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.
Human Rights Watch has reviewed information published by the Bank of Israel and reports on banking activities in Israeli settlements recently published by the Israeli nongovernmental organization Who Profits, the Danish media and research group Danwatch, and a coalition of French groups. Human Rights Watch made field visits to bank branches and construction sites in settlements and reviewed information about service points in settlements published by the Bank of Israel and Israeli banks. Human Rights Watch also reviewed settlement local and regional council meeting minutes, company reports on settlement construction, and publicly available information regarding new settlement projects.
This research shows that all five of Israel’s largest banks are operating in settlements.
Human Rights Watch reviewed current Israeli legislation and court decisions, legislative proposals, Israeli parliamentary research reports, articles by Israeli scholars in the field of banking and an expert opinion on Israeli domestic law and banking activities in the settlements that Who Profits commissioned.
Human Rights Watch wrote to the Bank of Israel, the Association of Banks in Israel (the industry’s association) and to the five largest Israeli banks, requesting details of banking activities in the settlements and explanations about their understanding of the domestic legal framework. Bank Leumi and the Bank of Israel provided brief comments. The other four banks, Hapoalim, Bank Discount, Mizrahi Tfahot and First International Bank of Israel, did not respond. The Association of Banks in Israel provided written responses to questions posed by Danwatch for a January 2017 publication, which Human Rights Watch reviewed, but its spokesperson declined to answer Human Rights Watch’s questions for this publication.
Human Rights Watch also consulted with Israeli lawyers and legal scholars with expertise in Israeli corporate, banking, property and anti-discrimination law.
In addition to the response by the Bank of Israel, which is detailed below, a spokeswoman for Bank Leumi wrote in an e-mail, in response to a list of questions, that “Bank Leumi operates in accordance with the laws of the State of Israel” and referred Human Rights Watch to the Association of Banks in Israel for further questions.
Why Banking in Israeli Settlements Violates International Law
Human Rights Watch has previously documented how businesses in Israeli settlements in the West Bank contribute to and benefit from serious violations of human rights and international humanitarian law (IHL): they violate the prohibition on transferring an occupying power’s civilians into occupied territory, are located on land that has been unlawfully taken from Palestinians, exploit natural resources that belong to Palestinian society but are allocated in a discriminatory manner in favor of Israelis, and are part of a discriminatory system that privileges Israeli businesses while inhibiting the development of Palestinian businesses, social, and cultural institutions, and infrastructure. Settlements trigger serious abuses such as restrictions on Palestinian freedom of movement, unlawful seizure of Palestinian land, home demolition, and displacement. Transferring an occupying power’s civilian population into occupied territory is a war crime.
Settlement businesses depend on and benefit from Israel’s unlawful confiscation of Palestinian land and other resources and facilitate the functioning and growth of settlements. Settlement-related activities also directly benefit from Israel’s discriminatory policies in planning and zoning, the allocation of land, natural resources, financial incentives, and access to utilities and infrastructure. These policies result in the forced displacement of Palestinians and place Palestinians at an enormous disadvantage in comparison with settlers. The World Bank estimates that restrictions on Palestinian economic development and construction in Area C alone, the 60% of the West Bank where most settlements are located, cost the Palestinian economy $3.4 billion annually, a third of Palestinian GDP.
Banks’ Human Rights Responsibilities
Following international standards articulated in the United Nations Guiding Principles on Business and Human Rights, businesses are expected to undertake human rights due diligence to identify and mitigate contributions to human rights violations of not only their own activities but also activities to which they are directly linked by their business relationships. They are also expected to respect IHL standards. Businesses are expected to take effective steps to avoid or mitigate potential human rights harm and to consider ending business activity where severe negative human rights consequences cannot be avoided or mitigated.
Based on extensive prior research, it is Human Rights Watch's view that adequate due diligence would show that business activities in or in contract with Israeli settlements or with settlement businesses contribute to rights abuses. Human Rights Watch has concluded that businesses cannot mitigate or avoid contributing to these abuses so long as they engage in such activities, as they contribute to the operation and expansion of settlements that violate international law. In Human Rights Watch’s view, the context of human rights abuse to which settlement business activity contributes is so pervasive and severe that businesses cannot fulfill their human rights responsibilities if they continue carrying out activities inside or for the benefit of settlements, including financing, providing services to, or otherwise supporting settlements or settlement-related activities and infrastructure.
None of the five largest Israeli banks responded to questions about whether they implement the UN Guiding Principles. Human Rights Watch did not find publicly available documents relating to such implementation. Many of the major foreign institutional investors in these banks, however, including pension funds such as the Norwegian Government Pension Fund and the Dutch Government Pension Fund (ABP), have publicly committed to respecting human rights throughout their investment decisions. These two funds have withdrawn funding from some Israeli companies on human rights grounds, including involvement in cluster weapons and settlement construction in the West Bank but have remained invested in Israeli banks that engage in settlement-related activities.
Israeli Banking Association Claims
While a spokesman for the Association of Banks in Israel declined to comment on questions Human Rights Watch posed, the association did provide a detailed response to questions posed by the Danish media and research center Danwatch for its January 2017 report on investments in Israeli settlements. In its response, the association suggested that it was legally obliged to offer financial services in the settlements to comply with a previous version of Israel’s Anti-Discrimination Law.
The banking association referred to an Israeli statute, The Prohibition on Discrimination in Products, Services and Entry into Places of Entertainment and Public Places, 5761-2000 (“Anti-Discrimination Law”). The association wrote:
[The Anti-Discrimination Law] prohibits banks, who provide banking services and credit, from discriminating in the provision of banking services and credit due to race, religion, religious group, nationality, country of origin, gender, sexual orientation, point of view, partisan affiliation, personal status or parenthood. It also provides that discrimination includes setting irrelevant conditions in the provision of services.
