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In Melbourne Shabbat begins Fri 22 Dec 2017 08:23 PM and ends Sat 23 Dec 2017 09:24 PM

Practical aspects of Rabbinical Arbitration

בס׳ד
ח' כסלו ה' אלפים תשע"ב

Is there a need for a rabbinical arbitration process to determine civil and commercial disputes in the Jewish community?

Introduction

It is a fundamental requirement of halacha, that if two Jews are in involved dispute with one another, no matter what the issues, including financial issues, the dispute is required to be referred for determination under Jewish law and not to a non-Jewish court. 

It is well accepted that Jewish law or halacha is recognized as an advanced legal system in its own right, which provides a complex system of substantive and procedural law for the resolution of disputes of all types, not only religious and marriage and divorce matters, but also commercial and financial dealings.  That is also relevant in the context of an entitlement under the new arbitration legislation that provides that a dispute may be decided by arbitration by such rules of law as are chosen by the parties.  It can be fairly argued that Halacha contains recognised rules of law that are capable of being applied for the resolution of commercial disputes.  

Disputes in the Orthodox Jewish Community have traditionally been submitted to a Beis Din for determination according to halacha, but these disputes have invariably been religious and marriage disputes, and less often financial or business disputes.

The fundamental problem is that a traditional Beis Din has no really effective power to enforce decisions made by it, or to compel members of the Jewish community to obey its rulings.  The sole means of compelling a person to obey a ruling of a Beis Din is to place the recalcitrant litigant who refuses to disobeys a p'sak in a state of a Cherem, (loosely translated as the notion of shunning or excommunication); that is to deprive the person of various communal religious rights and privileges, such as the right to host a Kiddush, the right to be called to the Torah for an aliya, the right to be buried in a Jewish Cemetery and even exclusion from a congregation.   However, Beis Din are most reluctant to invoke such drastic sanctions and rarely do so, or do so successfully.

So the purpose of Rabbinical arbitration is to permit commercial disputes to be referred to a Din Torah, in accordance with Jewish law and procedure, whilst also enabling the determination of the Beis Din to be enforced as an order of the Court under secular law.

Enforcement of a determination by a secular court means simply that the same range of enforcement remedies are available to a successful party before a Rabbinical arbitration, as are available to any successful litigant in a secular court, because        A determination of an arbitral tribunal is recognized as equivalent to an order of the Court. 

There is no difficulty in halacha in enforcing a determination based on Jewish law in a secular court.  

The establishment of a religious arbitration tribunal to arbitrate commercial and financial disputes, where the decisions are able to be enforced by secular courts, is therefore an important priority for an observant Jewish community.   Other large Jewish Communities throughout the world have successfully  established Beis Dins which operate as arbitration tribunals and are subject to the secular courts.  Considerable steps have taken under the guidance of Rabbi Kluwgant and the RCV to establish a high quality Rabbinical Arbitration Tribunal in Melbourne.

What is rabbinical arbitration?

Rabbinical arbitration  essentially involves the idea that parties involved in a dispute, can by agreement in writing, either before a dispute arises, as part of their contract, or after a dispute arises by a separate Arbitration Agreement, refer their disputes to an impartial Beth Din of their own choosing for hearing and determination in private, and it becomes a formal arbitration, where the decision or arbitral award as it is called, is binding and can be recognized and enforced by the secular courts. 

The advantages of arbitration as against litigation in the Courts are that:

  • the parties are able to choose their own tribunal, or nominating body, such as a panel of Rabbis;
  • the procedure is intended to be expeditious, informal and cost effective;
  • the hearings are held in private, which can be an important consideration when there are delicate private and communal issues in dispute;
  • most significantly, a decision award made under an arbitration agreement is binding and may be enforced as a judgment of the Court with all the remedies for enforcement available in the Court, including the powers of execution and contempt.
  • In my experience, the Courts are strongly supportive of arbitration, and in the past have generally enforced arbitration determinations.   There has also in the last few weeks been a new wide ranging Arbitration Act in Victoria proclaimed which applies to commercial disputes, called the Commercial Arbitration Act 2011, and essentially provides that the decision of an arbitral tribunal is final and binding with very limited powers of appeal on a question of law and limited grounds for refusing enforcement.

In relation to appeal on the grounds of error of law, this can only occur if the parties agree within a limited period that an appeal may be made, and a Court also grants leave on the basis that the decision is obviously wrong and it is just and proper for the courts to intervene.  Previously, under the old legislation the Court had to grant leave to appeal, but there was no obligation for the parties to agree that an appeal may be brought.  The new Act is in line with the international approach to arbitration that seeks to limit appeals against arbitral decisions.   So under the new Act a decision of an arbitral tribunal is pretty much final and binding on the parties.

