Protocol on Economic Relations
the Government of the State of Israel
the P.L.O., representing the Palestinian people
Paris, April 29, 1994
The two parties view the economic domain as one of the cornerstone in their
mutual relations with a view to enhance their interest in the achievement of
a just, lasting and comprehensive peace. Both parties shall cooperate in
this field in order to establish a sound economic base for these relations,
which will be governed in various economic spheres by the principles of
mutual respect of each other's economic interests, reciprocity, equity and
This protocol lays the groundwork for strengthening the economic base of the
Palestinian side and for exercising its right of economic decision making in
accordance with its own development plan and priorities. The two parties
recognise each other's economic ties with other markets and the need to
create a better economic environment for their peoples and individuals.
FRAMEWORK AND SCOPE OF THIS PROTOCOL
- This protocol establishes the contractual agreement that will govern
the economic relations between the two sides and will cover the West Bank
and the Gaza Strip during the interim period. The implementation will be
according to the stages envisaged in the Declaration of Principles on
Interim Self Government Arrangements signed in Washington D.C. on September
13, 1993 and the Agreed Minutes thereto. It will therefore begin in the Gaza
Strip and the Jericho Area and at a later stage will also apply to the rest
of the West Bank, according to the provisions of the Interim Agreement and
to any other agreed arrangements between the two sides.
- This Protocol, including its Appendixes, will be incorporated into the
Agreement on the Gaza Strip and the Jericho Area (in this Protocol - the
Agreement), will be an integral part thereof and interpreted accordingly.
This paragraph refers solely to the Gaza Strip and the Jericho Area.
- This Protocol will come into force upon the signing of the Agreement.
- For the purpose of this Protocol, the term "Areas" means the areas under
the jurisdiction of the Palestinian Authority, according to the provisions
of the Agreement regarding territorial jurisdiction. The Palestinian
Jurisdiction in the subsequent agreements could cover areas, spheres or
functions according to the Interim Agreement. Therefore, for the purpose of
this Protocol, whenever applied, the term "Areas" shall be interpreted to
mean functions and spheres also, as the case may be, with the necessary
THE JOINT ECONOMIC COMMITTEE
- Both parties will establish a Palestinian-Israeli Joint Economic
Committee (hereinafter - the JEC) to follow up the implementation of this
Protocol and to decide on problems related to it that may arise from time to
time. Each side may request the review of any issue related to this
Agreement by the JEC.
- The JEC will serve as the continuing committee for economic cooperation
envisaged in Annex III of the Declaration of Principles.
- The JEC will consist of an equal number of members from each side and
may establish sub-committees specified in this Protocol.
A sub-committee may include experts as necessary.
- The JEC and its sub-committees shall reach their decisions by agreement
and shall determine their rules of procedure and operation, including the
frequency and place or places of their meetings.
IMPORT TAXES AND IMPORT POLICY
- The import and customs policies of both sides will be according to
the principles and arrangements detailed in this Article.
- The Palestinian Authority will have all powers and
responsibilities in the sphere of import and customs policy and procedures
with regard to the following:
- Goods on List Al, attached hereto as Appendix I locally-produced in
Jordan and in Egypt particularly and in the other Arab countries, which the
Palestinians will be able to import in quantities agreed upon by the two
sides up to the Palestinian market needs as estimated according to para 3
- Goods on List A2, attached hereto as Appendix II, from the Arab, Islamic
and other countries, which the Palestinians will be able to import in
quantities agreed upon by the two sides up to the Palestinian market needs
as estimated according to para 3 below.
- The import policy of the Palestinian Authority for Lists Al and A2 will
include independently determining and changing from time to time the rates
of customs, purchase tax, levies, excises and other charges, the regulation
of licensing requirements and procedures and of standard requirements. The
valuation for custom purposes will be based upon the GATT 1994 agreement as
of the date it will be introduced in Israel, and until then - on the
Brussels Definition of Valuation (BDV) system. The classification of goods
will be based on the principles of "the Harmonized Commodity Description and
Coding System". Concerning imports referred to in Article VII of this
Protocol (Agriculture), the provisions of that Article will apply.