Therefore, setting a policy at a bank, whereby banking services or credit would not be provided in connection with activity, such as mortgages, financing of building projects or provision of credit, in Judea and Samaria [the biblical name for the West Bank commonly used in official Israeli discourse] constitutes discrimination due to nationality, race, religious group and point of view which is prohibited under the law.
The association’s statement did not explain how refusing to provide services in West Bank settlements, most of which are outside the boundaries of the State of Israel as defined by Israeli law, would constitute discrimination against individuals based on nationality, race, religion or point of view. None of the Israeli banks responded to a Human Rights Watch request to explain that position. Since the association made its statement, the Anti-Discrimination Law has been amended, as will be discussed below.
A spokesperson for the Bank of Israel, which is responsible for ensuring that Israeli banks operate according to domestic law, wrote in an e-mail that questions posed by Human Rights Watch “relate to legal aspects of activities of banks in Israel. The answers are complicated and dependent on the circumstances of each and every case on its merits, and therefore, in general, we do not address questions of this nature.”
Analysis of the Obligations Imposed on Banks by Israeli Law
Based on its previous research on the involvement of business with unlawful settlements, Human Rights Watch takes the position that providing banking services in or to settlements contravenes the international human rights responsibilities of Israeli banks. Indeed, were Israeli law in fact to require businesses to provide such services – and some Israeli lawmakers have proposed amending the law to impose such a requirement, thus far unsuccessfully – it would make compliance by these businesses with their human rights responsibilities difficult or impossible and would necessitate other companies to reevaluate any relationships with these businesses.
Israeli banking customer service is governed by The Banking Law (Customer Service), 1981 (“Banking Law”) and other laws relating to anti-discrimination and customer service. A close reading of these laws by Human Rights Watch shows that banks can, under Israeli law, decline to provide many of the services they provide in Israeli settlements in the West Bank based on business and human rights considerations. Research and an analysis of the applicable law strongly suggest that, rather than being obligated to operate in or with settlements, Israeli banks are choosing to provide many of these services, each according to its own business judgment.
Application of Israeli Banking Law in West Bank Settlements
A preliminary question to be addressed is whether and how Israeli law applies at all to banking in West Bank settlements. Like most Israeli statutes, the Banking Law’s territorial reach is limited to the boundaries of the State of Israel as recognized by Israeli law, which do not include the settlements in the West Bank, except in East Jerusalem, which Israel claims to have annexed and where it applies its domestic laws. However, the Israeli military, which acts as both legislator and regulator in the West Bank, has ordered that Israeli law will apply to the branches of Israeli banks that it licenses to operate in the West Bank. The military also exempts those Israeli branches from compliance with the Jordanian banking law otherwise in place in the West Bank. So while there is no obligation for Israeli banks to operate in settlements, as detailed below, once they do, the Israeli military will apply Israeli law to their operations.
International humanitarian law requires the occupying power to respect the pre-occupation laws of the territory, with limited exceptions for security or to benefit the population living under occupation. Extending Israel’s domestic banking laws and enforcement authority to occupied territory, for services extended to Israelis settlers unlawfully present in the West Bank, as though Israel were the lawful sovereign there, therefore violates IHL.
Obligations Imposed by Israeli Banking Law on Israeli Banks
Israel’s Banking Law lists the three services that Israeli banks are prohibited from unreasonably refusing to provide: receiving deposits; opening and managing, under certain conditions, a current account (also known as a checking account) in Israeli shekels; and issuing bankers’ checks. The law allows banks to determine their own policies on credit-worthiness, explicitly stating that “no obligation shall exist to provide a service involving the provision of credit to a customer.” It also allows banks to set policies to guide decisions about service provision, subject to approval by the Bank of Israel, and decisions made according to approved policies are presumed to be reasonable.
Israeli banking law, applied to settlements via military orders and applying in Israel as a matter of course, could be interpreted to require Israeli banks to agree to individual requests to open and manage current accounts and sell bank checks for residents of Israeli settlements, institutions, businesses and organizations in Israeli settlements, and settlement local councils, under appropriate conditions. Of course, a bank wanting to avoid any such requirement could, subject to Bank of Israel permission, create a policy declining to open accounts for settlement businesses and local authorities – for example to comply with its international human rights responsibilities. In that case, for businesses and settlement entities, the differentiation is based on the substance of the transaction and the support it provides to settlements, not the place of residence of the customer. Approval of such a policy by the Bank of Israel would offer the bank a kind of safe haven from adverse legal action, as decisions made pursuant to approved policies are presumptively reasonable.
The Banking Law does not, however, appear to require banks to provide many of the additional services they offer to or in settlements, as elaborated below.
No Obligation to Establish Bank Branches
The Bank of Israel is responsible for approving new branches of banks, but the rules largely relate to commercial considerations regarding when and where branches are opened or closed. There does not appear to be any legal requirement that banks have branches in settlements. Indeed, most settlements do not have service points; according to information published by the Bank of Israel and the banks’ web sites, just six of the 126 settlements in the West Bank, not including East Jerusalem, have bank branches or ATMs set up by the banks.
Information on the Bank of Israel’s division of Supervision of Banks website says that Israeli banks make decisions to open and close branches “according to their business considerations.” The Banking Law (Licensing) 1981 requires permission from the Bank of Israel to open or close a branch, which considers, among other factors, the “public welfare.” It would be difficult, therefore, to read into Israeli law an obligation to open bank branches in settlements, as banks are actually prohibited from doing so until they affirmatively request and receive permission. Israeli law does require permission from the Bank of Israel to close existing bank branches in Israeli settlements (or anywhere else). Since 2015, Israeli banks have closed four bank branches in the Israeli settlements of Beitar Ilit, Modi’in Ilit and Oranit, according to the Bank of Israel’s online listing.
