Business before politics: Merchants set up court to handle Israeli-Palestinian trade disputes
Tired of waiting for a political solution, Israeli and Palestinian businessmen are taking matters into their own hands, launching a court to handle business disputes properly.
Tired of waiting for a political solution, Israeli and Palestinian businessmen are taking matters into their own hands, launching a court to handle business disputes properly.
Secretary of State John Kerry has put Palestinian economic growth high on the agenda with his recent shuttle diplomacy to restart peace talks, but听a group of Israeli and Palestinian business leaders are a couple steps ahead of him.
The last few years, amid a dearth of political progress, they have been working toward the establishment of an arbitration court, the first of its kind, to resolve cross-border-trade business disputes听between Israelis and Palestinians听that otherwise have no realistic address for adjudication.听
Economic collaboration between Israelis and Palestinians has been hobbled by the lack of a neutral forum for settling disagreements听between Israeli and Palestinian businessmen听when they arise. Palestinians and Israelis face restricted access听to each other鈥檚 territory听and听have little trust in听courts lying across the border. Without any legal recourse for听problems like a bounced check, transactions become riskier and less attractive, cooling commercial ties.
So they created the "Jerusalem Arbitration Center," which is sponsored by chamber of commerce associations on both sides and slated to begin its work by the end of 2013. The goal is to give merchants and investors peace of mind, eliminating disincentives to expanding the trade relationship that totals $4 billion a year 鈥� Palestinians鈥� largest such relationship, by far. The court will consist of two Israelis, two Palestinians, and five international legal or arbitration experts. The Israeli and Palestinian governments have agreed to enforce the court's rulings.
"The trade community became a cash-based community, because there was no recourse if a check bounced," says Sam Bahour, a Palestinian businessman. "If [the arbitration court] gets traction, it could be something interesting."
Skirting politics 听
As part of the revived push for a peace agreement,听Israel, the US, and the Palestinians are听devoting substantial time and attention to efforts to boost the听Palestinian economy, believing economic growth would improve the environment for negotiations.
Many of the steps,听such as ceding听Israeli control over听some听parts of the West Bank听so the land can be devoted to听Palestinian economic projects and relaxation of restrictions on Palestinian movement, are likely to face opposition from hardliners in Israeli Prime Minister Benjamin Netanyahu鈥檚 cabinet.听The US is also expected to transfer more aid for infrastructure projects 听 听听
The arbitration center is something different. Three years in the making, it is a听homegrown,听independent effort by business communities on both sides to smooth commerce 鈥� in spite of chilled relations between their governments, a vacuum of negotiations, and Israeli barriers on movement and access that handicaps Palestinian businessmen.
"It has nothing to do with the political process. It has to do with surviving the conflict and not ending the conflict," says Samir Hulileh, the chief executive of Padico, a Palestinian conglomerate with businesses from real estate to telecommunications to manufacturing. "It gives confidence to investors. Investors should see there鈥檚 an exit, and that they鈥檙e not part of a problem held up in the political process."
The effort has been听spearheaded听by Palestinian billionaire Munib Masri, the owner of Padico, and Oren Shachor, a former major听general who oversaw the听Israeli government鈥檚听civil administration of the Palestinian territories.
At the outset of a transaction, businessmen will sign contracts agreeing to use the Jerusalem Arbitration Center in the event of a dispute. Should a case be brought to the court, it will be handled by a panel of three arbitrators 鈥� one Israeli, one Palestinian and one international. The decisions will then be referred to local courts, whether in Israel or the Palestinian territories, which will oversee implementation and enforcement by police authorities.听听
It鈥檚 unclear, however, how the court would handle a trade dispute linked to geopolitical issues like the movement and access restrictions on Palestinians dictated by Israeli security authorities.
Creating trust
Last month, days after the announcement of a plan to normalize estranged ties between Turkey and Israel, the local chambers of commerce said the arbitration center will be chaired by Rifat听Hisarc谋kl谋o臒lu, a Turkish business leader close to Turkish President Abdullah Gul.
Turkey was chosen because it听remained an听important trade partner听for Israel, despite the deterioration of relations between the two governments in the last couple years.听For the Palestinians, Turkish involvement represents the presence of a Muslim regional power that has actively supported the Palestinian cause.
"Turkey is a country that is close by, and we have a huge cycle of business with," says Mr. Shachor, who believes trade between Israel and the Palestinians will double in five years as a result of the arbitration. "The center is a bridge between Palestinians and Israelis."
Israeli and Palestinian companies trade in everything from agriculture, to building materials, to telecommunications services. Companies in all industries might end up availing themselves of the arbitration center.
It will potentially simplify the lives of those like听Brian Thomas, a British Israeli who imports computer equipment and then sells to Palestinian vendors in the West Bank. He says all of his transactions are in cash, which forces him to carry tens of thousands of dollars in cash at a time.
If a joint court worked as advertised, he says he might consider allowing Palestinian clients buy on credit, although he says he remains skeptical because enforcement of transaction claims is lax, even among Israelis.
"Everybody knows there is no legal recourse if they run away with your money. If I looked into it, and it was real, and I had confidence, it might mean that I would do more business with these guys," he says. "But Israeli courts chasing Israelis is hard enough, to go after an Arab in Nablus sounds stupid."
Improved trade with Israel听would听be an economic boon for Palestinians:听the current听$500 million in annual exports to Israel represents 80 percent of all Palestinian听exports. Even a 25 percent increase would be significant, says Saad Khatib, the former director general of the Palestinian Federation of Industries.
Mr. Khatib says that in order to create the conditions for long-term growth of the Palestinian private sector, Israeli and Palestinian politicians need to sit down and negotiate a new customs regime that will give Palestinians control over tariffs听on goods from abroad听while preserving free trade听between Israelis and Palestinians.
He suggests that politicians take their cues from the business community.
"The private sector wants to work together and wants to improve the situation," he says. "Generally, the private sector is miles ahead of any government. Hopefully it will play catch up."