A diamond cutter in Israel is facing legal proceedings that could see him personally liable for the full value of a $270,000 (approximately 1 million shekels) diamond that was destroyed during the cutting process. The case involves the Israel Diamond Exchange (IDE) Arbitration Tribunal, two supplier companies, and legal proceedings initiated in the Tel Aviv District Court.
Background to the Incident
The diamond cutter, identified only as Y, was employed by a company owned by his brother when the incident occurred. While processing the stone — a recognised high-risk aspect of diamond processing — the diamond shattered, rendering it worthless. Such breakages are a recognised risk during cutting and polishing, and are typically covered by insurance.
In this case, however, the diamond was not insured, prompting the suppliers to pursue legal action directly against Y through the IDE’s Arbitration Tribunal. Although the company Y worked for is not a member of the IDE and therefore not subject to its arbitration processes, Y himself is a member, allowing the suppliers to bring the claim against him personally.
Legal Arguments and Court Proceedings
Avichai Yosef, Y’s attorney, has challenged the legal basis of the proceedings, arguing that Y was acting purely as an employee without independent authority or contractual obligations. He stated, “Y acted solely as an employee in his brother’s company, without making independent decisions or making personal commitments.”
Highlighting industry norms, Yosef added, “This is an event that sometimes occurs during the processing and polishing process, and usually the insurance covers the damage.” He said that the lack of insurance was the primary cause of the current dispute: “It is clear that the lack of insurance is what caused the outbreak of the dispute that reached the door of the Diamond Exchange Arbitration Institute.”
Yosef has petitioned the Tel Aviv District Court for a declaratory judgment, aiming to clarify the rights and obligations of all parties involved and to suspend the IDE’s arbitration proceedings pending a court ruling. He also requested a temporary injunction to prevent conflicting decisions between the court and the arbitration panel.
Commenting on the rarity of court involvement in internal arbitration matters, Yosef stated, “Court intervention in an internal arbitration proceeding of the stock exchange is indeed extremely rare. But here, when it is clear that it was the company that signed the agreements and the employee acted only as an employee, the case constitutes a clear exception, and therefore there is a real chance of legal intervention.”
Industry Implications
The case highlights the importance of securing insurance for high-value diamonds during processing stages. It also draws attention to issues of employee liability when industry risks occur. Jewellers and diamond manufacturers may view this as a reminder to ensure that appropriate contractual protections and insurance policies are in place to manage such risks.
The outcome of this case could influence practices around employment contracts, insurance obligations, and arbitration processes within the diamond industry, particularly where disputes involve non-member companies but member individuals.
