. Each of these three agreements also embodies Israel’s consent to submit disputes to investor-state arbitration.

Israel has not published commentaries or exchanges of notes as interpretative aids in respect of its investment treaties.

Israel does not have a single, comprehensive law governing foreign direct investment (FDI); rather, it regulates FDI through a combination of sector-specific legislation and administrative measures. This domestic framework does not, at present, grant investors access to investor-state arbitration.

Governmental bodies may resolve commercial disputes through arbitration, subject always to prior review of the underlying agreement by the legal adviser of the relevant body, and often the Deputy Attorney General (International Law) and/or the Attorney General, as the case may be.

To date, Israel has not been a respondent state in investor-state arbitration, and there is accordingly no significant body of practice addressing the relative prominence of specific claims – such as breach of contract, expropriation, fair and equitable treatment, or national and most-favoured-nation treatment – in the Israeli context.

The International Commercial Arbitration Law (ICAL), enacted in 2024, preserves the parties’ full autonomy in the selection of arbitrators, imposing no restrictions on that choice.

In the absence of agreement between the parties, the arbitral tribunal shall consist of three arbitrators. Each party appoints one arbitrator, and the two party-appointed arbitrators then select the third, who serves as presiding arbitrator. If a party fails to appoint its arbitrator within 30 days of receiving a request to do so from the other party, or if the two arbitrators fail to agree on the third within 30 days of their own appointment, the court may, upon the request of either party, make the necessary appointment.

There is currently no default procedure applicable to multi-party arbitrations.

Upon the application of a party, a court may issue any decision or direction necessary to constitute the arbitral tribunal in the following circumstances:

• a party has failed to act as required under the agreed appointment procedure;
• the parties, or the arbitrators already appointed, have failed to reach an agreement required under that procedure; or
• a third party has failed to perform a function entrusted to it under the agreed appointment procedure.

A court’s decision on the appointment of an arbitrator is not, however, final: unlike the position under the UNCITRAL Model Law, the ICAL permits such a decision to be appealed, subject to the appellate court granting leave.

An arbitrator may be challenged if circumstances exist that give rise to justifiable doubts as to their impartiality or independence, or if the arbitrator lacks qualifications agreed upon by the parties.

A party wishing to challenge an arbitrator must submit a written statement setting out the grounds for the challenge within 15 days of becoming aware of the tribunal’s constitution or of any circumstance giving rise to such doubts. If the arbitrator does not voluntarily withdraw, and the other party does not agree to the challenge, the arbitral tribunal shall decide the matter. Should the challenge be unsuccessful, the challenging party may, within 30 days of receiving notice of the decision rejecting the challenge, apply to the court for review – though, as with decisions on the appointment of arbitrators, the court’s ruling on a challenge is itself subject to appeal, with the leave of the appellate court.

Arbitrators are required, before accepting an appointment, to disclose any circumstances likely to give rise to justifiable doubts as to their independence or impartiality. From the time of appointment and throughout the proceedings, they must further disclose to the parties, without delay, any such circumstances that may subsequently arise.

An arbitral tribunal may grant interim measures binding on the parties. Such measures are limited to preserving the status quo, protecting the integrity of the arbitral proceedings, safeguarding assets for the purposes of future enforcement and preserving relevant evidence. An arbitral tribunal is not, however, authorised to issue preliminary orders on an ex parte basis.

Israeli courts may enforce interim measures regardless of the state in which they were issued. Enforcement may, however, be refused where:

• the arbitral tribunal’s decision ordering the posting of security for the interim measure has not been complied with;
• the interim measure has been terminated or suspended by the arbitral tribunal or by a competent court;
• the interim measure is not one that the court is authorised to grant under Israeli law, unless it can be adapted without altering its substance; or
• the conditions for refusing enforcement of an arbitral award apply, mutatis mutandis.

In addition, Israeli courts have the power to issue the same interim measures in connection with arbitration as they may grant in litigation proceedings, even where the arbitration is seated outside Israel. This power extends to the issuance of preliminary orders on an ex parte basis. Unlike arbitral tribunals – whose authority to grant interim relief is confined to a defined list of measures – courts may grant any form of interim relief available under Israeli law.