Anti-Discrimination Law Does Not Appear to Require Service in Settlements
Israel’s recently amended Anti-Discrimination Law and consumer protection law require businesses, which would include banks, to notify customers if they decline to provide services in settlements, but they do not require them to provide those services. As detailed below, this new amendment was not primarily aimed at banking services but rather focused on services such as the delivery and repair of appliances and other physical goods. While the courts have yet to interpret this amendment, it applies to the banking sector as well, and is therefore worth reviewing.
Here too, the question of applicability should be noted. While Israel’s Anti-Discrimination Law would ordinarily be limited to the territory of Israel, it would also appear to apply to Israeli banking activities in settlements via the military order applying Israeli law to bank branches operating in settlements and, to a lesser extent, a 2017 amendment that will be discussed below. Among other things, the law governs the provision of financial services, including banking and credit extension.
The law was amended in March 2017 to prohibit discrimination based on place of residence, but only for goods and services provided within the place of business. It may be interpreted by Israeli courts to prohibit banks from rejecting customers based on place of residence, even if the place of residence is outside Israel, in Israeli settlements in the West Bank. However, it does not oblige banks to provide their services everywhere and does not prohibit them from refusing to offer services based on business or other considerations, which can include human rights responsibilities. In the case of settlements, as noted, the law allows businesses to avoid offering goods and services there, provided they notify customers of this choice. Indeed, attempts to amend the Anti-Discrimination Law to require businesses to provide services and supply goods to settlements (and other geographical locations) failed.
The amendment as adopted changes the Consumer Protection Law, 1981, to require businesses to clearly notify customers if they do not provide goods or services in settlements (or any other geographic location). The official parliamentary explanatory remarks accompanying the bill note that the amendment:
[d]etermines that the place where the consumer will be supplied with the asset or service will be considered a substantial part of the transaction … so that the business will be barred from doing something, by action or inaction, in writing, orally in or any other way, including after the transaction is undertaken, that could mislead the consumer regarding the location where he will be supplied with the asset or service, including regarding supplying the asset or service to the area of Judea and Samaria [Biblical name for the West Bank].
In other words, under a reasonable interpretation of the new law, businesses may still decline to supply goods or services in settlements, provided they notify customers in advance.
The chair of the parliamentary Economic Affairs Committee, Eitan Cabel, confirmed this interpretation at the parliamentary session at which the bill was passed into law. Referring to delivery and service of large goods like appliances, which were the focus of parliamentary discussions, he said, “We are not even talking about a situation in which we say ahead of time: he [the business operator] must travel to this or that place, but rather that the business did not notify ahead of time that he is not prepared to come to Elkana [an Israeli settlement in the West Bank]. Let him say so ahead of time.”
There is room for interpretation in determining how to apply the amendment’s provisions on “place of business” to banking services, whose physical location can be hard to pin down. The law would appear to bar a bank from discriminating in the provision of services within the physical building of the bank branches only, based on a client’s place of residence, but would not prohibit a bank from declining to provide other services in the settlements themselves, such as mortgage loans secured by properties in Israeli settlements, loans to settlement local councils secured by collateral or guarantees originating in settlements, operating bank branches in settlements or partnering with developers to finance new settlement construction projects. These latter activities could require banks to evaluate title and property rights in settlements, assess planning and zoning regulations there, and send representatives to the settlements, for example to monitor progress of a construction project, assess value, take possession of property in settlements in case of default, establish a service center or engage in other activities that pass-through settlements, none of which appear to be required under the amendment. They are not confined to the bank’s physical place of business, meaning the branch office itself.
In other words, under the Anti-Discrimination Law, banks cannot refuse banking services to anyone, within the bank branches, based on place of residence. However, banks are not obliged to provide banking services in settlements as long as they disclose it. While this interpretation has not been tested in the courts, it does appear to be consistent with the law. Banks are not obliged to provide all services to everyone anywhere under the law, since that is something the banks have to determine based on credit-worthiness, business decision-making, and other factors.
Indeed, Israel’s Anti-Discrimination Law permits differentiation, if the differential treatment is relevant to the substance of the good or service being provided. This would include ethical responsibilities such as protecting human rights. Under Israeli law, people may be treated differently if their circumstances present differences relevant to the issue at hand, and the purpose of the differential treatment is related to the substance of the issue at hand, rather than related to a forbidden category of discrimination.
There are numerous substantive differences between transactions in settlements and transactions in Israel. Doing business in or with settlements inherently contributes to serious violations of human rights and IHL. The land on which settlements are built is territory occupied by Israel. Even under Israeli domestic law, with the exception of East Jerusalem, the land is only held temporarily by the military, which does not hold legal title to it and whose authority to dispose of the land would be extinguished with the end of the military occupation. There are also relevant differences in the planning and zoning regime and land registration procedures in settlements that affect the banks’ risk calculations. Doing business in settlements creates risks for Israeli banks and exposes them to reputational harm abroad, including by investors concerned about their human rights responsibilities. Israeli law allows banks to take these differences into account in determining policies about service provision in settlements.
