Supreme Court Compels Minister of Finance to Explain Reasons for Excluding Businesses in Four Arab Villages from Full Compensation Awarded for War Damages

On 7 December 2006, the Supreme Court of Israel held a hearing on a petition filed by Adalah, which challenges the state’s compensation scheme for war damages incurred during the second Lebanon war. In the petition, Adalah challenged three designations and compensation formulas regulated by the Minister of Finance in July 2006 as they apply to: ‘border towns’; ‘restricted towns’; and ‘non-governmental organizations (NGOs)’.

At the hearing, the Court specifically addressed the issue of the exclusion of four Arab villages (Arab al-Aramshe, Fasuta, Ma’alia and Jesh) from the list of ‘border towns’ for the purpose of receiving compensation for damages incurred during the second Lebanon war (between Israel and Hizbullah) in July-August 2006. In the petition, Adalah sought an order requiring the Minister of Finance, Avraham Hirshzon, to grant the status of ‘border towns’ to the four Arab villages. Businesses in towns and villages afforded such status are eligible for higher compensation payments for damages incurred during the war under the amended Property Tax Regulations and Restitution Fund (Compensations Payments) (Direct and Indirect War Damages) (Temporary Order), 2006. The four villages are located on or very close to the border with Lebanon and in the same geographic area as Jewish towns granted the status of ‘border towns.’ The petition further demands the setting of clear, transparent and equitable criteria for the granting of ‘border town’ status.

During the hearing, Adalah Attorney Sawsan Zaher argued that the exclusion of these Arab towns constitutes discrimination against them, as they are located in the same geographical area as the neighboring Jewish towns which have been categorized as ‘border towns,’ and were exposed to the same security dangers during the war.

In response, the state argued during the hearing that the Minister of Finance intends to examine the list of ‘border towns,’ and to form a committee to investigate the issue and to make recommendations. Adalah opposed this suggestion, on the ground that forming a committee and waiting for it to make recommendations is a means of postponing and evading dealing with the discrimination. The Supreme Court accepted Adalah’s argument in this regard, and compelled the Minister of Finance to explain the reasons for excluding the four Arab villages from the aforementioned list within 21 days.

The petition was filed by Attorney Zaher on 13 September 2006, on behalf of number of Arab organizations, including the High Follow-up Committee for Arab Citizens in Israel, the Kayan Feminist Organization, The Arab Business Club in Israel and The Galilee Society, and on behalf of two business owners from Ma’alia and Jesh who suffered damage to their businesses as a result of the war, and in Adalah’s own name.

In the petition, Adalah also requested that an equitable policy be determined for the calculation of compensation payments covering the remaining towns and villages in northern Israel, which have been classified as ‘restricted towns’. This would entail applying an equal method of compensation, in accordance with the Property Tax Regulations and Restitution Fund (Compensation Payments) (Direct and Indirect War Damages), 1973, to all towns and villages exposed to the same dangers during the war.

Adalah further demanded that the Finance Minister not exclude NGOs from entitlement to compensation for damages incurred as a result of the war, including compensation for salaries to employees. NGOs which rely on donations for one third of their income were omitted from those defined as ‘damaged’. The petitioners contended that this exclusion constitutes discrimination based on type of association.

As Adalah contended in the petition, “The legal situation, which results from discriminatory regulations, constitutes disproportionate damage to constitutional rights: the right to equality, the right to freedom of occupation, the right to property and the right to freedom of association. The regulations are inappropriate and disproportionate; therefore they do not meet the conditions of the test of the limitation clause, as stipulated in the Basic Laws.”

Previously, the Supreme Court issued an order nisi in the case, on 4 December 2006, compelling the Minister of Finance to present his reasons for not using one method for calculating compensation for all towns and villages in the north regarding indirect damages incurred as a result of the war.

The Court is expected to issue a decision after the Minister of Finance files his position on the issue of the four Arab villages.

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