The ICAL does not limit the authority of arbitral tribunals to order security for costs.

Third-party funding is permitted in Israel and continues to gain traction. At present, three prominent third-party funders operate in the jurisdiction, providing financing for both litigation and arbitration matters.

There appears to be no reported case law regarding third-party funding of arbitration proceedings.

There are no legal provisions requiring the disclosure of a third-party funding agreement in arbitration proceedings. However, in the context of class actions, Israeli courts have held that failure to disclose such an arrangement constitutes bad faith.

Arguably, the duty of the parties to act in good faith would require disclosure of the existence of a third-party funding agreement. However, Israeli courts have declined to order disclosure of the agreement itself, finding that its content was not relevant to the merits of the dispute.

There are no decisions directly addressing whether the existence of third-party funding should be considered when ruling on applications for security for costs. However, in one case, the Tel Aviv District Court, when deciding on a request for security for costs, declined to take into account the fact that court fees had been paid by a third party.

All of Israel’s investment agreements provide for a cooling-off period, requiring investors to seek an amicable settlement before initiating arbitration proceedings. This negotiation period is typically between three and six months.

More recent agreements, in addition, incorporate a “time-bar” provision, precluding investors from submitting a claim where more than three years have elapsed since they first became aware, or ought to have become aware, of the alleged breach of the treaty.

The ICAL contains no provisions regarding the confidentiality or transparency of arbitration proceedings. Confidentiality is accordingly determined by the relevant instrument of consent or the applicable arbitration rules.

During negotiations to amend the ICSID Arbitration Rules, Israel recognised the importance of transparency in arbitration proceedings, while emphasising the need to protect confidential information.

Most of Israel’s investment agreements do not address confidentiality or transparency. Exceptions include the Israel–South Korea FTA (2021), which, subject to the conditions set forth therein, provides for the publication of certain documents and open access to hearings, and the Israel–Japan BIT (2017), which permits – but does not require – the respondent state to make certain documents relating to the proceedings available to the public.

The ICAL does not address the issue of remedies. Several of Israel’s more recent investment treaties, however, permit tribunals to award monetary damages and restitution of property, while expressly excluding punitive damages. Notably, the Israel–Philippines BIT (2022) also bars tribunals from awarding moral damages.

Israeli courts apply all major recognised methodologies for quantum assessment in investment arbitration. These include approaches such as the discounted cash flow, market value and cost-based methods. The choice of methodology is made on a case-by-case basis.

Under the Statutory Interest Rate and Linkage Adjudication Law, 5721–1961, arbitral tribunals may award interest on monetary judgments, costs and attorney’s fees. A party may recover such interest once the award is enforced.

The 1968 Israeli Arbitration Law explicitly authorised arbitral tribunals to award costs, including attorney’s fees and tribunal fees. Similarly, the International Arbitration Rules of the Israeli Institute for Commercial Arbitration require tribunals to include directives regarding the payment of arbitration costs and attorney’s fees in their awards.

By contrast, the ICAL expressly addresses the tribunal’s power to award costs only in connection with interim relief. This omission likely reflects the ICAL’s foundation in the UNCITRAL Model Law, which does not regulate costs. Although there is no established practice under the ICAL, it is expected that, as under the 1968 Arbitration Law, parties will be able to recover costs awarded by a tribunal once the award is enforced.

As for cost allocation, Israeli courts generally follow a “costs-follow-the-event” approach when awarding costs.

The duty to mitigate damages may be regarded as a general principle of law forming part of general international law (see Middle East Cement Shipping and Handling Co. S.A. v Arab Republic of Egypt, ICSID Case No ARB/99/6, Award, 12 April 2002, paragraph 167). Under Israeli law, this duty is expressly provided for in the Contracts (Remedies for Breach of Contract) Law, 5731–1970.

Enforcement of Arbitral Awards

To enforce an arbitral award in Israel, the applicant must file a petition for enforcement with an Israeli court. Under the 1968 Regulations on arbitral matters, the petition may be submitted to:

• the court in the respondent’s place of residence or principal place of business;
• the court in the location where the arbitration was conducted or intended to be conducted;
• the court in the place where the act that is the subject of the arbitration occurred;
• the court agreed upon by the parties; or
• failing the foregoing, a court in Jerusalem with subject-matter jurisdiction over the dispute.