- For the purposes of para 2(a) above, the Palestinian market needs for
1994 will be estimated by a sub-committee of experts. These estimates will
be based on the best available data regarding past consumption, production,
investment and external trade of the Areas. The sub-committee will submit
its estimate within three months from the signing of the Agreement. These
estimates will be reviewed and updated every six months by the
sub-committee, on the basis of the best data available regarding the latest
period for which relevant data are available, taking into consideration all
relevant economic and social indicators. Pending an agreement on the
Palestinian market needs, the previous period's estimates adjusted for
population growth and rise in per-capita GNP in the previous period, will
serve as provisional estimate.
- The Palestinian Authority will have all powers and responsibilities to
independently determine and change from time to time the rates of customs,
purchase taxes; levies, excises and other charges on the goods on List B,
attached hereto as Appendix III, of basic food items and other goods for the
Palestinian economic development program, imported by the Palestinians to
- With respect to all goods not specified in Lists Al, A2
and B, and with respect to quantities exceeding those determined in
accordance with paras 2(a) & 3 above (hereinafter - the Quantities), the
Israeli rates of customs, purchase tax, levies, excises and other charges,
prevailing at the date of signing of the Agreement , as changed from time to
time, shall serve as the minimum basis for the Palestinian Authority. The
Palestinian Authority may decide on any upward changes in the rates on these
goods and exceeding quantities when imported by the Palestinians to the
- With respect to all goods not specified in Lists A1 and A2, and with
respect to quantities exceeding the Quantities, Israel and the Palestinian
Authority will employ for all imports the same system of importation, as
stipulated in para 10 below, including inter alia standards, licensing,
country of origin, valuation for customs purposes etc.
- Each side will notify the other side immediately of changes made in
rates and in other matters of import policy, regulations and procedures,
determined by it within its respective powers and responsibilities as
detailed in this Article. With regard to changes which do not require
immediate application upon decision, there will be a process of advance
notifications and mutual consultations which will take into consideration
all aspects and economic implications.
- The Palestinian Authority will levy VAT at one rate on both locally
produced goods and services and on imports by the Palestinians (whether
covered by the three Lists mentioned above or not), and may fix it at the
level of 15% to 16%.
- Goods imported from Jordan, Egypt and other Arab countries according to
para 2(a)(1) above (List Al) will comply with rules of origin agreed upon by
a joint sub-committee within three months of the date of the signing of the
Agreement. Pending an agreement, goods will be considered to have been
"locally produced" in any of those countries if they conform with all the
- They have been wholly grown, produced, or
manufactured in that country, or have been substantially transformed there
into new or different goods, having a new name, character, or use, distinct
from the goods or materials from which they were so transformed;
- They have been imported directly from the said country;
- The value or the costs of the materials produced in that country, plus
the direct processing costs in it, do not fall short of 30 percent of the
export value of the goods. This rate may be reviewed by the joint committee
mentioned in para 16 a year after the signing of the Agreement.
- The goods are accompanied by an internationally recognized certificate
- No goods will be deemed as substantially new or different goods, and no
material will be eligible for inclusion as domestic content, by virtue of
having merely undergone simple combining or packaging, or dilution with
water or other substances, which do not materially alter the characteristics
of the said goods.
- Each side will issue import licences to its own importers, subject to
the principles of this Article and will be responsible for the
implementation of the licensing requirements and procedures prevailing at
the time of the issuance of the licenses. Mutual arrangements will be made
for the exchange of information relevant to licensing matters.
- Except for the goods on Lists Al and A2 and their Quantities - in which
the Palestinian Authority has all powers and responsibilities, both sides
will maintain the same import policy (except for rates of import taxes and
other charges for goods in List B) and regulations including classification,
valuation and other customs procedures, which are based on the principles
governing international codes, and the same policies of import licensing and
of standards for imported goods, all as applied by Israel with respect to
its importation. Israel may from time to time introduce changes in any of
the above, provided that changes in standard requirements will not
constitute a non-tariff-barrier and will be based on considerations of
health, safety and the protection of the environment in conformity with
Article 2.2. of the Agreement on Technical Barriers to trade of the Final
Act of the Uruguay Round of Trade Negotiations. Israel will give the
Palestinian Authority prior notice of any such changes, and the provisions
of para 6 above will apply.
- The Palestinian Authority will determine its own rates of
customs and purchase tax on motor vehicles imported as such, to be
registered with the Palestinian Authority. The vehicle standards will be
those applied at the date of the signing of the Agreement as changed
according to para 10 above. However, the Palestinian Authority may request,
through the sub-committee on transportation, that in special cases different
standards will apply. Used motor vehicles will be imported only if they are
passenger cars or dual-purpose passenger cars of a model of no more than
three years prior to the importation year. The sub-committee on
transportation will determine the procedures for testing and confirming that
such used cars comply with the standards' requirements for that model year.
