The Israeli public and the legal community were justifiably shocked by the news leaked on January 16 that Israel Bar Association President Efraim Nave was the prime suspect in a sex-for-judicial-appointment scandal. His prompt resignation was widely seen as an admission of guilt.
Why were we shocked by this news? Because most of us had assumed that the judicial appointment process is aboveboard; these disclosures revealed our naivete. Although the conventional wisdom had been that connections help in the process, most of us thought that it had its limits.
It was not only the judiciary and the bar that have been tarnished by the Nave scandal. But so far few, if any, observers have taken note of an additional victim — the arbitration system.
Arbitration is essentially the process of having a civil dispute resolved privately, outside the court system. Under Israel’s Arbitration Law, if a contract states that the arbitrator is to be appointed by a third party, such a provision is legally enforceable.
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For decades, the common practice in Israel has been for agreements to provide that, if a dispute arises, the president of the bar association would appoint an arbitrator to adjudicate. For years, it was common knowledge that the bar president appointed his political allies, and that “payback time” for the plum assignments came when the president was up for re-election.
But in 2009, then-IBA president Yuri Guy-Ron made a dramatic change by establishing an arbitration institute under the auspices of the bar association. The Arbitration Institute functioned largely independently of the president (in the interest of full disclosure, I had been appointed by the institute).
When Nave was elected in 2015, he abruptly shut down the institute. His motivation in killing it was clear — Nave wanted all of the power to appoint arbitrators for himself.
Fast forward to early 2019, when we learned of the sex-for-judicial appointment scandal. Given the history whereby bar presidents pre-2009 used their power to appoint arbitrators to assist in their re-election efforts, does anyone believe that when Nave appointed arbitrators, he acted under a higher ethical standard than when he took part in appointing judges?
Of course not.
In the judicial appointment process, Nave exercised no powers by himself, he could only influence appointments. But when it came to arbitrator’s appointed by the bar, Nave alone was king.
Nobody knows whether sexual favors played a role in Nave’s appointments, but one can assume that they came with a quid pro quo — perhaps on a more extreme level than had ever been used by bar presidents before 2009.
How has arbitration as an institution been damaged?
First, courts promote arbitration as a way of reducing litigation; yet if, because of the Nave scandal, motions will be filed to stay arbitrations or to cancel arbitral awards, then the consequences will be the precise opposite of a major goal of arbitration.
Second, lawyers and businesspeople are more hesitant than before to recommend arbitration by an IBA-appointed arbitrator: The possibility of nullifying an arbitral award is usually low, and if you’re going to entrust someone with that level of authority, you want that person to be as pure as snow.
Assuming that Nave acted improperly in the appointment of at least some arbitrators, what is the remedy for parties to those arbitration cases?
The answer is unclear, but it is precisely such lack of clarity that suggests that arbitration as an institution in Israel has taken a big hit.
The police are busy investigating the many judges who were appointed during Nave’s term. It is unlikely they will devote many resources to investigate Nave-appointed arbitrators.
That is where the Israel Bar Association comes in. Only the bar association has a record of the number of Nave’s arbitral appointments. The IBA should recognize the shadow the affair has cast on arbitration as an institution. The new president should promptly appoint a commission to review the process by which every arbitrator was appointed by Nave.
That’s not all. Every candidate for the bar presidency should promise that, if elected, he or she will appoint arbitrators under the review of an independent board that interviews candidates to ensure that they are appointed on the grounds of merit, not political patronage.
The bar association created this mess. The bar association needs to take the laboring oar in cleaning it up. If not, the public’s already low opinion of the bar will only decline further.
Eric S. Sherby, an American-Israeli lawyer, is a member of the panel of arbitrators of the Israeli Institute of Commercial Arbitration.