However, if the process is an arbitration,  the conduct of the arbitration is also subject to the supervision of the Courts. In particular, under the new Act:

  • the parties must be treated with equality and each must be given a reasonable opportunity to present its case;
  • the arbitrators from the time of their appointment must be impartial and independent  and not biased. 
  • even though the new Act severely constrains Court intervention, the Civil Courts are entitled to set aside or refuse to enforce arbitral decisions in the event of serious procedural deficiencies such as bias or failure to permit a party to have a reasonable opportunity to present its case, what is know as breach of the rules of natural justice.

That simply means that every dispute has to be dealt with fairly; without bias and allowing the parties a reasonably opportunity to be heard.  It was suggested during the notable Mond v Berger Case, involving Caulfield Shule which was heard and determined by the Supreme Court in 2003/2004, that bias was permissible under Jewish law and that natural justice did not apply to Jewish law and procedure.  The trial judge, Justice Dodds-Streeton, concluded on the basis of expert evidence led before her in the case, that it had not been established that Jewish law and procedure did not require natural justice or permitted bias.   In fact, there were powerful indications to the contrary.  In any event, Her Honour made it clear that a Victorian Court would not accept a decision of Rabbinical Arbitrators made in breach of essential principles of natural justice, as a matter of the public policy of the State.  Under the new Act an award may be set aside if it is in conflict with the public policy of the State, which is a new provision in arbitration law.

It is apparent that the greatest obstacle to rabbinical arbitrators making binding decisions, that will be enforced by the courts, is likely to be a failure of the dayanim to understand or appreciate what is required procedurally.  Deliberate unethical conduct or blatant dishonesty in a Beis Din is pretty rare and is self evident.   What can occur more often is irregularity in proper procedure, which is not acceptable to the secular courts, and which can include:

  • o failure to give reasons or adequate reasons.
  • o failing to give enforceable relief.
  • o failing to decide all the issues referred for determination.
  • o deciding issues which have not been referred for determination.
  • o delegating issues which have been referred for arbitration to a third party, such as an accountant.
  • o failure act impartially. For example, speaking to one of the parties privately during an adjournment or during the hearing process, at a community function, for example.
  • o conflict of interest. Dayan should not act in a dispute where he may have a personal interest without proper disclosure;
  • o failure to give the parties adequate notice of the hearing and a reasonable opportunity to be heard.

What is important in our system of justice, is not just the need to avoid bias, but the need to avoid even a perception of bias.  If a Dayan is seen meeting privately with one of the parties, it does not matter if he is discussing something quite innocent, there is nevertheless a reasonable apprehension of bias which can invalidate the decision.    In any event, affording the parties fair and equal treatment is also a hallmark of Jewish Justice.  There is a quote from Rashi  that comments that a Judge who rules falsely is guilty of a perversion of Justice and what he has done is an abomination.

Potential issues with rabbinical arbitration

One of the issues frequently asserted is that there is a conflict between halacha and secular principles of natural justice which would make compliance with the secular law impossible, if a true Din Torah is to be conducted.    Some of the specific areas of concern seem to be the following:

  • the testimony of a woman, a non-Jew or a minor (under bar mitzvah age) is said to be not acceptable or of lesser weight.
  • ex parte communications, which is said to be a feature of Beth Din procedure, would also be subject to potential criticism by a secular court.
  • the concept of a zabla, where each party chooses a dayan (a borer) to participate in the Beth Din, and the two borerim appoints a third judge (a shalish). The problem occurs when a party appoints not an impartial judge but rather an advocate and that person continues to act as an advocate rather than an impartial tribunal.
  • the entitlement in Jewish Law for a dayan to change or amend his decision if a dayan is mistaken in his judgment. Secular law only permits an arbitrator to amend his decision in the case of an accidental slip or omission.
  • the concept of a dayan attempting to bring about a peshoro (or compromise solution) during the course of a hearing.
  • the ability of a dayan to introduce new matters not raised in the original dispute, without proper procedures;
  • whether lawyers should play a part in the hearing, which is not encouraged in Jewish law.

It seems to me that the problems may not be nearly as intractable as they might  at first appear and could be resolved with some measure of common sense and better understanding of the purpose of the relevant halachic requirements, without overturning established halachic doctrine.    The Beth Din of America in its Guide to Rules and Procedures, gives recognition to the obligations of both Jewish law as well as secular law.  Procedures have been set out which ensure that all the parties have a reasonable opportunity to present their case.  The rules provide that there shall be no ex parte communication between dayanim and the parties, or between the dayanim and any witness.  Each party is entitled to have the right to be represented by a qualified lawyer.  The Beth Din of America has got around the problem of the zabla by requiring that the person chosen by each side shall be a judge recognized by the Beth Din and therefore will act impartially and not as an advocate following his appointment.  In any event halachically Dayonim are required to rule impartially, even if chosen in a zabla.  