The issue of importing commercial vehicles of a model prior to the
importation year will be discussed in the joint sub-committee mentioned in
para 16 below.
- Each side may determine the terms and conditions for the transfer of
motor vehicles registered in the other side to the ownership or use of a
resident of its own side, including the payment of the difference of import
taxes, if any, and the vehicle having been tested and found compatible with
the standards required at that time by its own registration administration,
and may prohibit transfer of vehicles.
- Jordanian standards, as specified in the attached
Appendix I, will be acceptable in importing petroleum products into the
Areas, once they meet the average of the standards existing in the European
Union countries, or the USA standards, which parameters have been set at the
values prescribed for the geographical conditions of Israel, the Gaza Strip
and the West Bank. Cases of petroleum products which do not meet these
specifications will be referred to a joint experts' committee for a suitable
solution. The committee may mutually decide to accept different standards
for the importation of gasoline which meet the Jordanian standards even
though, in some of their parameters, they do not meet the European Community
or USA standards. The committee will give its decision within six months.
Pending the committee's decision, and for not longer than six months of the
signing of the Agreement, the Palestinian Authority may import to the Areas,
gasoline for the Palestinian market in the Areas, according to the needs of
this market, provided that:
- this gasoline is marked in a distinctive colour to differentiate it
from the gasoline marketed in Israel; and
- the Palestinian Authority will take all the necessary steps to ensure
that this gasoline is not marketed in Israel.
- The difference in the final price of gasoline to consumers in Israel and
to consumers in the Areas, will not exceed 15% of the official final
consumer price in Israel. The Palestinian Authority has the right to
determine the prices of petroleum products, other than gasoline, for
consumption in the Areas.
- If Egyptian gasoline standards will comply with the conditions of
sub-para (a) above, the importation of Egyptian gasoline will also be
- In addition to the points of exit and entry designated according to the
Article regarding Passages in Annex I of the Agreement for the purpose of
export and import of goods, the Palestinian side has the right to use all
points of exit and entry in Israel designated for that purpose. The import
and export of the Palestinians through the points of exit and entry in
Israel will be given equal trade and economic treatment.
- In the entry points of the Jordan River and the Gaza Strip:
- Freight shipment
The Palestinian Authority will have full responsibility and powers in the
Palestinian customs points (freight-area) for the implementation of the
agreed upon customs and importation policy as specified in this protocol,
including the inspection and the collection of taxes and other charges, when
Israeli customs officials will be present and will receive from the
Palestinian customs officials a copy of the necessary relevant documents
related to the specific shipment and will be entitled to ask for inspection
in their presence of both goods and tax collection.
The Palestinian customs officials will be responsible for the handling of
the customs procedure including the inspection and collection of due
In case of disagreement on the clearance of any shipment according to this
Article, the shipment will be delayed for inspection for a maximum period of
48 hours during which a joint sub-committee will resolve the issue on the
basis of the relevant provisions of this Article. The shipment will be
released only upon the sub-committee's decision.
- Passengers customs lane
Each side will administer its own passengers customs procedures, including
inspection and tax collection. The inspection and collection of taxes due in
the Palestinian customs lane will be conducted by customs officials of the
Israeli customs officials will be invisibly present in the Palestinian
customs lane and entitled to request inspection of goods and collection of
taxes when due. In the case of suspicion, the inspection will be carried out
by the Palestinian official in a separate room in the presence of the
Israeli customs official.
- The clearance of revenues from all import taxes and levies, between
Israel and the Palestinian Authority, will be based on the principle of the
place of final destination. In addition, these tax revenues will be
allocated to the Palestinian Authority even if the importation was carried
out by Israeli importers when the final destination explicitly stated in the
import documentation is a corporation registered by the Palestinian
Authority and conducting business activity in the Areas. This revenue
clearance will be effected within six working days from the day of
collection of the said taxes and levies.
- The Joint Economic Committee or a sub-committee established by it for
the purposes of this Article will deal inter alia with the following:
- Palestinian proposals for addition of items to Lists Al, A2 and B.
