Economic leaders urge PM to enter talks on judicial overhaul, offer counter proposal

Group made up of academics, business and high-tech chiefs warn of immense damage to country, propose first concrete alternative path to reforming legal system

The Supreme Court convenes for a hearing on the Central Election Committee decision to disqualify Likud party member Amichai Chikli from running in the upcoming Knesset election, October 6, 2022.
The Supreme Court convenes for a hearing on the Central Election Committee decision to disqualify Likud party member Amichai Chikli from running in the upcoming Knesset election, October 6, 2022.

A group of several dozen leading Israeli economic figures penned a letter to Prime Minister Benjamin Netanyahu urging him to enter talks over the government’s judicial overhaul, and proposed an alternative framework for reform.

The letter, first reported by Channel 12 on Thursday, marks the first concrete alternative that has been proposed amid a wave of opposition to the plan that critics say will undermine Israel’s democracy, economy and security.

“We are very disturbed by the proposals to reform the legal system in Israel,” they wrote. “While we believe that there is a need for changes and improvements in the legal system in Israel, we believe that the proposals presented by Justice Minister Yariv Levin pose a threat to the system of checks and balances and therefore a threat to democracy in the State of Israel.”

“We also believe, based on hundreds of conversations with investors and international companies, that the changes proposed by Minister Levin will cause irreversible damage to the society, economy, and security of the State of Israel, as well as its international standing,” the letter said. “Therefore, we call on the government of Israel to stop advancing the reform in its current form and to halt the legislative process.

As presented by Levin, the coalition’s proposals would severely restrict the High Court’s capacity to strike down laws and government decisions, with an “override clause” enabling the Knesset to re-legislate struck-down laws with a bare majority of 61. It would also give the government complete control over the selection of judges, prevent the court from using a test of “reasonableness” to judge legislation and government decisions, and allow ministers to appoint their own legal advisers, instead of getting counsel from advisers operating under the aegis of the Justice Ministry.

The legislative process is set to start Monday and Levin has said he is not willing to negotiate over any of the fundamental elements of the planned laws, arguing that the reforms are crucial to help rebalance the power structure in Israel in which the courts have outsized influence over elected lawmakers.

Other lawmakers and President Isaac Herzog have also called for dialogue, but have not offered specific proposals.

The letter lays out a 10-point plan for judicial reform that includes legislating several new Basic Laws, completing a bill of rights, setting higher limits for overturning laws, establishing an appeals court above the district courts, and proposing new guidelines for choosing judges.

Justice Minister Yariv Levin attends a cabinet meeting at the Prime Minister’s Office in Jerusalem on January 15, 2023. (Yonatan Sindel/Flash90)

It also calls for codifying the powers of the Attorney General in law, easing the process for replacing government legal advisers, and adding judges to the magistrates and district courts to reduce case backlogs.

The letter calls for any changes to only go into effect in the next Knesset.

While the signatories include leading economic and business personalities and some lawyers, it was unclear if they had any legislative, judicial or constitutional expertise, nor who drafted the 10-point plan.

Among the signatories were hi-tech entrepreneur and investor Gigi Levy-Weiss, former Finance Ministry director-general Keren Turner and former Netanyahu economics adviser Prof. Eugene Kendel.

Eugene Kendel, then the head of the National Economic Council, attends a press conference in Jerusalem on June 25, 2014. (Miriam Alster/FLASH90)

The letter adds to a growing chorus of opposition from the business and economics community, in addition to protests from political groups and the public.

Companies, moneymakers, business organizations and policymakers have warned that the judicial overhaul plan, which they say threatens democracy, will hurt Israel’s standing as a stable hub for investments. The fear is that a weakening of the judiciary system will create uncertainty and scare away foreign investors from injecting funds into companies in Israel. This in turn could force local and international businesses to leave and set up shop elsewhere.

Opposition groups have called for a nationwide strike on Monday to protest the move.

However, the Finance Ministery, headed by Religious Zionism’s Bezalel Smotrich, warned that public sector workers who do strike will not be paid.

Meanwhile, an association of lawyers declared a labor dispute over the planned reform, which they said entailed “unilateral organizational changes to their work by the state.”

Warnings have also come from abroad.

On Wednesday, over 50 leading economists at US universities penned an open letter to Netanyahu warning the premier that his government’s efforts to significantly weaken Israel’s judiciary would be “detrimental” to prospects for economic growth.

“A strong and independent judiciary is a critical part of a system of checks and balances. Undermining it would be detrimental not only to democracy but also to economic prosperity and growth,” read the letter, which was signed by 56 current and former professors at leading American universities.

Eleven Nobel laureates signed on to the letter, including Peter Diamond of the Massachusetts Institute of Technology, Oliver Hart of Harvard, Paul Milgrom of Stanford and Edmund Phelps of Columbia.

Another signatory, Princeton’s Daniel Kahneman, has been vocal against the reforms from the get-go. He told Channel 12 last month that the new government’s proposals have him more concerned for the future of the country than he was during the 1973 Yom Kippur War.

“From my perspective, it’s almost the end of the world,” he said. “It’s the end of the country as I know it.”

Several of the signatories work or previously worked at MIT, where Netanyahu received bachelor’s and master’s degrees.

Workers from the high-tech sector protest against the proposed changes to the legal system, in Tel Aviv, on February 7, 2023. (Tomer Neuberg/Flash90)

The economists argued that the proposals announced by Netanyahu’s government last month “would adversely affect the Israeli economy by weakening the rule of law and thereby moving Israel in the direction of Hungary and Poland.”

“Although we significantly vary in our views on public policy and on the challenges facing Israeli society, we all share these concerns,” they added.

Also Tuesday, Channel 12 reported that five more Israeli unicorn firms — companies whose value exceeds $1 billion — have pulled significant funds from Israel due to pressure from concerned investors. The firms did not make a public announcement such as those by Wiz, Papaya Global, Verbit and Skai, who declared last week that their decisions were a result of the judicial overhaul plans.

The total amount of funds withdrawn from Israeli banks now stands at $7 billion, the network said.

Advocates in the government have dismissed claims that their proposals will harm Israel’s democratic character or lead to economic tumult, arguing that opponents are politically motivated and are misinforming the public in order to spread fear. Netanyahu has argued that limiting the judiciary’s power will also lead to the shrinking of the bureaucracy that businesses face, thereby improving economic conditions in the country.

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