The activities of Israeli banks in Israeli settlements in the occupied West Bank raise serious human rights concerns. By providing services to and in settlements, which are illegal under international humanitarian law (IHL), and partnering with developers in new construction projects, Israeli banks are making existing settlements more sustainable, enabling the expansion of their built-up area and the take-over of Palestinian land, and furthering the de facto annexation of the territory. All of this contributes to serious human rights and IHL abuses.
When faced with such concerns over their banking activities in and with Israeli settlements in the West Bank, Israeli banks have said that they are required by Israeli law to provide those services.
However, Human Rights Watch can find no Israeli domestic law that requires Israeli banks to provide many such settlement-related activities. In other words, Israeli banks could stop many of their settlement-related activities – notably financing new construction, providing mortgages, and operating service points -- branches and ATMs – without necessarily incurring adverse domestic legal consequences.
Even if that were not the case, Israeli banks would have a responsibility in all circumstances to seek ways to honor the principles of internationally recognized human rights.
In this paper, Human Rights Watch analyzes Israeli domestic law governing banking activities, including recent amendments to anti-discrimination and consumer protection legislation and a law addressing calls to boycott Israel or its settlements. This paper outlines which activities Israeli law does and does not require banks to undertake in settlements, and makes recommendations to Israeli banks, their investors, the Bank of Israel, the Israeli government and third-party states. It also addresses the human rights responsibilities that foreign institutional investors in these banks have and provides recommendations for how they might meet those responsibilities. The analysis in this paper is limited to the activities of Israeli banks in and with settlements and does not address other kinds of activities undertaken by Israeli banks.
Human Rights Watch does not believe it is possible for businesses to operate in the settlements in compliance with their international responsibilities, due to the inherent IHL and human rights violations that characterize settlements. Human Rights Watch is calling for banks, like other businesses, to comply with their own human rights responsibilities by ceasing settlement-related activities.
Under Israeli banking, consumer, and anti-discrimination law, banks cannot reject customers based on their place of residence, which could be interpreted by Israeli courts to include residence outside of Israel, in Israeli settlements in the West Bank. But it is Human Rights Watch's assessment that banks can, under domestic law, avoid providing many services that support settlements and settlement activity, and that doing so is necessary to fulfill their human rights responsibilities. Banks are not obliged to provide their services everywhere and are not prohibited from refusing to offer services based on business or other considerations, regardless of where a would-be customer lives. Israeli law prohibits discrimination against an individual based on the individual's place of residence, not differentiation based on the geographic location where services will be provided or other substantive elements of a service or transaction. Indeed, Israeli consumer protection law allows businesses to refrain from offering goods and services in settlements, provided they notify customers in advance of this choice and apply the policy to all customers, irrespective of their place of residence. Israeli anti-discrimination law forbids banks from discriminating in services or goods provided in the place of business, based on the client's place of residence, but does not bar declining financial services in a certain area based on other considerations.
For these reasons, Human Rights Watch believes that while banks cannot, under Israeli law, reject settlers as customers, they do not have to provide financial services that involve settlements, such as financing construction projects or mortgages for settlement properties, when the grounds for refusal are not the place of residence of the customer but rather the business and human rights considerations stemming from the location of the activities, for example the nature of the property rights in the housing unit and the construction's implications on Palestinians’ human rights.
Based on Human Rights Watch’s analysis of Israeli law and the international humanitarian and human rights standards applicable to businesses and settlements, this means that banks can refuse to offer many services that “touch” settlements, as long as they disclose that policy and as long as the grounds for the refusal are perceived by courts not as relating to the clients themselves, but as stemming from the special business and other implications that arise from the nature of the transaction. For example, banks could refuse to offer a service if that transaction originates, terminates or passes through a settlement as long, as they disclose that they decline to provide services in settlements and apply that policy to all customers. Israeli regulatory law also provides banks a kind of safe haven by allowing them to propose policies of this type to the Bank of Israel for approval. This is just one of the many steps that Israeli banks can and should take to fulfill their human rights responsibilities and cease doing business in or with settlements.
Published on HRW on September 12, 2017.
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