Dayan Baruch Rubanowitz, a leading Halachic scholar, gave a presentation in Melbourne recently when he stressed that the Beis Din process was essentially a search for truth, in which common sense needs to prevail.  The testimony of a child or woman was acceptable evidence even if they did not have the same halachic standing   It is highly unlikely that a reasoned decision will be written by a Beth Din in which a woman's testimony will be deemphasized merely because she is not halachically of equally standing.

Deciding a case according to Jewish law

Another issue of potential concern is whether there is any prohibition on a Rabbinical Arbitrator deciding a dispute according to Jewish law in a case where Jewish law may be inconsistent with local law.

Under the new Commercial Arbitration Act 2011 the arbitral tribunal must decide the dispute in accordance with such rules of law as are chosen by the parties as applicable to the dispute (s.28(1)).    In addition, the arbitral tribunal must decide the dispute, if the parties so agree in accordance with such other considerations as are agreed by the parties (s.28(4)).  That provides ample jurisdiction for the parties to agree that the dispute is to be determined under Jewish Law.  But the Act also states that the arbitral tribunal must decide in accordance with the terms of the contract and must take into account the usages of the trade applicable to the transaction in all cases (s.28(5)).  What that indicates is that in commercial disputes the Beth Din has to apply the terms of the contract the parties have entered into, and to take account of the accepted practices in the trade or industry, which is the subject of the dispute.    

In the Mond Case, Justice Dodds-Streeton suggested that an arbitration decision must conform to the Laws of Victoria, and that the parties could not contract out of that position.  This was said to arise as a matter of public policy.   Her Honour had no difficulty, however, in the case being decided under Jewish Law. It is likely, in any event, that in so far as a dispute raises financial or commercial issues the Beis Din will want to apply the appropriate local commercial law.  

In a recent decision of the High court of South Africa, a husband sought an injunction to prevent  the Beth Din of Johannesburg from publishing a Cherem, where he had failed to comply with the provisions of a Beth Din ruling.  The Court accepted the validity of Jewish Law and the right of the Beth Din to issue a Cherem to enforce its decision.

Conclusion

To have any measure of success the rabbinical arbitration process must function in such a way as to have both the confidence of the community, and also the support of local courts.  There are certain fundamental requirements which must be met:

  • the procedures and conduct of the arbitration must conform with the requirements of secular law, particularly the natural justice requirements as set out in the Commercial Arbitration Act 2011. For example, a decision which gives less weight to the testimony of a woman in certain circumstances will not be accepted.
  • The dayanim must be entirely impartial and not subject to the slightest accusation of bias or conflict of interest;
  • the panel of dayanim must be well trained and respected in the community. The move to establish a specialist panel of independent Dayanim who will hear cases, is a good one;
  • lawyers should be permitted to play a role;
  • all evidence needs to be heard in open hearing in the presence of both parties;
  • the dayanim who are part of the panel of arbitrators have to be aware of the basic principles of commercial law and the usages of the trade, namely the accepted practices which apply in the industry the subject of the dispute and not ignore commercial realities, such as the limited liability of corporations;
  • the decision needs to be in writing with reasons, and clearly able to be understood and capable of enforcement in a civil court;

Every effort should be made to avoid judicial challenges to Rabbinical Determinations.    It is a considerable source of embarrassment to the community when this occurs and sets back the process of Rabbinical Arbitration.   In this respect, Rabbi Kluwgant and his committee has been progressing slowly and methodically, to ensure that there is understanding and consensus amongst the Rabbis of our community as to what is required, appropriate training and expertise, and support from the Secular Courts to establish the legitimacy of a Rabbinical Arbitration Tribunal.


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I would be interested to hear further discussion over whether a recourse to legal principles and procedures not found in the halachic model of law will not be viewed as a breach of the "fundamental requirement of halacha..."to refer a dispute for determination under Jewish Law.

Posted on 2011-12-14 00:31:45 GMT


The problem with Rabbinical Arbitration is that being a SMALL COMMUNITY, many of the members of the community are or may be related directly or indirectly to the Rabbonim who may act as Dayonim! It happened in the past and may happen again! The only solution is to appoint independent Dayonim from abroad to reside as arbitrators.

Posted by Abe Muchnik on 2011-12-11 23:53:40 GMT


Even in the Supreme Court of Victoria, there are Justices who are not experienced in commercial matters. Quite a few of the judgements of the Associate Justices (the old Masters) are successfully appealed in the Supreme Court. A new Commercial Court (List E) was established within the Supreme Court to avoid costly retrials and appeals. I just cannot see that Rabbis with nil business experience let alone complex commercial matters will be able to determine a ruling. It is simply not possible to rule on commercial matters from a theoretical basis. This why most of the Supreme Court commercial Justices have real experience in operating businesses.

Posted on 2011-12-10 22:25:56 GMT