Under international law, at least, it is also hard to define differentiation based on international illegality as discrimination, under circumstances in which the aim of the differential treatment is to avoid contributing to serious human rights and IHL violations. Like Israeli law, international law distinguishes between unjustifiable discrimination based on a person’s membership in a protected social group and differential treatment based on differences in factual circumstances. The UN body responsible for interpreting the International Covenant on Civil and Political Rights notes that differential treatment does not constitute discrimination if the criteria for differentiation are reasonable and objective, and the purpose is legitimate under the convention. In the Israeli legal system, where possible, courts are to interpret domestic law as consistent with the international obligations that Israel has assumed.
Providing financial services in and to settlements contributes to severe human rights abuses including discrimination against Palestinians, who are not permitted to set foot in settlements except as laborers bearing special permits and whose land is unlawfully seized and used for settlement construction and expansion. Therefore, a bank choosing to differentiate in service provision by declining to provide services in settlements would be acting in furtherance of the principle of equality and other important human rights, one of the many valid arguments it could and should make, within the Israeli legal system, that it is acting in pursuit of a legitimate aim.
To summarize, while a bank cannot discriminate against individuals based on place of residence under Israeli domestic law, it is not obliged to agree to give them any service or financing they request. A bank may choose not to provide mortgages in settlements or finance settlement construction projects and apply that policy to all would-be borrowers, including those who live in settlements and those who live in Israel but seek to buy or build properties in settlements.
Human Rights Watch was also not able to find evidence to support the claim of the Association of Banks in Israel, made prior to the March 2017 amendment to the Anti-Discrimination Law, that refusal to provide services in settlements would constitute discrimination based on “nationality, race, religious group and point of view.” Living in a settlement is not a proxy for these categories that the Anti-Discrimination Law protects.
According to data from the Israeli Census Bureau, residents of Israeli settlements are overwhelmingly Jewish citizens of Israel, as are most residents of Israel itself. They are heterogeneous in their ethnicities, political views, and party affiliations, as voting records also indicate. They include secular and religious Israelis, Israelis who move to the settlements for economic and quality-of-life reasons, and those who move there for a variety of religious and political reasons.
Little Obligation to Provide Loans to Settlement Municipalities
The Israeli Interior Ministry, which among other things supervises municipalities and local and regional councils, affirmed that banks are under no obligation to provide loans to local or regional councils in the settlements or anywhere else. The ministry’s assistant director general at the time, Dovrat Silberstein, told lawmakers at a June 19, 2007 parliamentary finance committee hearing that even in cases in which the ministry provides a struggling local council with 50 percent of its shortfall in the form of grants, thereby making it a more attractive prospective borrower, banks are under no obligation to provide loans: “We can’t require the banks to give the money,” Silberstein said. “We are dependent on the banking system, and they are not obligated to do anything. They are not a government entity, they are a business entity.”
The parliamentary hearing was called following reports that, under pressure from foreign investors, the Dexia Israel Bank was refusing to grant loans to settlement local or regional councils, a claim that Dexia representatives denied.
Since that hearing, the Anti-Discrimination Law was amended, as noted above, and it is possible that an Israeli court could interpret it to limit the ability of banks to treat settlement local or regional councils differently in granting loans, provided that such loans would be considered a service granted inside the bank branch itself. If the loan were secured by property located in settlements or an income stream located in the settlement, such as municipal taxes and other fees, it is less likely that the domestic law prohibition on discrimination based on place of residence would apply, as such loans require the banks to assess the value of income and property outside the bank branch and, ultimately, foreclose on such property in the event of default. These activities are not confined to the bank branch itself, and declining to accept settlement property as collateral could be interpreted as a substantive aspect of the transaction, rather than discrimination based on place of residence.
Possibility of Civil Lawsuits
There has been at least one effort by Israeli shareholders to sue financial institutions for allegedly refusing to operate in settlements.
In 2014, amid reports that Dexia Israel Bank was refusing to grant loans to settlement local councils, a claim it steadfastly denied, a group of Israeli shareholders filed a derivative lawsuit, claiming that Dexia and its directors were violating their fiduciary duties to maximize profits and undermining the bank’s reputation by turning down potentially lucrative business opportunities in settlements. The suit was subsumed into a much larger and unrelated class action shareholder suit and ultimately settled in 2016.
There was no final ruling on these matters. Dexia Israel Bank claimed that no such ruling was necessary, because, as part of the court-approved settlement, it stated that it had not in the past adopted a policy not to grant loans to settlement local councils and that it would not do so in the future.
It is worth noting that in 2011, the Israeli parliament enacted a law authorizing civil suits to recover damages from those who publicly call for a boycott of Israel or of Israeli settlements, defined as “deliberately refraining from economic, cultural or academic ties with another person or actor only because of his ties with the State of Israel, one of its institutions or an area under its control, in such a way that may cause economic, cultural or academic damage.” That civil liability portion of the law would not apply to a policy by banks to refrain from operating in settlements, because it targets those who publicly encourage others to boycott Israel or its settlements, not those who themselves choose to refrain from settlement-related activities. However, the law also authorizes the Finance Minister to establish directives restricting participation in public tenders for those who undertake to participate in a boycott, using the same definition as cited above. No such directives have yet been established, so it would be premature to speculate about what they might mean for banks.
Businesses’ International Human Rights Responsibilities
Israeli law does not appear to require Israeli banks to provide services in settlements, with the apparent exception of maintaining bank accounts for settlement entities and residents of settlements and refraining from discrimination in service provision inside the bank branches themselves. However, providing services to and in settlements contravenes Israeli banks’ international human rights responsibilities.
The UN Guiding Principles require businesses to conduct due diligence, to determine whether their activities contribute to or benefit from serious human rights abuses or violations of IHL standards. Such diligence would show that by contributing to building, buying, and selling homes on unlawfully seized land, providing support to local councils that provide services to Israelis but not to West Bank Palestinians, and establishing service points on Palestinian land that is off-limits to Palestinians, banking activities in or with settlements contribute to serious abuses.