In January 2025, the Ministry of Justice published draft regulations under the ICAL, proposing to centralise all petitions for the enforcement of arbitral awards in the Tel Aviv District Court. Pursuant to the ICAL, the enforcement petition must include the original arbitral award or a copy thereof. If requested by the court, the award must also be translated into Hebrew. Petitions to enforce arbitral awards are currently exempt from any filing fee.

Israeli courts may refuse to enforce an award on any of the grounds listed in Article V of the New York Convention:

• invalidity of the arbitration agreement or lack of capacity of a party thereto;
• lack of proper notice or inability of a party to present its case;
• the arbitral tribunal’s having exceeded the scope of its jurisdiction;
• irregularity in the constitution of the arbitral tribunal;
• non-arbitrability of the dispute under Israeli law; or
• contradiction with Israeli public policy.

Parallel Proceedings

Where a party seeks enforcement of an arbitral award in Israel while the award is, at the same time, subject to set-aside proceedings at the seat of the arbitration, Israeli courts may suspend the enforcement proceedings. It appears, however, that Israeli courts have not so far availed themselves of this possibility, proceeding instead to examine the enforcement request.

Sovereign Immunity from Jurisdiction

Under the Foreign States Immunity Law, 5769–2008 (the “Immunity Law”), a foreign state does not enjoy immunity from jurisdiction at the enforcement stage of an arbitral award where it has agreed in writing to submit the dispute to arbitration. This provision does not, however, apply to arbitration agreements between states governed by public international law. Israeli courts have not yet had occasion to apply this rule, but the legislative history indicates that the exclusion was intended to cover state-to-state arbitration only, and not investor-state disputes.

Israeli courts generally enforce international arbitral awards under the New York Convention, refusing enforcement on public policy grounds only in rare and exceptional circumstances where recognition would contravene the fundamental values, morality or principles of justice of the Israeli legal system. One such case involved an award signed under duress, where the arbitrator had been subjected to extortion attempts and threats to his life, compelling him to sign the award against his will.

Israeli practice regarding the enforcement of ICSID awards remains limited. On 25 August 2025, the Tel Aviv District Court issued Israel's first decision on the enforcement of an ICSID award, in Sun-Flower Olmeda GmbH & Co KG and others v Kingdom of Spain (ICSID Case No ARB/16/17). The court declined to enforce the award, reasoning that Israel was not an appropriate forum for enforcement. Specifically, it found that the award lacked a substantial connection to Israel, and that the claimants had not identified any Spanish assets within the jurisdiction that could be subject to enforcement. Leave to appeal the decision is currently pending before the Supreme Court.

State assets in Israel are not recorded in any designated registry and are typically identified with the assistance of a private investigator.

A party seeking to enforce an arbitral award may petition the Israeli courts for a temporary attachment order pending the decision on enforcement. The court may grant such an order if satisfied that failure to do so would substantially impede execution of the award. Where a request for temporary attachment concerns the assets of a foreign state, or otherwise raises issues of sovereign immunity, the court may seek the position of the Attorney General.

Under the Immunity Law, the assets of a foreign state are generally immune from enforcement proceedings. This immunity does not extend, however, to:

• commercial assets;
• assets located in Israel that the foreign state has acquired by succession, gift or as bona vacantia; or
• immovable property situated within Israel.

The assets of a foreign state are likewise not protected by immunity where the state has expressly waived it, whether in writing or by written or oral notice to the court. Such waiver may be general or limited to a specific matter, but does not extend to military assets, which remain immune in all cases.

In practice, once an arbitral award has been enforced by a court, the award creditor may initiate asset enforcement proceedings through the Law Enforcement and Collection System Authority. The Authority assesses whether the foreign state’s assets fall within the categories that may be lawfully seized, and a decision of its registrar may be appealed to the District Court.

The doctrine of piercing the corporate veil is recognised under Israeli law, but its application is confined to exceptional circumstances. To date, there is no reported case law in Israel applying this doctrine specifically to the assets of states or state-owned entities.