Is it permissible for two Jews to settle their financial disputes in a secular court, or are they required to bring their case to a Bet Din (Rabbinical Court)?
The Shulhan Aruch (Hoshen Mishpat 26:1) explicitly rules that Halacha forbids bringing one's civil suits to a secular court. This law is inferred from the verse in the Book of Shemot (21:1), "And these are the statutes that you shall place before them." The words "before them" are taken to mean that civil cases are to be brought "before them," qualified Rabbinical Courts, and not before secular courts. Trying cases in secular courts constitutes a particularly grave sin, as it reflects the attitude that Torah law is inferior to secular law, Heaven forbid, and does not provide an adequate means of fairly resolving one's dispute.
If one of the parties refuses to appear before a Bet Din and insists on trying the case in a secular court, the other party must consult with the Bet Din and ask them to summon his fellow. If he refuses three summonses (or, in some instances, if he refuses even once or twice), then the Bet Din will give the other party written authorization to sue him in the secular courts. Only after receiving this written authorization is it permissible to sue another Jew in a secular court. (Hoshen Mishpat 26:2)
If two Jews bring their case to a secular court, the losing party may not then demand that the case be brought to a Bet Din. The Sages imposed a Kenas (penalty) upon somebody who chose to bring his case to a secular court and forbade him from then appealing to a Bet Din. If, however, the litigant sincerely repents and regrets having tried his case in a secular court in violation of the Torah, Bet Din will then agree to adjudicate the case if he so desires.
Although it is forbidden to bring one's civil suits to a secular court, the Shach (commentary to the Shulhan Aruch by Rabbi Shabtai Ha'kohen, 1621-1663) in H"M 26:2, s"k 1, rules that it is permitted to settle one's disputes with a non-Jewish arbitrator or arbitration panel. Since the arbitrator functions not as a court deciding innocence and guilt, but rather as a third-party mediator to resolve the conflict, this kind of consultation does not violate the prohibition against trying cases in secular courts.
If a secular court summons a Jew to testify, he must appear before the court to render testimony in order to prevent the Hillul Hashem (defamation of God's Name) that would result from his refusal. However, before rendering testimony against a fellow Jew one must consult with a competent Halachic authority for guidance. Likewise, whenever a Jew is involved in a criminal case brought by the state prosecutor, he must consult with a competent Halachic authority for guidance concerning the level of participation that Halacha allows. (Hoshen Mishpat 28:3)
Summary: Trying a civil case in a secular court constitutes a grave Torah violation; one may sue another Jew in a secular court only if he refused the summons of a Bet Din and the Bet Din then gave written authorization to refer to the secular courts. If two Jews did bring their case to a secular court, the losing party may not then bring the case to Bet Din, unless it is clear that he has sincerely repented. One may settle disputes through a secular/non-Jewish arbitrator. One who is summoned to render testimony in a secular court must do so, but should first consult with a Halachic authority for specific guidance.
See the book- "Pure Money" by Dayan Cohen, pages 211-214.
