In December 2024, ten days of evidentiary hearings were held in an arbitration proceeding in California, in which claims brought by several customers of an online video game store called Stream Online against the store owner Valve Corp., were consolidated. During one of the breaks, the arbitrator had an informal conversation with counsel for the parties and had difficulty concealing his excitement about his upcoming trip to the Galapagos Islands in Ecuador. He said that he intended to issue the arbitration award as soon as possible, before the trip, so that he could travel with peace of mind. In the first week of 2025, shortly after the post-hearing briefs had been completed, the arbitrator sent the parties the arbitration award. That very same day, he boarded a plane to the Galapagos Islands, on his way to trade long hearings and overloaded binders for two weeks of diving alongside sea turtles and iguanas.
One of the claimants, whose claim had been denied, filed a motion in a federal court in California to vacate the arbitration award. He argued that the award cited factual assertions that were incorrect, and some of them had not even been raised in the proceeding at all - a clear indication, in his view, that AI software had been used in drafting the arbitration award, along with the "illusions" to which such software is prone.
According to the claimant, a review conducted using ChatGPT confirmed the suspicion that parts of the award had been written by AI software, based also on the vague wording, unnecessary repetitions, and erroneous generalisations in the arbitrator's findings. The claimant argued before the court that the arbitrator's use of AI software reflected an excess of the authority granted to him under the arbitration agreement - a ground for vacating the arbitration award under the US Federal Arbitration Act (and also under the Israeli Arbitration Law). He added that just as it has previously been held in the US that there are grounds to vacate an arbitration award where the arbitrator "outsourced" his authority to another person, so too there is reason to vacate an award where the arbitrator has, in effect, similarly "outsourced" that authority to AI software.
This issue has not yet been ruled on by the court in California, but it serves as an interesting sample case for the challenges facing the legal world in general, and the world of arbitration in particular, as the AI revolution impacts them.
In several recent Israeli court judgments, including by the Israeli Supreme Court, criticism has been voiced - at times sharp criticism - by the courts regarding the use by litigants and their lawyers of AI software in documents exchanged between them and in pleadings filed with the court. In some cases, judges pointed to parties' reliance on incorrect quotations from case law and even references to non-existent documents (for example, in a case in which the Supreme Court ordered the Ramat Gan Municipality to pay costs in legal proceedings, even though the proceeding had been settled, due to the municipality's "uncontrolled and reckless" use of AI). This is, of course, not merely a local phenomenon. One of the largest and leading US law firms was recently forced to submit an apology to a federal court for the use of incorrect citations and other inaccuracies in documents filed with the court, resulting from AI "illusions" in software used to draft them.
The possible use of AI software, rather by those deciding legal proceedings - in particular courts and arbitrators - has, so far, attracted fewer headlines. But that does not mean that the courts in Israel are unaware of the challenge - alongside the opportunities - that AI tools present. In March, the Director of the Courts published an ethical code for the use of AI tools in the judiciary, ahead of the anticipated introduction for judges of the "Net HaMishpat" system - an AI system based on Google's Gemini engine aimed at easing and streamlining their work.
The ethical code established principles, operative instructions, and oversight mechanisms for efficient, cautious, and responsible use of AI tools in the court system. These principles recognize the opportunity that AI tools may provide to the justice system, including improving efficiency, saving judicial time, and easing the burdens imposed on the system. At the same time, the principles stress that these are merely auxiliary tools, and they underscore the need for human supervision and responsibility, as well as judicial independence. In the world of arbitration as well, international arbitration institutions have in the past two years begun publishing guidelines for the use of AI software in arbitration proceedings (including the UK's Ciarb, the US AAA, and Sweden's SCC).
To a large extent, the world of arbitration may become the spearhead in all matters relating to integrating the use of AI tools not only by the parties and their counsel, but also by the adjudicative decision-maker - namely, by arbitrators themselves. The American Arbitration Institution recently broke new ground when it began offering a new service called "AI Arbitrator," which is currently limited to disputes involving construction projects that do not require the examination of testimony. The service has been hailed as "the new path to dispute resolution." This is not yet a robot replacing the arbitrator - the road to that destination still appears long. The AI Arbitrator analyses the documents submitted by the parties and produces a proposed arbitration award, but a flesh-and-blood arbitrator is still responsible for reviewing that proposed award, approving it, and, where necessary, correcting it. Still, the importance of such a service as a first swallow heralding broader implementation of artificial intelligence tools within the work of arbitrators cannot be overstated. This is especially so given the technology's dizzying pace of development and improvement and considering the relatively flexible manner in which arbitration proceedings are conducted, the possibility of contracting out of the rules of evidence, and the ability to agree on procedural rules.
Alongside the opportunity to streamline and improve the conduct of arbitration proceedings, the challenges and dangers must also be remembered. An arbitration award is often more resistant to judicial intervention than a court judgment, in the sense that in most cases (except where the parties have agreed on the possibility of seeking a right of appeal before the court) the grounds for intervention are limited to the statutory grounds for vacatur (as opposed to a court judgment, which may be appealed and, in appropriate cases, even fact findings may be revisited). An Israeli court asked to vacate an arbitration award on the basis of the arbitrator's reliance on AI would be required to determine whether this indeed constitutes an excess of the arbitrator's authority or whether another ground exists for vacating the award - and, depending on the circumstances of the case, this may be no simple legal question.
In the introduction to Dr. Nimrod Kozlovski's 2000 book "The Computer and Legal Procedure," Justice Cheshin referred to the computer and the internet and remarked, in his vivid language, "We have begun moving at the speed of light while our bodies are in a carriage, and the flow of our thought is at the speed of the carriage." Those words are equally true of the AI revolution and the way it affects the legal world, and the world of arbitration in particular, which, as noted, stands in many respects at centre stage in this context. The responsibility resting on arbitration institutions and on arbitrators themselves to make thoughtful and cautious use of these tools, while maintaining maximum transparency with the parties and their counsel, is a heavy one. We should all remember that, for all the technological progress, there is still no substitute for deep human thought and careful human examination of documents and testimony, even if that means the Galapagos will have to wait.
The author is a partner and head of the litigation and dispute resolution department at Epstein Rosenblum Maoz ERM.
Published by Globes, Israel business news - en.globes.co.il - on August 16, 2026.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.