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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. 

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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 – 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.  

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It’s 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 Hisarcıklıoğlu, a Turkish business leader close to Turkish President Abdullah Gul.

Turkey was chosen because it remained an important trade partner for Israel, despite the deterioration of relations between the two governments in the last couple years. 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 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 would be an economic boon for Palestinians: the current $500 million in annual exports to Israel represents 80 percent of all Palestinian 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 on goods from abroad while preserving free trade 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."

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