Freezing and Confiscation of Palestinians’ Bank Account Balances at Banks Operating in 1948

-       What happened in Palestine in 1948.

-       Excerpts from a doctoral dissertation on the history of money in Palestine from 1900 to the present, which dealt with this important dissertation on the history of money in Palestine from 1900 to 2014, (A History of Money in Palestine: From the 1900s to the Present) by the researcher Sreemati Mitter (Mitter, Sreemati), which was published in June 2014... from the Department of History and Economics at Harvard University – one of the most prestigious American universities in the world – "examining the economic behavior of people who do not hold citizenship, the Palestinians (without a state of their own), over a hundred years, from the final decades of Ottoman rule in the early twentieth century to the present," as the researcher, through this thesis, investigated what happened to the financial and economic assets of ordinary Palestinians when they became either stateless overnight (as happened in 1948), or when they suffered a gradual loss of sovereignty and control over their economic lives (as occurred from the early twentieth century to the 1930s, or again from 1967 to the present).

-       This valuable dissertation explains how the persistent absence of a sovereign state and a sovereign currency of their own affected Palestinians' economic behavior and shaped their relationship with the monetary and banking apparatuses of the different political systems under which they lived, producing the following results:

·      First: that the absence of a state and access to their own sovereign institutions, and in particular the lack of a central bank and a sovereign currency of their own, made Palestinians in particular, and repeatedly, vulnerable to dispossession of their financial and monetary assets.

·      Second: that despite this vulnerability, Palestinians showed that they were able, repeatedly over the course of this century, to struggle for their economic rights and to exhibit a thoughtful understanding of the best ways to protect their financial assets from expropriation.

-       "A History of Money in Palestine: From 1900 to the Present" is the title of a doctoral dissertation at Harvard University submitted by the researcher Mitter Sreemati in 2014. The dissertation is 257 pages long and is divided into several chapters. One of these chapters concerns the bank account balances of Palestinians — individuals and institutions — in 1948. In examining the archives of the banks operating in Palestine in 1948, the researcher indicated that there were between 10,000 and 20,000 bank accounts of Palestinian individuals and institutions at the banks operating in Palestine. The most important of these banks were: the Ottoman Bank, Barclays Bank and the Arab Bank, and she estimated balances of between 3–10 million pounds sterling, in addition to trust funds that contained Palestinians' valuable possessions. (There is variance in the figures between the banks' archives and the archives and records of the British Mandate in Palestine and reports of international bodies and the Arab League and some researchers.)

-       The researcher reviews events and decisions issued by the British Mandatory authorities, and Israeli orders after the declaration of the State of Israel in May 1948, that had serious effects on Palestinians' financial and economic lives and caused them heavy losses.... The researcher attributes the deterioration of Palestinians' financial and economic condition in 1948 to the absence of a state to protect their rights and property from confiscation, in addition to the absence of a currency and a central bank to care for the currency and the state's foreign-exchange reserves and to regulate banking.

-       In the field of Palestinian currency — the Palestinian pound — coinage was minted in 1926, in addition to the establishment of a Palestinian Currency Board in 1927, and the period from 1925 to 1935 was a period of economic boom, during which the number of banks and lending institutions exceeded 70 banks and their branches.

-       The British Mandatory authorities took a series of financial and economic decisions in 1948, in addition to their political decision to withdraw from Palestine in 1948, and these financial decisions exhausted Palestinians' wealth and savings accumulated over past decades. Among these decisions was the announcement of withdrawal of Palestine from the sterling area on 22-2-1948, without prior warning, and the Palestinian currency suddenly became without backing by the pound sterling and without value, so it became difficult to convert Palestinian customers' accounts at the banks from the Palestinian pound to the pound sterling, and great chaos occurred, especially since implementation of the decision to withdraw from the sterling area was swift and without providing a sufficient period to allow substitution of cash with other currencies or precious metals to preserve its value. Consequently, the value of the deposits and accounts at the banks fell sharply, in addition to the trust funds belonging to customers at the banks. In addition to that decision, the Palestine Currency Board was abolished with the departure of Britain from Palestine in 1948, and therefore Palestinians also lost the Palestine Currency Board's holdings of foreign-currency reserves, where Palestinians had rights in the Palestine Currency Board's assets, unpaid amounts to Palestinian shareholders in the Palestine Currency Board, and other balances, which the researcher estimated in her dissertation at approximately 120 million pounds sterling, and she estimated their value in current terms in 2011 at about 700 million pounds sterling, approximately.