Based on the UN Guiding Principles and their commentary, businesses have a responsibility to comply with local laws and to respect human rights wherever they operate. Where the domestic context makes it impossible to respect human rights fully, “business enterprises are expected to respect the principles of internationally recognized human rights to the greatest extent possible in the circumstances, and to be able to demonstrate their efforts in this regard.”
In the case of opening current accounts for settlement entities and the few other banking services required by domestic law, there is an apparent contradiction between the international human rights responsibilities of Israeli banks and their domestic legal obligations. For this limited set of activities for which an apparent contradiction exists, Israeli banks have a responsibility “to seek ways to honor the principles of internationally recognized human rights” and to demonstrate “ongoing efforts to mitigate the impact” of the human rights abuses. At the very least, Israeli banks should demonstrate their efforts to comply with their international human rights responsibilities, including by proposing policies restricting the operation of financial services for settlement businesses and local authorities and seeking to persuade the Bank of Israel not to veto such proposed policies.
If local law could be interpreted in a number of ways, Israeli banks should pursue the interpretation that is consistent with their international human rights responsibilities. And for the many services in settlements that are not required by Israeli law but that contravene the banks’ human rights responsibilities—including operating service points, financing settlement construction and providing loans secured by real and other property or income streams located in settlements—banks need to avoid providing them in order to avoid contravening their human rights responsibilities.
Should the Israeli parliament pass additional legislation requiring Israeli businesses to provide services in Israeli settlements, as lawmakers unsuccessfully proposed for the recent amendment to the Anti-Discrimination Law, Israeli banks would have responsibilities under the UN Guiding Principles to demonstrate their best efforts to limit its applicability to their operations.
Especially for foreign businesses, for which the relationships with Israeli banks are not “crucial,” any additional Israeli domestic legislation requiring businesses to do business in or with settlements should be a red flag that would require them to reconsider their relationships with companies subject to such requirements. Indeed, the Commentary to the UN Guiding Principles notes that: “There are situations in which the enterprise lacks the leverage to prevent or mitigate adverse impacts and is unable to increase its leverage. Here, the enterprise should consider ending the relationship, taking into account credible assessments of potential adverse human rights impacts of doing so.”
The Israeli authorities, including quasi-state organs such as the statutorily-created Bank of Israel, have a responsibility to ensure that “laws and policies governing the creation and ongoing operation of business enterprises, such as corporate law, do not constrain but enable business respect for human rights”. Israeli laws and regulations should encourage – not hinder – respect for international human rights law.
In order to comply with their human rights responsibilities, Israeli banks should stop providing services in settlements, including financing construction projects, providing mortgage loans and loans to local or regional councils, and operating bank branches and ATM’s in settlements. They should refrain from opening new service points in settlements and request permission from the Bank of Israel to close their existing service points. They should also propose service provision policies ending or eliminating the creation of current accounts for settlement businesses and local or regional councils, subject to approval from the Bank of Israel. They should demonstrate ongoing efforts to change any domestic legal requirements that require them to provide services in Israeli settlements in the West Bank and should pursue interpretations of the current domestic law that are consistent with their human rights responsibilities.
Institutional Investors in Israeli Banks
As part of their responsibility to conduct heightened human rights due diligence in situations of occupation, institutional investors in Israeli banks should engage the banks in which they invest on their settlement-related activities. They should determine the extent of the banks’ involvement in settlement-related activities, their future plans, their understanding of the domestic legal framework, and the willingness and ability of the banks to verify that investors’ funding is not contributing to or assisting settlement activity. In particular, Human Rights Watch suggests that they ask the following questions of the Israeli banks in which they invest:
- Which, if any, domestic law obligations require you to provide services to the settlements and to locate business activities there?
- What, if anything, have you done to change those domestic law obligations, to propose interpretations that are consistent with the UN Guiding Principles on Business and Human Rights and/or to seek exemptions from them by making policy proposals to the Bank of Israel?
- Have you or will you send an internal policy to the Bank of Israel declining to provide financing services, municipal loans, branch or ATM services and mortgages in Israeli settlements?
- Have you or will you submit a request to close your bank branches in Israeli settlements in Area C?
- What if any new bank branches or ATMs do you plan to open in Israeli settlements in the West Bank?
- What new housing projects in the settlements do you plan to finance?
- How many construction projects in the settlements are you currently financing? What is their monetary value?
- How many construction projects in settlements have you pre-approved for mortgage loans?
- How many mortgage loans are you currently providing for properties in settlements? What is their monetary value?
- Please detail any loans or bank guarantees you are providing to settlement local or regional councils and municipalities in the West Bank, beyond the Green Line.
- Do you currently hold any government contracts that require you to provide financial services to settlement local or regional councils and municipalities, including loans, to transfer funds or to provide any other support? Please provide details, including their expected expiration (dates) and whether you intend to renew them, if applicable.
These institutional investors should ensure that their business relationships do not contribute to or benefit from serious human rights or IHL violations.
Bank of Israel
By regulating the activities of Israeli banks in settlements, applying Israeli banking law to those activities, and approving the opening of service points there, the Bank of Israel is contributing to violations of international law. The Bank of Israel oversees a single legal Israeli banking regime that applies to Israel and the occupied West Bank, including Israeli settlers but excluding West Bank Palestinians. It also has the authority to approve policies by banks that would limit the scope of their activities in settlements or, conversely, expand such activities.