Proposals for changes in rates and in import procedures, classification,
standards and licensing requirements for all other imports;
- Estimate the Palestinian market needs, as mentioned in para 3 above;
- Receive notifications of changes and conduct consultations, as mentioned
in para 6 above;
- Agree upon the rules of origin as mentioned in para 8 above, and review
- Coordinate the exchange of information relevant to licensing matters as
mentioned in para 9 above;
- Discuss and review any other matters concerning the implementation of
this Article and resolve problems arising therefrom.
- The Palestinian Authority will have the right to exempt the Palestinian
returnees who will be granted permanent residency in the Areas from import
taxes on personal belongings including house appliances and passenger cars
as long as they are for personal use.
- The Palestinian Authority will develop its system for temporary entry of
needed machines and vehicles used for the Palestinian Authority and the
Palestinian economic development plan.
Concerning other machines and equipment, not included in Lists Al, A2 and B,
the temporary entry will be part of the import policy as agreed in para 10
above, until the joint sub-committee mentioned in para 16 decides upon a new
system proposed by the Palestinian Authority. The temporary entry will be
coordinated through the joint sub-committee.
- Donations in kind to the Palestinian Authority will be exempted from
customs and other import taxes if destined and used for defined development
projects or non-commercial humanitarian purposes. The Palestinian Authority
will be responsible exclusively for planning and management of the donors'
assistance to the Palestinian people. The Joint Economic Committee will
discuss issues pertaining to the relations between the provisions in this
Article and the implementation of the principles in the above
MONETARY AND FINANCIAL ISSUES
- The Palestinian Authority will establish a Monetary Authority (PMA)
in the Areas. The PMA will have the powers and responsibilities for the
regulation and implementation of the monetary policies within the functions
described in this Article.
- The PMA will act as the Palestinian Authority's official economic and
- The PMA will act as the Palestinian Authority's and the public sector
entities' sole financial agent, locally and internationally.
- The foreign currency reserves (including gold) of the Palestinian
Authority and all Palestinian public sector entities will be deposited
solely with the PMA and managed by it.
- The PMA will act as the lender of last resort for the banking system in
- The PMA will authorize foreign exchange dealers in the Areas and will
exercise control (regulation and supervision) over foreign exchange
transactions within the Areas and with the rest of the world.
- The PMA will have a banking supervision department that
will be responsible for the proper functioning, stability, solvency and
liquidity of the banks operating in the Areas.
- The banking supervision department will predicate its supervision on the
international principles and standards reflected in international
conventions and especially on the principles of the "Basle Committee".
- The supervision department will be charged with the general supervision
of every such bank, including:
- The regulation of all kinds of banking activities, including their
- The licensing of banks formed locally and of branches, subsidiaries,
joint ventures and representative offices of foreign banks and the approval
of controlling shareholders;
- The supervision and inspection of banks.
The PMA will relicense each of the five branches of the Israeli banks
operating at present in the Gaza Strip and the West Bank, as soon as its
location or the authorities regarding it come under the jurisdiction of the
Palestinian Authority. These branches will be required to comply with the
general rules and regulations of the PMA concerning foreign banks, based on
the "Basle Concordat". Para I0 d, e, and f below will apply to these
- Any other Israeli bank wishing to open a branch or a
subsidiary in the Areas will apply for a license to the PMA and will be
treated equally to other foreign banks, provided that the same will apply to
the Palestinian banks wishing to open a branch or a subsidiary in Israel.
- Granting of a license by both authorities will be subject to the
following arrangements based on the "Basle Concordat" valid on the date of
signing of the Agreement and to the host authority's prevailing general
rules and regulations concerning opening of branches and subsidiaries of
In this para 10 "host authority" and "home authority" apply only to the Bank
of Israel (BOI) and the PMA.
- A bank wishing to open a branch or establish a subsidiary will apply to
the host authority, having first obtained the approval of its home
authority. The host authority will notify the home authority of the terms of
the license, and will give its final approval unless the home authority
- The home authority will be responsible for the consolidated and
comprehensive supervision of banks, inclusive of branches and subsidiaries
in the area under the jurisdiction of the host authority. However, the
distribution of supervision responsibilities between the home and the host
authorities concerning subsidiaries will be according to the "Basle
- The host authority will regularly examine the activities of branches and
subsidiaries in the area under its jurisdiction. The home authority will
have the right to conduct on site examinations in the branches and
subsidiaries in the host area. However, the supervision responsibilities of
the home authority concerning subsidiaries will be according to the "Basle
Accordingly, each authority will transfer to the other authority copies of
its examination reports and any information relevant to the solvency,
stability and soundness of the banks, their branches and subsidiaries.
