Report: UK economic links with Israeli settlements

Report, Profundo, 18 March 2009

The following is the edited summary of the research paper, “UK economic links with Israeli settlements in occupied Palestinian territory.” The paper was prepared for the Sir Joseph Hotung Programme for Law, Human Rights and Peace Building in the Middle East, School of Oriental and African Studies, University of London by the research group Profundo:

Since June 1967, Israel has occupied the West Bank (including East Jerusalem), the Gaza Strip and the Golan Heights. These territories are beyond the “Green Line,” which is accepted as the provisional, de facto border of Israel, until the successful conclusion of the Middle East peace process confirms its permanent international frontiers. Israel has established civilian settlements in these occupied territories, which is illegal according to international law. The creation of these settlements is in violation of Israel’s obligations under the Fourth Geneva Convention of 1949 which was adopted to protect civilians during armed conflict. This was known by Israel in 1967 when the then-Israeli government first considered establishing civilian settlements in the territories it had captured during the 1967 War. Israel’s settlements in the Gaza Strip were dismantled in August 2005. In the West Bank and the Golan Heights, however, settlements are expanding and new ones are being established in breach of international law and, in relation to the West Bank, the Road Map.

Economic activities in the West Bank and East Jerusalem

An occupying power is entitled under international law to make use of the economy and resources of the territory it occupies, but only in order to fulfill the needs of its army and to meet the costs of administering the occupied territory. In recent years there has been a growing concern in Europe that economic links with settlements may simply perpetuate the illegal situation created by settlements. This report focuses only on Israeli settlements in the West Bank, including East Jerusalem. It does not examine settlement products emanating from the occupied Golan Heights or whether any UK companies are involved in the construction of settlement infrastructure, including the West Bank wall. The objective is to identify the roles played by UK companies, organizations and institutions in supporting — directly or indirectly — the existence, functioning and continued expansion of Israeli settlements in the occupied Palestinian territories.

Business activities in the settlements and their associated industrial zones are very important for their economic viability. Agricultural companies producing fruit, vegetables and flowers dominate, but industries producing food products, plastic products, metal products, chemicals, cosmetics and many other products are also relevant for the economy of the settlements and thus are an important factor in their continued existence. Accordingly, these economic links sustain a continuing violation of international law, which has grave consequences for the enjoyment of human rights by the local non-settler population.

The purpose of this report is to document economic links between UK companies and those based in settlements. The research has identified 68 British companies which have direct or indirect relationships with Israeli settlements in occupied Palestinian territory; 49 of which have their head office in the United Kingdom and 19 of which are British subsidiaries of companies based in Israel or other countries.

Trade relationships

Until relatively recently, products originating from settlements in the occupied territories were labelled as originating from Israel. This meant that it was impossible to identify whether products marked as Israeli had been produced in Israel proper, or whether they originated in settlements. Following the conclusion in June 2000 of the EU-Israel Association Agreement, under which Israeli industrial exports and many agricultural exports to the European Union became exempt from import duties, this practice continued even though settlement products are not eligible for preferential treatment under the terms of the agreement because they originate or have been produced outside Israel’s own territory.

Human rights groups protested that this mislabeling practice violated the Association Agreement (tariff preference and human rights provisions), and general international law. Subsequently, the EU required that all goods imported into the EU from Israel under the Tariff Preference Program, be marked with their place of origin and postcode. This was in order to prevent settlement products benefiting from the tariff preference regime. These new rules came into effect in February 2005. Since then product labels have generally distinguished between products originating from Israel and those originating from the West Bank. Despite this, some settlement producers attempted to circumvent these new rules by misrepresenting the place of origin on customs declarations and invoices. This prompted the EU to implement new rules that came into effect in July 2008 in an attempt to eliminate this practice.

While stricter labeling may have denied some settlement companies the benefits of preferential trade agreements available to companies located in Israel proper, it has been criticized for misleading consumers to assume that a product labelled “West Bank” originates from a Palestinian enterprise, when in fact it is more likely to have come from an Israeli settlement. The issue of settlement goods being imported free of import duties which is in breach of the EU-Israel Association Agreement and sold in the EU is topical in the UK, as the UK government is taking the lead within the EU to curb this practice.

During the research for this report, it became apparent that the process of verification of trading links between companies and Israeli settlements is often complex and difficult. The intertwining of the Israeli domestic economy with that of the West Bank also renders it more difficult for companies to track and trace the production process from start to finish, as they are often legally required to do.

