Supreme Court Upholds Ban on Jerusalem Municipality's Irregular Fund Transfers

Israel's Supreme Court has rejected an appeal by the Jerusalem Municipality, upholding a lower court's decision to cancel a procedure that allowed the transfer of tens of millions of shekels to external bodies, primarily ultra-Orthodox organizations, without competitive bidding over a 12-year period. Supreme Court President Isaac Amit adopted the ruling of the Jerusalem District Court, stating the procedure "lacked a legal basis."

The case originated from a petition filed by the "Yerushalayim Te'ur" (Jerusalem Awakening) party and its head, Adir Schwartz. They argued that from late 2019 to November 2021, the municipality transferred at least 36 million shekels through this procedure for joint ventures where another party invested at least 50% of the cost, bypassing standard tender requirements.

Among the main recipients cited were the "Tzama" festival by Chabad Youth, which received 2.3 million shekels, and events organized by the Al HaMayan network, affiliated with the Shas party, which received 1.6 million shekels. Other allocations included 500,000 shekels for a Siyum Hashas (completion of the Talmud study) event by Bnei Brak Municipality, 600,000 shekels for a youth event by the Pirchei HaDegel movement led by the Peretz family, and another 500,000 shekels for a Siyum Hashas by the Degel Yerushalayim movement, also led by the Peretz family.

The District Court had previously ruled the procedure illegal, noting it relied on exemption regulations meant for government ministries, not municipalities. The Supreme Court, with Justices Ofer Grosskopf and Alex Stein concurring, emphasized that municipalities must adhere to administrative legality and cannot create exceptions to tender laws. The court also noted that the Ministry of Interior, contrary to the municipality's claims, had opposed the procedure and supported the petitioners.

Although the former Interior Minister Moshe Arbel had instructed his director-general to examine granting exemptions similar to Jerusalem's procedure in June 2023, Justice Amit clarified that this directive did not grant authority to create such a procedure, and no amendment was made. The Jerusalem Municipality was ordered to pay 20,000 shekels in legal costs.