- The BOI and the PMA will establish a mechanism for cooperation and for
the exchange of information on issues of mutual interest.
- The New Israeli Sheqel (NIS) will be one of the
circulating currencies in the Areas and will legally serve there as means of
payment for all purposes including official transactions. Any circulating
currency, including the NIS, will be accepted by the Palestinian Authority
and by all its institutions, local authorities and banks, when offered as a
means of payment for any transaction.
- Both sides will continue to discuss, through the JEC, the possibility of
introducing mutually agreed Palestinian currency or temporary alternative
currency arrangements for the Palestinian Authority.
- The liquidity requirements on all deposits in banks
operating in the Areas will be determined and announced by the PMA.
- Banks in the Areas will accept NIS deposits. The liquidity requirements
on the various kinds of NIS deposits (or deposit linked to the NIS) in banks
operating in the Areas will not be less than 4% to 8%, according to the type
of deposits. Changes of over 1% in the liquidity requirements on NIS
deposits (or deposits linked to the NIS) in Israel will call for
corresponding changes in the above mentioned rates.
- The supervision and inspection of the implementation of all liquidity
requirements will be carried out by the PMA.
- The reserves and the liquid assets required according to this paragraph
will be deposited at the PMA according to rules and regulations determined
by it. Penalties for non compliance with the liquidity requirements will be
determined by the PMA.
The PMA will regulate and administer a discount window system and the
supply of temporary finance for banks operating in the Areas.
- The PMA will establish or license a clearing house in
order to clear money orders between the banks operating in the Areas, and
with other clearing houses.
- The clearing of money orders and transactions between banks operating in
the Areas and banks operating in Israel will be done between the Israeli and
the Palestinian clearing houses on same working day basis, according to
Both sides will allow correspondential relations between each others'
The PMA will have the right to convert at the BOI excess NIS received
from banks operating in the Areas into foreign currency, in which the BOI
trades in the domestic inter-bank market, up to the amounts determined per
period, according to the arrangements detailed in para 16 below.
- The excess amount of NIS, due to balance of payments
flows, that the PMA will have the right to convert into foreign currency,
will be equal to:
- Estimates of all Israeli "imports" of goods and services from the
Areas, valued at market prices (inclusive of taxes), which were paid for in
- the taxes collected by the Palestinian Authority on all
Israeli "imports" from the Areas and rebated to Israel in NIS, and
- the taxes collected by Israel on all Israeli "imports" from the Areas
and included in their market value, and not rebated to the Palestinian
- Estimates of all Israeli "exports" of goods and services to the Areas,
valued at market prices (inclusive of taxes), which were paid for in NIS,
- the taxes collected by Israel on such "exports" and rebated
to the Palestinian Authority, and
- the taxes collected by the Palestinian Authority on such "exports" and
included in their market value, and not rebated to Israel;
- The accumulated net amounts of foreign currency converted previously
into NIS by the PMA, as recorded in the BOI Dealing Room.
- The said flows and amounts will be calculated as of the date of the
signing of the Agreement.
Notes to para 16:
- The estimates of the said "exports and imports" of goods and
services will include inter alia labor services, NIS expenditure of tourists
and Israelis in the Areas and NIS expenditure of Palestinians of the Areas
- Taxes and pension contributions on "imports" of labor services, paid to
"importing" side and rebated to the "exporting" one, will not be included in
the estimates of the sums to be converted, as the "exports'" earnings of
labor services are recorded in the statistics inclusive of them, although
they do not accrue to the individuals supplying them.
The PMA and the BOI will meet annually to discuss and determine the
annual amount of convertible NIS during the following calendar year and will
meet semi-annually to adjust the said amount. The amounts determined
annually and adjusted semi-annually will be based on data and estimates
regarding the past and on forecasts for the wi following period, according
to the formula mentioned in para 16. The first meeting will be as soon as
possible within three months after the date of the signing of the
- The exchange of foreign currency for NIS and vice-versa
by the PMA will be carried out through the BOI Dealing Room, at the market
- The BOI will not be obliged to convert in any single month more than 1/5
of the semi-annual amount, as mentioned in para 17.
- There will be no ceiling on the annual foreign currency conversions by
the PMA into NIS. However, in order to avoid undesirable fluctuations in the
foreign exchange market, monthly ceilings of such conversions will be agreed
upon in the annual and semi-annual meetings referred to in para 17.