A total of 27 Israeli companies operating in settlements and exporting to the United Kingdom have been identified:

* Fruit, vegetables and fresh herbs: Agrexco, Arava, Flowers Direct, Hadiklaim, Mehadrin Tnuport Export
* Other food products: Abady Bakery, Achdut, Adumim Food Additives/Frutarom, Amnon & Tamar, Oppenheimer, Shamir Salads
* Beverages: Adanim Tea, Soda-Club, Tishbi Estate Winery
* Cosmetics: Dead Sea Laboratories, Intercosma
* Pharmaceuticals: Fermentek
* Plastic products: Keter Plastic, Tip Top Toys, Twitoplast
* Metal products: DiSTeK, Mul-T-Lock, Yardeni Locks
* Textile products: Caesarea Carpets, Dispobud, Ofertex
* Other products: Greenkote

In most cases these companies export products produced in settlements in the occupied territories to the United Kingdom, sometimes mixed with products from Israel proper. In some cases the exported products are produced solely in Israel, but the company is listed here as it has a major office or factory in the settlements.

For 25 of these 27 companies a total of 51 British trading partners were found: 12 British marketing subsidiaries of the Israeli companies concerned and 39 British importers and retailers. Fruit and vegetables exported by these settlement companies are sold by major UK high street retailers, such as Tesco, Sainsbury’s, Waitrose and Somerfield. Other products exported by settlement companies are sold by well-known British retail chains, such as Marks & Spencer (M&S), John Lewis and B&Q.

The following British companies sell products from more than one Israeli company linked to the Israeli settlements in the West Bank:

* Just Kosher is linked to six companies: Abadi Bakery, Achdut, Adanim Tea, Amnon & Tamar, Oppenheimer, Shamir Salads.
* Tesco is linked to four companies: Arava, Hadiklaim, Mehadrin-Tnuport, Soda-Club.
* Sainsbury’s is linked to two companies: Hadiklaim, Soda-Club.
* John Lewis (including its supermarket division Waitrose) is linked to two companies: Ahava, Hadiklaim
* Argos is linked to two companies: Keter Plastic, Soda-Club.

Other British business links with the occupied territories

Three British companies with investments in settlements in territories occupied by Israel have been identified:

* Hanson UK is a supplier of heavy building materials to the construction industry. It has a subsidiary in Israel which owns factories and quarries in the West Bank. Hanson UK was acquired in September 2007 by German company Heidelberg Cement.
* British Israel Investment is an Israeli property company owning a shopping mall in Maaleh Adumim, a settlement in the occupied West Bank. The major shareholder of British Israel Investment is the British businessman Leo Noe, the executive chairman of F&C REIT Asset Management.
* Unilever is a major Anglo-Dutch food, detergent and personal care company which owns a 51 percent share in Beigel & Beigel, a pretzel and snacks factory located in a settlement in the occupied West Bank. Unilever recently announced that it will sell its stake in Beigel & Beigel.

One British company offering products or services to Israeli settlements has been identified:

* Power tools from British manufacturer Record Power are imported from the United Kingdom to Israel by Israeli company D.N.M. Technical Equipment and Tools, which has a branch located in the Barkan Industrial Zone, in the West Bank.

The British bank HSBC is involved as underwriter in financing the Israeli state budget by helping the Israeli government to issue bonds on the international capital markets. On its own there is nothing wrong with this; it is only where such funds are used to support prohibited activities, such as the establishment of settlements in occupied territory and their associated infrastructure in breach of Israel’s obligations under international law, would this raise concerns.

In addition, we found nine British financial institutions owning bonds issued by the State of Israel, which are used to fund activities undertaken by the government of Israel. Again, it is only where such activities are in breach of international law that this becomes a cause for concern:

* Artemis Investment Management
* Ashmore Investment Management
* Barclays Global Investors
* Capital International Ltd, part of Capital Group (United States)
* Fortis Investments (United Kingdom), part of Fortis (Belgium)
* Investec Asset Management
* Morley Fund Management
* Pictet Asset Management (UK) Ltd, part of Pictet (Switzerland)
* State Street Global Advisors UK Ltd, part of State Street Corporation (United States)

Two large Israeli banks, Bank Leumi and the Mizrahi Tefahot Bank, have subsidiaries in the United Kingdom. These two banks also have branches in settlements in the occupied territories. Their Israeli parent banks engage in mortgage and other lending activities that include financing the construction and acquisition of settlement housing and commercial properties and lending to settlement-based Israeli businesses. Bank Leumi is also a lender to the Jerusalem light rail project which links settlements in the occupied West Bank with Israel proper and thus consolidates the existence of these settlements.

The British investment company CSS was involved in several financing rounds for Greenkote, an Israeli company exporting coating with a plant and main R&D centre located in the Barkan Industrial Zone.

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