Fares Akram, Ethan Bronner
The New York Times (Analysis)
November 18, 2011 - 1:00am

In what could be the first of many such decisions, a Hamas-appointed court this week ordered two major banks in Gaza to pay tens of millions of dollars in back fees and fines for refusing to accept the taxing power of the Hamas government, rather than its West-Bank-based rival, the Palestinian Authority.

Bank officials, who boycotted the judicial hearings, said the decision, handed down by a lower court earlier this week, might force them to shut down temporarily, at least, further reducing access to money in this isolated coastal enclave.

The ruling comes at an awkward time, just before a planned meeting between President Mahmoud Abbas of the Palestinian Authority and Khaled Meshal, the political leader of Hamas, who is based in Syria, aimed at making progress on their plans for a unity government. That meeting, scheduled to be held on Nov. 25 in Cairo, follows a decision last May for a transitional cabinet of technocrats to govern until elections. Little has happened since.

The ruling on the banks was not published in any publicly available forum, so details were incomplete. But officials said that the Bank of Palestine, one of the largest banks in the West Bank and Gaza, was ordered to pay $113 million in taxes and fines.

The decision also bans 11 members of the bank’s board of directors who live here from leaving Gaza.

A similar ruling from the same court was issued against the Palestine Islamic Bank, but the amounts of the fines were not available, and bank officials declined to discuss them. There are nine banks in Gaza, and all of them, along with companies that import fuel and electricity and operate cellphones, may face similar rulings as cases make their way through the courts here.

The disputes stem from the 2007 split between Hamas and the Palestinian Authority. Hamas won parliamentary elections in the West Bank and Gaza in 2006, forcing Fatah, which dominates the Palestinian Authority and held the presidency and much of the government and security services, to share power with it for the first time. An attempt at a government of national unity eventually fell apart; after a short civil war, Hamas ejected Fatah officials from Gaza.

Since then, although it has refused to recognize the Hamas government, the Palestinian Authority has continued to pay salaries to tens of thousands of people to stay home from their ministries and state agencies here. In their places, Hamas has appointed new employees, including judges of the courts. Mr. Abbas also ordered all banks and private companies in Gaza to stop paying fees to the Hamas government.

“We are studying the order and will respond to it in coordination with the Palestinian Monetary Authority,” said a Bank of Palestine official, speaking on the condition of anonymity from the West Bank city of Ramallah, where the bank moved its headquarters in 2007. In addition to affiliating with the authority there, the banks want to avoid being in the position of financing Hamas, which Europe, Israel and the United States classify as a terrorist group. That might leave the banks vulnerable to sanctions.

After the Hamas victory, Israel imposed severe restrictions on the movement of goods and people into and out of Gaza. In late 2008 it invaded militarily to stop rocket fire, killing more than 1,300 people. In the past year, it has eased its siege following international pressure. But the restrictions make cash often in short supply, and banks often have to use dollars instead of Israeli shekels.

A Palestinian Authority official in Ramallah who asked that his name not be disclosed said the ruling threatened the stability of the banking system in Gaza. He said that once there was a unity government and a functioning Parliament again, the tax situation would clarify. But it remains unclear how much progress will be made in Cairo next week, given all the tensions between the two groups.

Muin Rajab, an economics professor at Al-Azhar University in Gaza, said he was surprised that the court issued its ruling this week, given the plans for a reconciliation meeting. “As we get nearer to implementing the reconciliation, these problems must be contained,” he added.

Hamas officials declined to comment on the ruling or its consequences on Thursday. But earlier, a spokesman for the Hamas government was quoted by the West Bank newspaper Al-Ayyam as saying that the banks “have to choose between Palestinian and American legitimacy.”

Last year, saying it was carrying out a court order, Hamas sent security forces to the two banks and confiscated money from the assets of local nonprofit groups.

The government has also imposed new regulations on journalists seeking to enter Gaza, requiring them to obtain visas from Hamas and have local sponsors.


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