Business arbitration: A milestone for Palestinian statehood?

Business arbitration: A milestone for Palestinian statehood?

After years of effort, Israel and the PA agree to a framework that will ease economic cooperation

Rifat Hisarcıklıoğlu (center), Oren Shachor (right) and Munib al-Masri (left) at a ceremony for a new institution for commercial arbitration between Israel and the Palestinian Authority in Turkish mediation. (photo credit: Flash90)
Rifat Hisarcıklıoğlu (center), Oren Shachor (right) and Munib al-Masri (left) at a ceremony for a new institution for commercial arbitration between Israel and the Palestinian Authority in Turkish mediation. (photo credit: Flash90)

Business ties between Israel and the Palestinian Authority have been proceeding apace regardless of security challenges, but that does not mean there have not been clashes. After years of efforts, a mechanism has been established to help businesspeople on both sides resolve disputes. According to Oren Shachor, chairman of Israel’s branch of the International Chamber of Commerce, the new Jerusalem Arbitration Center will help smooth out bumps on the road to greater economic cooperation between Israel and the PA.

At a gala event this week, top business people in Israel and the PA, along with Shachor and executives from the ICC, kicked off the project. “The JAC will bring fair, expeditious and cost-efficient dispute resolution to the region and is expected to help rectify ties between Palestinian and Israeli business people,” said ICC chairman Harold McGraw. The project will enable companies to pursue new markets, “attract local and foreign investments, and bring long-term benefits to the legal profession here,” he added.

The JAC’s facilitation of business relations between Israel and the PA is being welcomed by both communities. But the project could have an inadvertent side effect. By agreeing to the ICC’s conditions for arbitration, Israel is essentially recognizing the validity of the Palestinian court’s decisions as equivalent to those of any other nation, thus conferring a “back-door” form of recognition of a Palestinian state.

Israel is the Palestinian Authority’s biggest trading partner; in 2011, 86 percent of the PA’s exports went to Israel, and under the Oslo Accords — the legal framework that established the PA and sets the rules under which it operates — Israel administers imports for the authority. Currently, trade between Israel and the PA is close to $5 billion.

But like political relations, economic ties between Israel and the PA have often been strained. Businesspeople on both sides have complaints: Roadblocks, checkpoints, and other security-related phenomena cause delays for Palestinian workers and businesses, costing them in late fees, lost contracts, spoiled produce and other woes. Israelis who do business with PA businesses complain that they are sometimes stiffed on payments, and that there is no way to enforce contracts and address legal issues.

Businesspeople on both sides called for a grassroots solution, regardless of the political issues between their respective governments. Thus, said Shachor, was born the JAC, an arbitration panel based on internationally accepted business principles and administered by the International Chamber of Commerce, which runs arbitration courts around the world for companies operating in different countries with different rules that have a difference of opinion on who owes whom what.

The group, which represents hundreds of thousands of companies in 120 countries around the world, has an extensive rulebook on how to deal with disputes of all kinds, making it the right choice to sponsor the JAC, said Shachor, who established the center with PA businessman Munib al-Masri. “We’ve had many discussions on how to go about doing this, and the ICC rules are the best fit,” said Shachor. “Our objective is to make business easier for business people, and life better for everyone, by applying internationally accepted standards to business disputes.”

It hasn’t been easy, however. Negotiations on establishing the JAC have been going on for several years, with the goal finally achieved after the Palestinians agreed to enforce official JAC rulings when necessary — which they had been resisting. Even so, said John Beechey, president of the ICC’s International Court of Arbitration, the only way the JAC is going to succeed is if both sides take it seriously and respect its decisions. “If it begins to operate and awards are given and honored, or disputes are referred to courts in Israel or the PA and those decisions are respected, the thing will flourish. If not, then it will fall apart,” he said.

But failing to respect those decisions would be very short-sighted, Beechey said. “Trade is over $4 billion now, but there is much more potential, and this could certainly significantly increase that volume, bring benefit to both sides.” Beechey would not say which side, in his opinion, was more likely to break the agreement. “My mission is to do something that will succeed and benefit everyone, and I believe the JAC can do that,” he added.

The JAC’s international arbitration committee will include nine members, including its president, Rifat Hisarciklioglu, who is also president of ICC Turkey. Israel and the PA will supply two of the members, and the others will be nominated by Hisarciklioglu. Disputes will be handled by the ICC offices in Ramallah and Tel Aviv, depending on the location of the complaining parties.

The arrangement may be good for business, but it contains a sensitive political element in that it gives both Israeli and Palestinian courts equal jurisdictional rights over disputes. In essence, the JAC paves the way for an important element of Palestinian statehood — an acknowledgement by Israel of the legitimacy of these courts’ decisions in international venues.

That may be an even more powerful element of statehood than the recognition of Palestine by the UN General Assembly, UNESCO, and other international forums in recent years. For the first time, Israeli companies and courts will be expected to regard Palestinian court decisions as legal and binding within the context of Israeli law, as it would any other state.

How the government might feel about this isn’t clear, but it’s just fine as far as Shachor, who helped negotiate several agreements with the PA, is concerned. “I can’t say whether or not the PA sees this as a strategy for international recognition. The JAC is about improving the situation of Palestinians and helping business.” But if it does, Shachor is fine with it. “I believe in the two state solution. The Palestinians are interested in this in part because it will improve their international standing,” he added. “They want to be accepted in the international community.”

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