-       From the Israeli side, several financial and administrative decisions were also issued that affected Palestinians' economic and monetary life in 1948. Among these decisions, Israel issued, less than a month after its establishment and in June 1948, orders instructing the banks operating in the area under its control to freeze the accounts of Palestinian Arabs with them and to treat all Arabs as "absentees," and ordered them not to carry out any banking transactions on these accounts under penalty of law; consequently, Palestinians were unable to operate their accounts at the banks.

-       Another Israeli decision was the seizure of the bank deposits of Palestinians, as it issued another order to the banks in December 1948 to transfer the balances of Palestinian "absentees'" accounts that had been frozen by the earlier order and their trust funds to an account created in the name of the "Custodian of Absentee Property." The banks had no choice but to comply with the Israeli orders, and the researcher noted that the managements of Barclays Bank and the Ottoman Bank in Britain, the two main banks for Palestinians' accounts, confirmed the necessity for banks to submit to the political authority — "the fait accompli" according to international law — even if the customers of these banks opposed, despite the fact that these banks did not inform their customers of these developments. According to the estimates of the managements of Barclays Bank and the Ottoman Bank, the value of individual deposits held by them in 1948 was about 3 million pounds sterling, and the balances of Palestinian institutions about 1 million pounds sterling, of which a deposit of the Arab Bank at Barclays Bank in its branches in Jerusalem and Jaffa amounted to half a million pounds sterling.

-       In addition to all these confiscations of the bank balances belonging to Palestinians whom Israel considered "absentees" — despite the existence of large numbers of Palestinians who were able to remain within the areas occupied by Israel in 1948 and were not expelled or did not leave to neighboring countries and yet were nonetheless included in the Israeli orders and treated as absentees — Israel also issued an order in 1948 to freeze the accounts of investments of financial institutions operating in Palestine and to transfer them to the Account of Absentee Property, as happened with individuals earlier. The freezing and transfer to the Custodian of Absentee Property included checks issued to the order of Palestinians — individuals and companies — at those financial institutions at that time. In addition, the Israeli orders to freeze and transfer included the receivables of the Jerusalem Municipality at Barclays Bank, in addition to amounts collected and contributions from Palestinian farmers in agricultural banks such as the Ottoman Agricultural Bank, which was founded in 1888 in Turkey and opened its first branch in Palestine in 1898 in Jerusalem, then opened branches in many Palestinian cities and towns..

In light of those confiscation orders, Palestinians attempted to withdraw their balances from the two aforementioned banks, Barclays and the Ottoman, but their requests were refused by the banks under the pretext of freezing their accounts and transferring them to the Custodian of Absentee Property in Israel. Palestinians who had fled to neighboring countries attempted to visit branches of these banks in those countries such as Amman and Beirut, but they were refused, invoking the same reason: "accounts frozen and transferred to the Custodian of Absentee Property in Israel"... Individual and small-group attempts were made to persuade some managers of those branches of the necessity of withdrawing their funds given that they were refugees in neighboring countries and needed these deposits belonging to them to cover their daily living expenses, but their requests were also refused. Even the Arab Bank tried with Barclays' management in Jerusalem to withdraw its deposit at that bank, but without result, and then the Arab Bank insisted on pursuing the matter even in the British arena: it filed a lawsuit against Barclays before the British courts, but it lost the case.

The researcher reported in her doctoral dissertation that a legal firm of Messrs. Aziz and Fuad Shihadeh—who are well-known lawyers—in Ramallah brought cases against Barclays and the Ottoman Bank before the Jordanian courts, given that Jordan was at war with Israel and did not recognize it, and did not recognize any orders issued to banks by authorities not recognized by Jordan. Consequently this effort succeeded, and the Jordanian courts ruled in favor of those individuals, and in 1954 those courts issued orders to the managements of Barclays and the Ottoman to pay all balances of all their Palestinian customers since 1948. The Arab Bank also brought its case before the Jordanian courts, and in addition to its deposit balance with Barclays, requested interest at 9% retroactively from 1948; the accumulated interest was estimated at 60% of the balances.

