Supreme Court Upholds Ruling Against Jerusalem Municipality's Illegal Fund Transfers

Israel's Supreme Court, led by Chief Justice Yitzhak Amit, has fully endorsed a lower court's decision invalidating a Jerusalem municipality procedure that allowed for the illegal transfer of tens of millions of shekels to external bodies, primarily Haredi organizations, over a 12-year period without competitive bidding. The municipality had relied on its own unlawful internal directive for these transactions.

The case was brought forth by the "Yerushalayim Ta'ir" (Jerusalem Awakens) faction and its head, Adir Schwartz, who challenged the procedure for joint ventures. They argued that from late 2019 to November 2021 alone, the municipality transferred at least 36 million shekels under this directive. Notable recipients included the "Tzamah" festival organized by Chabad Youth (2.3 million shekels), events by the Shas party-affiliated "El HaMayan" network (1.6 million shekels), and various gatherings organized by groups associated with the Frosh family (totaling 1.1 million shekels).

District Court Judge Dana Cohen-Lekach had previously ruled the procedure illegal, stating it improperly relied on government exemption regulations rather than those applicable to municipalities, and contradicted Supreme Court precedents on narrowly interpreting tender exemptions. She rejected the municipality's claims of authority to create such a procedure, emphasizing that it undermined the mandatory tender process.

Chief Justice Amit dismissed the municipality's appeal, affirming that municipalities must adhere to administrative legality and cannot create exceptions to tender requirements contrary to local authority tender laws. He noted the municipality's claim of operating under the Interior Ministry's "watchful eye" was refuted, as the ministry supported the petitioners. While the former Interior Minister had considered a similar exemption in June 2023, no amendment was enacted, suggesting the ministry concluded it was unnecessary.

The Jerusalem Municipality was ordered to pay 20,000 shekels in legal expenses. Justices Ofer Grosskopf and Alex Stein concurred with Amit's ruling.