- Banks in the Areas will convert NIS into other circulating currencies
- The Palestinian Authority will have the authorities, powers and
responsibilities regarding the regulation and supervision of capital
activities in the Areas, including the licensing of capital market
institutions, finance companies and investment funds.
- Israel and the Palestinian Authority will each determine and
regulate independently its own tax policy in matters of direct taxation,
including income tax on individuals and corporations, property taxes,
municipal taxes and fees.
- Each tax administration will have the right to levy the direct taxes
generated by economic activities within its area.
- Each tax administration may impose additional taxes on residents within
its area on (individuals and corporations) who conduct economic activities
in the other side's area.
- Israel will transfer to the Palestinian Authority a sum equal to:
- 75% of the income taxes collected from Palestinians from the
Gaza Strip and the Jericho Area employed in Israel.
- The full amount of income taxes collected from Palestinians from the
Gaza Strip and Jericho Area employed in the settlements.
- The two sides will agree on a set of procedures that will address all
issues concerning double taxation.
INDIRECT TAXES ON LOCAL PRODUCTION
- The Israel and the Palestinian tax administrations will levy and
collect VAT and purchase taxes on local production, as well as any other
indirect taxes, in their respective areas.
- The purchase tax rates within the jurisdiction of each tax
administration will be identical as regards locally produced and imported
- The present Israeli VAT rate is 17%. The Palestinian VAT rate will be
15% to 16%.
- The Palestinian Authority will decide on the maximum annual turnover for
businesses under its jurisdiction to be exempt from VAT, within an upper
limit of 12,000 US $.
- The VAT on purchases by businesses registered for VAT purposes will
accrue to the tax administration with which the respective business is
Businesses will register for VAT purposes with the tax administration of the
side of their residence, or on the side of their ongoing operation.
There will be clearance of VAT revenues between the Israeli and Palestinian
VAT administrations on the following conditions:
- The VAT clearance will apply to VAT on transactions between
businesses registered with the VAT administration of the side in which they
- The following procedures will apply to clearance of VAT revenues
accruing from transactions by businesses registered for VAT purposes:
- To be acceptable for clearance purposes, special invoices, clearly
marked for this purpose, will be used for transactions between businesses
registered with the different sides.
- The invoices will be worded either in both Hebrew and Arabic or in
English and will be filled out in any of these three languages, provided
that the figures are written in "Arabic" (not Hindi) numerals.
- For the purpose of tax rebates, such invoices will be valid for six
months from their date of issue.
- Representatives of the two sides will meet once a month, on the 20th day
of the month, to present each other with a list of invoices submitted to
them for tax rebate, for VAT clearance. This list will include the following
details regarding each invoice:
- The number of the registered business issuing it;
- The name of the registered business issuing it;
- The number of the invoice;
- The date of issue;
- The amount of the invoice;
- The name of the recipient of the invoice.
- The clearance claims will be settled within 6 days from the meeting,
through a payment by the side with the net balance of claims against it, to
the other side.
- Each side will provide the other side, upon demand, with invoices for
verification purposes. Each tax administration will be responsible for
providing invoices for verification purposes for 6 months after receiving
- Each side will take the necessary measure to verify the authenticity of
the invoices presented to it for clearance by the other side.
- Claims for VAT clearance which will not be found valid will be deducted
from the next clearance payment.
- Once an inter-connected computer system for tax rebates to businesses
and for VAT clearance between the two sides is operational, it will replace
the clearance procedures specified in sub-paras (4) - (8).
- The two tax administrations will exchange lists of the businesses
registered with them and will provide each other with the necessary
documentation, if required, for the verification of transactions.
- The two sides will establish a sub-committee which will deal with the
implementation arrangements regarding the clearance of VAT revenues set
- VAT paid by not-for-profit Palestinian organizations and institutions,
registered by the Palestinian Authority, on transactions in Israel, will
accrue to the Palestinian tax administration. The clearance system set out
in para 5 will apply to these organizations and institutions.
- Both sides will attempt to maintain the normality of movement of
labor between them, subject to each side's right to determine from time to
time the extent and conditions of the labor movement into its area. If the
normal movement is suspended temporarily by either side, it will give the
other side immediate notification, and the other side may request that the
matter be discussed in the Joint Economic Committee.