Human Rights Watch recommends that the Bank of Israel take all measures within its authority to limit the scope of banking activities in the settlements, in order to create a regulatory environment that enables and encourages banks to meet their human rights responsibilities. That includes refusing requests to open additional service points (bank branches or ATMs) in Israeli settlements, approving any requests to close settlement service points, and approving policies proposed by banks that would limit or eliminate services provided in or for settlements.
Government of Israel
Israeli authorities should dismantle all Israeli civilian settlements in the West Bank. The Israeli Knesset should ensure that domestic laws comply with international standards and do not require businesses to participate in violations of human rights or IHL. As required by the Israeli legal system, Israeli courts should, to the extent possible, interpret Israeli domestic law in such a way that it is consistent with Israel’s international legal obligations.
Third Party States
Third party states that have domiciled in their jurisdictions institutional investors in Israeli banks should provide guidance on implementing the UN Guiding Principles on Business and Human Rights to companies operating in conflict-affected areas, including in the context of military occupations such as the occupied Palestinian territories. This could include, among other steps, individual outreach to institutional investors in Israeli banks, to advise them of existing business advisories warning of the legal and financial risks of doing business in Israeli settlements in the West Bank.
 Who Profits, Financing Land Grab: The Direct Involvement of Israeli Banks in the Israeli Settlement Enterprise, February 2017, https://whoprofits.org/content/financing-land-grab-direct-involvement-israeli-banks-israeli-settlement-enterprise (accessed August 23, 2017).
 Danwatch, Business on Occupied Territory, January 31, 2017, https://www.danwatch.dk/en/nyhed/europes-largest-pension-funds-heavily-invested-in-illegal-israeli-settlements/ (accessed August 23, 2017).
 Association France Palestine Solidarité et al, French Banks’ Dangerous Liaisons with Israeli Settlement Enterprise, March 2017, https://www.banktrack.org/news/report_reveals_links_between_five_french_banks_and_insurance_companies_and_the_israeli_settlements (accessed August 23, 2017).
 “Unedited response from the Association of Banks in Israel,” Danwatch, https://www.danwatch.dk/wp-content/uploads/2017/01/Unedited-response-from-the-Association-of-Banks-in-Israel.pdf (accessed June 1, 2017).
 Letter from Human Rights Watch to the Association of Banks in Israel, February 12, 2017, available at https://www.hrw.org/sites/default/files/supporting_resources/israel_banking_association_letter_english.pdf.
 Letter from Human Rights Watch to Bank Leumi, March 26, 2017. English translation available at https://www.hrw.org/sites/default/files/supporting_resources/israel_leumi_letter_english_web.pdf. Similar letters were sent to the other four Israeli banks noted in this publication.
 Bank Leumi email correspondence with Human Rights Watch, March 28, 2017. Unofficial English translation available at https://www.hrw.org/sites/default/files/supporting_resources/letter_from_leumi_english_web.pdf.
 Human Rights Watch, Occupation, Inc.: How Settlement Businesses Contribute to Israel’s Violations of Palestinian Rights, January 19, 2016, https://www.hrw.org/report/2016/01/19/occupation-inc/how-settlement-businesses-contribute-israels-violations-palestinian.
 World Bank, Report No. AUS2922, West Bank and Gaza, Area C and the Future of the Palestinian Economy, October 2, 2013, http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/01/23/000442464_20140123122135/Rendered/PDF/AUS29220REPLAC0EVISION0January02014.pdf (accessed August 23, 2017).
 United Nations Guiding Principles on Business and Human Rights, No. 13(b), available at http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf (accessed August 23, 2017),
 Human Rights Watch, Occupation, Inc.; Human Rights Watch, Separate and Unequal, Israel’s Discriminatory Treatment of Palestinians in the Occupied Palestinian Territories, December 19, 2010, https://www.hrw.org/report/2010/12/19/separate-and-unequal/israels-discriminatory-treatment-palestinians-occupied.
 The Norwegian Government Pension Fund notes that it will exclude companies that contribute to “serious violations of the rights of individuals in situations of war or conflict” or that otherwise contribute to serious violations of fundamental ethical norms. Council on Ethics for the Norwegian Government Pension Fund Global, Guidelines for observation and exclusion from the Government Pension Fund Global, December 18, 2014 (English translation), https://www.regjeringen.no/globalassets/upload/fin/statens-pensjonsfond/guidelines-for-observation-and-exclusion-14-april-2015.pdf (accessed August 23, 2017). As of 2016, the Norwegian Government Pension Fund lists investments in all five of Israel’s largest banks: Bank Hapoalim, Bank Leumi, Discount Bank, First International Bank of Israel and Mizrahi Tfahot. It owns between 0.5% and 3% of each bank. The fund’s online listing is available here: https://www.nbim.no/en/the-fund/holdings/ (accessed August 23, 2017).
 ABP has committed, by 2020, to implement a new policy limiting investment to companies that, among other things, pay sufficient attention to respecting human rights: Stichting Pensioenfonds ABP, Sustainable and Responsible Investment 2016, p. 10, https://www.abp.nl/images/responsible-investment-report-2016.pdf (accessed August 24, 2017). ABP lists investments in Bank Hapoalim and Bank Leumi as part of its portfolio as of March 31, 2017: https://www.abp.nl/images/listed-investments.pdf (accessed August 23, 2017).
 Norges Bank Investment Management, Observation and Exclusion of Companies, January 1, 2015, available at https://www.nbim.no/en/responsibility/exclusion-of-companies/ (accessed August 23, 2017).
 “Unedited Response from the Association of Banks in Israel”, Danwatch.
 Danwatch, Business on Occupied Territory.
 Prohibition on Discrimination in Products, Services and Entry into Places of Entertainment and Public Places, 5761-2000.
