Business before politics: Merchants set up court to handle Israeli-Palestinian trade disputes

Secretary of State John Kerry has put Palestinian economic growth high on the agenda with his recent shuttle diplomacy to restart peace talks, but 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 between Israelis and Palestinians that otherwise have no realistic address for adjudication. 

Economic collaboration between Israelis and Palestinians has been hobbled by the lack of a neutral forum for settling disagreements between Israeli and Palestinian businessmen when they arise. Palestinians and Israelis face restricted access to each other’s territory and have little trust in courts lying across the border. Without any legal recourse for 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 – Palestinians’ 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  

As part of the revived push for a peace agreement, Israel, the US, and the Palestinians are devoting substantial time and attention to efforts to boost the Palestinian economy, believing economic growth would improve the environment for negotiations.

Many of the steps, such as ceding Israeli control over some parts of the West Bank so the land can be devoted to Palestinian economic projects and relaxation of restrictions on Palestinian movement, are likely to face opposition from hardliners in Israeli Prime Minister Benjamin Netanyahu’s cabinet. The US is also expected to transfer more aid for infrastructure projects     

The arbitration center is something different. Three years in the making, it is a homegrown, independent effort by business communities on both sides to smooth commerce – 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’s an exit, and that they’re not part of a problem held up in the political process."

The effort has been spearheaded by Palestinian billionaire Munib Masri, the owner of Padico, and Oren Shachor, a former major general who oversaw the Israeli government’s civil administration of the Palestinian territories.

1 | 2

Next