The managements of Barclays and the Ottoman banks felt the seriousness of the situation and sent a delegation to negotiate with the Israeli financial authorities to release the balances, to pay the deposits of their clients who had cases before the Jordanian courts. However the Israelis refused to release the balances, justifying that the orders had been issued by the higher authorities in Israel. The negotiating delegation from the two banks sensed that the Israelis needed sterling and other hard currencies to spend on housing Jewish immigrants arriving from Europe and Arab countries to Palestine after 1950. In addition, the Israelis informed the negotiating banking delegation that it would be difficult to justify to Israeli public opinion at home and abroad the logic of releasing the deposits of absentees classified as their enemies, unless there were tangible incentives from the banks to persuade the higher authorities and thus Israeli public opinion to release those deposits. The banking negotiating delegation wired in 1954 to its management in London recommending granting the Israelis a loan equal to the seized deposits, which the researcher estimated, according to the banks’ private archives, at £3 million sterling, and that this loan be provided by the British Treasury; but the Treasury immediately refused, because—as the researcher reported—I srael was not a member of the British Commonwealth, which receives loans only from the British Treasury. The managements of the two banks in Britain requested that the Bank of England add its guarantee for the Israeli government regarding the loan to be granted to them in order to release the frozen balances, but the Bank of England refused; consequently the managements of the two aforementioned banks consented to provide a loan of £3 million sterling on the condition that an announcement be made releasing the frozen deposits of all Arab account holders. The Israelis refused that amount and demanded another incentive to encourage their officials to agree to the release, asking to add another £1 million sterling so that the loan would become £4 million sterling: £3 million in exchange for releasing the deposits, and the additional million for Israel to use as it wished. The proposed loan repayment period was 10 years at a low interest rate of 4% per annum, on condition that Israel announce the release of the frozen deposits of all Arab account holders, but the Israelis rejected the wording of the announcement to release all accounts and declared that they could not release all accounts; for example they could not release accounts such as those of Haj Amin al-Husseini—Grand Mufti of Jerusalem— for instance.

In addition, the Israelis informed the negotiating banking delegation that the balances intended for release, according to their records, did not match the numbers in the records of the two banks, because the Custodian of Absentee Property had dealt with some accounts of those who—according to their claims—had outstanding installments on mortgaged loans to the banks. The Israelis explained that the Custodian of Absentee Property had disposed of some mortgaged real estate and sold it at auction to Jewish buyers only when there were insufficient amounts in the account balances to pay the installments and obligations owed to the banks.

Thus it became clear that Israel had confiscated and disposed of the balances of the frozen accounts transferred to the account of the Custodian of Absentee Property, flagrantly disregarding all international charters and norms. The negotiating banking delegation continued to pressure the Israelis, so much so that the chairman of Barclays Bank threatened that the loan offer of £4 million sterling would be withdrawn and all the bank’s activities would be pulled out of Israel if the release of the balances was not announced as agreed... Here the Israelis explained to the negotiating banking delegation that they would withdraw their objections this time only on the condition that an additional incentive be offered to the Israelis to persuade the higher authorities in Israel to approve. Due to heavy pressure from the Jordanian courts on Barclays and the Ottoman to comply promptly with their rulings under the law, the managements of the two banks in London were forced to amend the loan amount to £5 million sterling: £3 million to disburse the balances of the frozen accounts, and the remainder to be used by Israel—£2 million sterling—in exchange for releasing all balances without exception and announcing that as soon as possible. In the loan offer agreement Israel was also granted the right to withhold 10% of the amounts of the released balances for any reasons it deemed appropriate, while differences in the balances were agreed to be handled in a suspended account between the two parties later. Israel announced the release of the Arab account balances on 27-9-1954, that is, after six years and three months from their confiscation, and after exercising all kinds of extortion and deception, including against foreign banks operating in Palestine, as explained above.

The financial and monetary rights of Palestinians, individuals and institutions, have still not been recovered for the most part, and the other banks in which Palestinians hold accounts have not been enumerated, nor have the validity of the data and records and the figures pertaining to the Palestinians’ monetary wealth over previous periods been verified. In addition, the Palestinian Currency Board’s large holdings of foreign currency reserves at current value, and Palestinian investment balances and portfolios, and contributions and savings and fractional rights of shares and bonds and checks of Palestinians with specialized Palestinian, Arab and foreign banks, are the Palestinians’ rights that must be demanded...!

The existence of a Palestinian state, a Palestinian central bank—monetary authority—and a Palestinian currency would be sufficient to follow up on, clarify, and recover the Palestinians’ monetary rights at their current values.!