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Israel will cover damages awarded to Israeli plaintiffs suing the Palestinian Authority and will deduct the funds from the PA only thereafter, Attorney General Menachem Mazuz said last week.

Mazuz is asking Israeli judges who adjudicate such cases to stop imposing temporary confiscation orders on PA funds. Israeli judges have customarily imposed seizures on Palestinian funds in response to Israeli citizens' damage suits against the PA in recent years, before the court has reached a verdict. The state has decided to guarantee the financial awards after the courts have ignored numerous state requests that they not issue confiscation orders.

The reason the courts gave for confiscating the funds was concern that the PA would collapse before it could pay out the money.

About half of the PA budget deficit was caused by seizures imposed by Israeli courts on PA funds, Palestinian sources say. A PA treasury source says the sum of confiscated funds reached some NIS 1 billion this month, consisting of levies, taxes and customs collected by Israel for services and merchandise intended for the PA. The cumulative deficit this year is $490 million, while the PA's current budget is $1,444 billion.

PA Finance Minister Salam Fayyad is expected to cover some $330 million with help from the donor states, but has not found funding for the remaining $160 million. The deficit makes it difficult for Fayyad to continue implementing some of the administrative and financial reforms that the PA is obligated to make.

The temporary seizures of the last two years contradict the state's commitment to the United States to transfer to the PA, under the road map, all the customs and tax money taken by Israel for merchandise and services intended for the PA. Representatives from the Israeli and Palestinian treasuries have met over the last two months, with American involvement, to discuss ways to solve the problem.

Attorney Yossi Arnon, who represents the PA, said the damage suits were much higher than customary. In cases of death, Arnon said, Israeli courts award up to NIS 1 million in compensation, while in suits against the PA for terror attacks the sums reach tens of millions of shekels. Israeli courts have confiscated NIS 858 million in PA funds in connection with lawsuits against the Authority.

About two months ago, Arnon petitioned the High Court of Justice over some of the temporary confiscation orders, after Tel Aviv District Court Judge Altuvia Magen accepted the PA's appeal and canceled a confiscation order on NIS 36 million of PA funds.

The next step was the urgent request Mazuz made to the Tel Aviv District Court last Thursday, when he called for a renewed examination of the decision to issue temporary confiscation orders. That court is hearing three lawsuits filed by three hotels against the PA and the Palestine Liberation Organization in 2003, for loss of tourist income due to the intifada.

In May 2004, District Court Judge Oded Mudrik rejected the attorney general's request to reassess a previous ruling in which he issued a temporary confiscation order of NIS 130 million in PA funds. At the time, Mudrik summarized the state's request (which was accompanied by a statement from Prime Minister Ariel Sharon's senior adviser, Dov Weisglass, who was the prime minister's bureau chief at the time) as follows:

"The State of Israel has a diplomatic interest to release the Palestinian Authority funds from the limitations of seizure, both to advance the process of the diplomatic arrangement and to satisfy the American government, as Israel is obligated to carry out its role in the arrangement."

Despite this, Mudrik rejected the request, saying that since Weisglass had linked the cancellation of the seizure orders with diplomatic talks, it was possible to conclude that there was no genuine Israeli interest involved in canceling the seizure because no talks were going on.

The attorney general's current request does not mention "diplomatic talks," but rather a "diplomatic interest" in transferring the funds urgently, saying the cumulative sum is substantial. Mazuz said in his request that a balance could be found between serving the plaintiffs' interests and returning PA funds.

"The state promises that if a ruling is handed down in favor of the plaintiffs in a case and they want to actualize it... from the funds held for the PA by the state at that time, if the amount held is lower than the amount in the ruling... the state will make up the difference," Mazuz wrote.

The letter says that in any case, Israel regularly receives PA money, such that the state will be able to deduct the funds, in accordance with agreements between the state and the PA.

Arnon expects that the state will now make similar requests of other judges.

At the moment, Arnon's office is representing the PA in a number of lawsuits, including 16 financial suits of various types, 37 suits dealing with terror attacks and five suits regarding damage caused to collaborators, coming to a total of NIS 6 billion.

Forty-seven lawsuits against the PA have been filed in Jerusalem, 17 in Tel Aviv, two in Haifa, two in Be'er Sheva and one in Nazareth. This year, seven suits have been filed against the PA, compared to 26 in 2003, 18 in 2002 and 13 in 2001.