 Human Rights Watch email correspondence with the Bank of Israel, December 22, 2016. Unofficial English translation available at https://www.hrw.org/sites/default/files/supporting_resources/israel_boi_letter_english_web.pdf.
 Bank of Israel email correspondence with Human Rights Watch, January 10, 2017. Unofficial English translation available at https://www.hrw.org/sites/default/files/supporting_resources/letter_from_boi_english_web.pdf.
 Banking (Service to Customer) Law, 5741-1981. Unofficial English translation available at http://www.boi.org.il/en/BankingSupervision/BankingLegislation/Bank%20of%20Israel%20%20Bank%20Legislation%20and%20Notices/150.pdf (accessed August 23, 2017).
 This annexation is not recognized by other states or the United Nations, and the area remains occupied territory under international humanitarian law. See e.g. Advisory Opinion on the Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory, International Court of Justice, July 9, 2004.
 “Order Regarding Amendment to Banking Law (No. 1177), para. 19,” in Israeli Military Attorney General, Manifestos, Orders and Appointments for Judea and Samaria Area, No. 75, 3 Heshvan 5750, November 1, 1989 (Hebrew). The amendment authorizes the military government to exempt from local law banks that operate in the West Bank but are branches of Israeli banks, if such branches follow the dictates of Israeli law. The order then applies Israeli law to such exempt branches. See also “Order Regarding Amendment to Banking Law (Amendment No. 2), Judea and Samaria (No. 1397) (1993), in Israeli Military Attorney General, Manifestos, Orders and Appointments for Judea and Samaria Area, No. 149, 5753-1993 (Hebrew), https://www.nevo.co.il/law_html/law70/ZAVA-0149.pdf#xml=http://www.nevo.co.il/Handlers/Highlighter/PdfHighlighter.ashx?index=5&type=Main (accessed August 23, 2017). The Israeli military is both legislator and regulator throughout the West Bank. It delegates some of that authority to the Palestinian Authority in about 40% of the West Bank, none of which includes Israeli settlements. All Israeli banks in the West Bank are located in Israeli settlements and are under direct Israeli authority.
 Ibid, Order Regarding Amendment to Banking Law (No. 1177).
 Hague Regulations of 1907, Art. 43. See also Geneva Convention relative to the Protection of Civilian Persons in Time of War (Fourth Geneva Convention), adopted August 12, 1949, 75 U.N.T.S. 287, entered into force October 21, 1950, art. 64.
 Banking Law (Customer Service), Ibid, para. 2(a).
 Ibid, para. 2(d).
 The Bank of Israel’s web site includes a database of bank branches by geographic location in Israel and the settlements: http://www.boi.org.il/he/BankingSupervision/BanksAndBranchLocations/Pages/LocatingBankBranches.aspx (accessed June 1, 2017).
 Bank of Israel web site, “Information on Opening and Closing Bank Branches” (Hebrew), available at http://www.boi.org.il/he/BankingSupervision/BanksAndBranchLocations/Pages/BankInfo.aspx (accessed June 2, 2017).
 Banking (Licensing) Law, 5741-1981, para. 28a-29. Unofficial English translation available at http://www.boi.org.il/en/BankingSupervision/BankingLegislation/Bank%20of%20Israel%20%20Bank%20Legislation%20and%20Notices/124.pdf (accessed August 23, 2017). Instructions issued by the Bank of Israel note that a bank wishing to close its branch must consider the needs of its current branch clients as well as the availability of alternative branches in other locations. Bank of Israel, Supervisor of Banks, Directive 400, “Closing Bank Branches and Reducing Teller Services,” January 9, 2017 (Hebrew), http://www.boi.org.il/he/BankingSupervision/SupervisorsDirectives/DocLib/400.pdf (accessed June 2, 2017).
 Bank of Israel, online search of bank branches. The listing includes bank branches that have been closed (Hebrew), http://www.boi.org.il/he/BankingSupervision/BanksAndBranchLocations/Pages/LocatingBankBranches.aspx (accessed July 1, 2017).
 Anti-Discrimination Law.
 Prohibition on Discrimination in Products, Services and Entry into Places of Entertainment and Public Places, 5777-2017 (Amendment 4), Reshumot, Laws of Israel, Vol. 2608, March 1, 2017, p. 442, http://fs.knesset.gov.il/20/law/20_lsr_381088.pdf (accessed August 23, 2017).
 There is a valid argument to be made that the provision that prevents discrimination based on place of residence would not apply at all to residence in the settlements, because of the presumption against extra-territorial application of Israeli law. The provision barring discrimination based on place of residence, unlike a separate provision requiring notification of refusal to deliver goods and services to certain geographical locations, does not specify application beyond the borders of Israel. The disposition of that argument would depend on a court’s interpretation of the law, but there is a tendency for Israeli courts to apply Israeli law to settlers on a personal basis, and the legislative history could suggest that lawmakers intended both parts of the amendment to apply to residence in settlements. In any event, as will be discussed in the recommendations section, to the extent possible, banks should pursue the interpretation of domestic law that allows them to fulfill their human rights responsibilities.
