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Tel Aviv District Court Judge Oded Mudrik has revoked a temporary attachment, placed over a year ago, on NIS 130 million in Palestinian Authority funds.

The attachment - in which a debtor's property is seized and placed under court control - was invoked in response to a lawsuit filed by three Israeli hotels against the PA for damages caused by the intifada.

This week's decision to revoke the attachment came after the state committed itself to cover the payment of any damages that may be allotted to the plaintiffs. The amount then would be deducted from the PA funds, which pass through the state coffers.

The treasury is holding about NIS 1 billion in PA funds that have been attached in recent years by Israeli courts that are hearing several lawsuits claiming damages against the PA. The attached funds are largely responsible for a severe budget crisis in the PA and amount to about half of the authority's cumulative deficit built up this year - $490 million. Prior to commiting to covering potential payments, the government was subjected to several months of American pressure to release the attachments. The attachment hurt Palestinian Authority Finance Minister Salam Fayyad's ability to implement some of the financial reform plans that the PA's donor countries, World Bank, and International Monetary Fund are trying to promote.

The temporary attachments, ordered by Israeli judges, were carried out over the past two years in contravention of the state's position. Israel had promised the United States to transfer to the Palestinian treasury, under the road map, all customs and taxes levied in the country on goods and services intended for the PA. The authority, through its lawyer Yossi Arnon, had appealed the attachment, and in a May 2004 hearing, Mudrik rejected a request by the attorney general to cancel the attachment. As a result, the government decided to take a further step guaranteeing payment of compensation should the court award any amount to the plaintiffs.

The attorney general informed Mudrik of this decision on October 19. The states's commitment, therefore, makes the court order redundant, since an attachment is a measure ordinarily taken when it is assumed that the respondent will become bankrupt.

Arnon is preparing appeals of attachments imposed by other judges. Two appeals already accepted by the courts have resulted in the lifting of attachments for NIS 36 million and NIS 50 million.