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What is the Time Period for Objecting to an Arbitration Award?
by Adv. Peggy Sharon Adv. Irit Shapira Webber and Adv. Deror Lin
Introduction:
In R.C.A. Harel Insurance Company v. Equitas Limited, a motion for leave to appeal to the Supreme Court on a judgment of the Tel Aviv District Court regarding the question of the time period for filing an objection to an Arbitration award according to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which was signed in 1958.
As the parties settled, the Tel Aviv District Court decision was not overturned by the Supreme Court.
Currently there are three different District Court decisions regarding the above questions, each addressing the issue of the motion for objection differently.
Background:
Following arbitration which was handled between Sahar-Zion Insurance Co. Ltd. and Equitas Ltd., an arbitration award was given in favour of Equitas against Sahar-Zion. During the lengthy arbitration proceedings, Sahar-Zion Insurance merged with another company and changed its name to Harel Insurance Ltd.
Equitas filed a motion to the Tel Aviv District Court, requesting affirmation of the award which was given in the UK. The motion was filed five months after the award was given. Harel filed its objection to the arbitration award to the District Court more than six months after it was given.
The Israeli Arbitration Law - 1968:
Section 27 of the Arbitration Law states that:
"The Court will not entertain an application to set aside, which is filed, if the award was made in the applicant's presence, after 45 days had elapsed from the day on which it was made, and if the award was made in the applicant's absence, after 45 days had elapsed from the day on which a copy of the award was delivered to the applicant by the arbitrator or by a party. The Court may extend the period, even if it already has expired, for special reasons which will be recorded, and in every case in which an application has been filed for the confirmation of a foreign arbitration award."
Thus, the date for filing an application for cancellation of an arbitration award according to the Law is 45 days from the date on which the award is handed down or from being received by the parties.
Equitas argument - the time period for objection is 45 days:
Equitas argued that Harel cannot object to the award as it did not file its objections within 45 days following receipt of the award, nor does it have any reason to extend the said period.
Harel's argument - Section 27 does not apply to an objection according to the New York Convention:
Harel argued that the time period provision in Section 27 applies only to awards given in Israel, and not to objections to awards, the enforcement of which is requested according to the New York Convention.
Section 29(a) of the Arbitration Law provides that:
"an application for affirmation or cancellation of a foreign arbitration award is subject to an international convention to which Israel is a signatory and the convention provides directives regarding the matter in question, to be filed and heard in accordance with those directives and subject thereto".
Harel contended that Section 29 enables to object to enforcement according to a convention, and that such objection is not subject to the time period set in Section 27, as it was filed in accordance with Section 5 of the New York Convention which states:
"Recognition and enforcement of the award may be refused, at the
request of the party against whom it is invoked,.."
Harel contended that once a party to an award requests its affirmation, the other party has the right, according to Section 5, to request refusal of the award.
The Tel Aviv District Court Decision:
The Tel Aviv District Court did not accept Harel's arguments based on the fact that the ending of Section 27(a) of the Arbitration Law also refers to a foreign arbitration award.
The Court accepted Equitas' arguments that Regulation 5 of the Regulations for Execution of the New York Convention (Foreign Arbitration) - 1978 applies to affirmation of arbitration awards in accordance with the New York Convention.
The Regulation states that it will apply provided that the New York Convention directives do not state otherwise. The Court ruled that the New York Convention does not set civil procedures which differ from the Regulations, and therefore the Regulation also apply to foreign awards.
According to the Regulations, an objection can be raised against affirmation of an arbitration award by way of an application for its cancellation filed within 15 days from the date on which notice was given about the application for affirmation of the award and not later than 45 days from the date on which the award is handed down.
In view of all the above, the District Court ruled that the motion for cancellation of the award, as well as the motion to object to its affirmation, were not filed in time.
The Court further ruled that as Harel did not provide any reason to extend the time period, such extension cannot be allowed, and ordered the enforcement of the award.
The Leave for Appeal to the Supreme Court:
Harel filed a motion for leave to appeal on this decision to the Supreme Court.
At the hearing, the Supreme Court was presented with several contradicting decisions by lower Courts of the same level:
Whilst the Tel Aviv District Court decided that Harel should have filed its objection within the time limit, the Jerusalem District Court ruled in another case that the objection may be filed at any time and is not subject to the same time limit as Israeli awards.
The Central District Court in Petah Tikva favoured the Tel Aviv ruling over the Jerusalem ruling and ordered that the time period in the Law applies also to foreign arbitration awards, i.e. the objection to such awards must be filed with 45 days of having received the award - a period which may be extended only for good.
Eventually Equitas and Harel settled the claim, hence no binding ruling was issued by the Supreme Court.
Conclusion:
When filing a motion for enforcement of an arbitration award, the party that wishes to object to the motion has 45 days to object from the date it received the award. While the Tel Aviv District Court and the Central District Court are of the opinion that this time period also applies to foreign arbitration awards, the Jerusalem District Court is of the opinion that this time period does not apply.
In view of these contradicting opinions, we recommend that a party to an arbitration award that wishes to oppose to the award, file its opposition in the country the award was given (according to the time period in that country) or in Israel within 45 days of having received the award, even if no motion for enforcement has been filed.
If the affirmation of the award is requested within the 45 day period, the time period for objection is shortened according to Section 27 of the Law to 15 days from the filing of the motion.
A party requesting to extend the time period for the objection, must request such from the Court within the above time period and give reasons for the request.
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