 An earlier version of the bill from May 2015 included a prohibition on refusing to provide goods and services in Israeli settlements (or other areas) while providing goods and services in areas of similar geographic proximity. See Draft Bill Amending the Prohibition on Discrimination in Products, Services and Entry into Places of Entertainment and Public Places, 5775-2015 (P/20/897), para. (1)(1a)(2)(a) (Hebrew), https://www.knesset.gov.il/privatelaw/data/20/897.rtf (accessed August 23, 2017). The minutes of parliamentary discussions document a failed attempt to require businesses to deliver goods and extend services to settlements. See Knesset Minutes, Vol. 17, 98th session of the 20th Knesset, Wednesday, February 3, 2016, 11 am (Hebrew), http://online.knesset.gov.il/eprotocol/PLAYER/ProtocolEPlayer.aspx?ProtocolID=49581&DateTor=03/02/2016 (accessed June 2, 2017). Supporters of the earlier version of the bill argued in favor of a clause, which was deleted from the final version, that would require businesses employing more than 100 people to supply goods and services inside Israeli settlements in the West Bank, if they provided those goods and services to towns within Israel located a similar distance away. However, the Knesset (Israeli parliament) rejected that requirement, and the final version of the law allows businesses to continue to differentiate based on geographical location in the provision of goods or services outside the place of business, for example delivery or service provision inside settlements or any other activity that would require travel to settlements or conducting activities there.
 Consumer Protection Law, 5741-1981, para. 2(a)(3a). The amendment entitles consumers to collect money damages from a business, if it misleads the consumer regarding “the place where the consumer will be provided the good or service”, including settlements in the West Bank.
 Draft Bill Amending the Prohibition on Discrimination in Products, Services and Entry into Places of Entertainment and Public Places, 5776-2016 (No. 4), June 13, 2016, H.H., 638, (Hebrew), http://fs.knesset.gov.il/20/law/20_ls1_343075.pdf (accessed August 23, 2017).
 Knesset Minutes, Vol. 17, 207th session of the 20th Knesset, Monday, February 20, 2017, 16:00, p. 67 (Hebrew http://fs.knesset.gov.il/20/Plenum/20_ptm_369184.doc (accessed August 23, 2017).
 When contractors choose to obtain bank guarantees for apartment buyers under the terms of Israel’s Sale Law (Apartments) (Guaranteeing Investments of Apartment Buyers) (1974), buyers make payments to the bank, not to the contractor, and the bank releases those payments to the contractor only after it confirms that the agreed-upon stage of construction has been completed.
 Anti-Discrimination Law, para. 3(d)(1).
 HCJ 6845/00 Niv v. National Labor Court, 57(6) PD 663, 680-1. See also AAP 343/09 The Jerusalem Open House for Pride and Tolerance v. Jerusalem Municipality 64(2) PD 1, 46; HC 11956/05 Bashara v. Minister of Housing and Construction (unpublished, judgment given December 13, 2006). See also See HCJ 528/88 Avital v. Israel Land Authority, 43(4) PD 297, 298, holding that “differentiation between different circumstances is not discrimination”.
 Human Rights Watch telephone interview with Dr. Ronit Levine-Schnur, senior lecturer in the Radzyner Law School, Interdisciplinary Center, Herzliya, August 15, 2017.
 United Nations Human Rights Committee, General Comment 18, para 13. A number of international human rights bodies have found that Israeli treatment of Palestinians in the West Bank constitutes unlawful discrimination. See for example Human Rights Committee, “Concluding Observations on the Fourth Periodic Report of Israel,” CCPR/C/ISR/CO/4, November 21, 2014, paras. 9, 16, 17.
 Israeli Central Bureau of Statistics, 2008 Census, Area Profile, Judea and Samaria, http://www.cbs.gov.il/census/?MIval=%2Fcensus%2Fpnimi_sub2_profiles.html&id_topic=11&id_subtopic=1&id_subtopic2=2&Mahoz=7 (accessed August 15, 2017).
 A database of voting outcomes for the 2015 national elections, broken down by town, shows that residents of Israeli settlements voted for a range of political parties. Hebrew language database available at http://votes20.gov.il/cityresults (accessed August 31, 2017).
 Settlers’ Council, New Data on the Population of Judea, Samaria and the Jordan Valley in 2016, Position Paper, January 31, 2017, noting that settlers in the West Bank, excluding East Jerusalem, are approximately one third secular, one third national religious and one third ultra-Orthodox (Hebrew), http://www.myesha.org.il/?CategoryID=335&ArticleID=7428 (accessed July 1, 2017).
 United Nations Human Rights Council, A/HRC/22/63, Report of the international fact-finding mission to investigate the implications of the Israeli settlements on the civil, political, economic, social and cultural rights of the Palestinian people throughout the Occupied Palestinian Territory, including East Jerusalem, para. 19.
 Knesset Finance Committee Hearing minutes, 17th Knesset, second session, June 19, 2007, p.3, www.knesset.gov.il/protocols/data/rtf/ksafim/2007-06-19-02.rtf (accessed August 23, 2017).
 D.L (D.C. T.A.) 14224-10-14 Shenhav v. Bank Dexia Israel, Ltd., Decision of June 6, 2016.
 Law for Preventing Harm to the State of Israel through Boycott, 5751-2011, para. 2(a). An unofficial English translation of the text of the law in bill form is available at http://adalah.org/Public/files/Discriminatory-Laws-Database/English/34-Bill-to-Prohibit-Imposing-Boycott-2011.pdf (accessed August 23, 2017).
 Boycott Law, Ibid, para. 3.
 UN Guiding Principles, No. 23 and Commentary on Principle No. 23.
 UN Guiding Principles, No. 23(b) and Commentary on Principle 19.
 UN Guiding Principles, Commentary on Principle 19.
 UN Guiding Principles, Commentary on Principle 19. See also UN Office of the High Commissioner for Human Rights, Mandate of the Working Group on the issue of human rights and transnational corporations and other business enterprises, Statement on the implications of the Guiding Principles on Business and Human Rights in the context of Israeli settlements in the Occupied Palestinian Territory, June 3, 2014, p. 10.
 UN Guiding Principles, No. 3(b).