The placement and employment of workers from one side in the area of the
other side will be through the employment service of the other side and in
accordance with the other sides' legislation. The Palestinian side has the
right to regulate the employment of Palestinian labor in Israel through the
Palestinian employment service, and the Israeli Employment Service will
cooperate and coordinate in this regard.
- Palestinians employed in Israel will be insured in the
Israeli social insurance system according to the National Insurance Law for
employment injuries that occur in Israel, bankruptcy of employers and
maternity leave allowance.
- The National Insurance fees deducted from the wages for maternity
insurance will be reduced according to the reduced scope of maternity
insurance, and the equalization deductions transferred to the Palestinian
Authority, if levied, will be increased accordingly.
- Implementation procedures relating thereto will be agreed upon between
the Israeli National Insurance Institute and the Palestinian Authority or
the appropriate Palestinian social insurance institution.
- Israel will transfer to the Palestinian Authority, on a
monthly basis, the equalization deductions as defined by Israeli
legislation, if imposed and to the extent levied by Israel. The sums so
transferred will be used for social benefits and health services, decided
upon by the Palestinian Authority, for Palestinians employed in Israel and
for their families.
The equalization deductions to be so transferred will be those collected
after the date of the signing of the Agreement from wages of Palestinians
employed in Israel and from their employers.
These sums will not include
- Payments for health services in places of employment.
- 2/3 of the actual administrative costs in handling the matters related
to the Palestinians employed in Israel by the Payments Section of the
Israeli Employment Service.
- Israel will transfer, on a monthly basis, to a relevant pension
insurance institution to be established by the Palestinian Authority,
pension insurance deductions collected after the establishment of the above
institution and the completion of the documents mentioned in para 6.
These deductions will be collected from wages of Palestinians employed in
Israel and their employers, according to the relevant rates set out in the
applicable Israeli collective agreements. 2/3 of the actual administrative
costs in handling these deductions by the Israeli Employment Service will be
deducted from the sums transferred. The sums so transferred will be used for
providing pension insurance for these workers. Israel will continue to be
liable for pension rights of the Palestinian employees in Israel, to the
extent accumulated by Israel before the entry into force of this para 4.
- Upon the receipt of the deductions, the Palestinian Authority and its
relevant social institutions will assume full responsibility in accordance
with the Palestinian legislation and arrangements, for pension rights and
other social benefits of Palestinians employed in Israel, that accrue from
the transferred deductions related to these rights and benefits.
Consequently, Israel and its relevant social institutions and the Israeli
employers will be released from, and will not be held liable for any
obligations and responsibilities concerning personal claims, rights and
benefits arising from these transferred deductions, or from the provisions
of paras 2-4 above.
- Prior to the said transfers, the Palestinian Authority or its relevant
institutions, as the case may be, will provide Israel with the documents
required to give legal effect to their aforesaid obligations, including
mutually agreed implementation procedures of the principles agreed upon in
paras 3-5 above.
- The above arrangements concerning equalization deductions and/or pension
deductions may be reviewed and changed by Israel if an authorized court in
Israel will determine that the deductions or any part thereof must be paid
to individuals, or used for individual social benefits or insurance in
Israel, or that it is otherwise unlawful. In such a case the liability of
the Palestinian side will not exceed the actual transferred deductions
related to the case.
- Israel will respect any agreement reached between the Palestinian
Authority, or an organization or trade-union representing the Palestinians
employed in Israel, and a representative organization of employees or
employers in Israel, concerning contributions to such organization according
to any collective agreement.
- The Palestinian Authority may integrate the existing
health insurance scheme for Palestinians employed in Israel and their
families in its health insurance services. As long as this scheme continues,
whether integrated or separately, Israel will deduct from their wages the
health insurance fees ("health stamp") and will transfer them to the
Palestinian Authority for this purpose.
- The Palestinian Authority may integrate the existing health insurance
scheme for Palestinians who were employed in Israel and are receiving
pension payments through the Israeli Employment Service, in its health
insurance services. As long as this scheme continues, whether integrated or
separately, Israel will deduct the necessary sum of health insurance fees
("health stamp") from the equalization payments and will transfer them to
the Palestinian Authority for this purpose.
- The JEC will meet upon the request of either side and review the
implementation of this Article and other issues concerning labor, social
insurance and social rights.
- Other deductions not mentioned above, if any, will be jointly reviewed
by the JEC. Any agreement between the two sides concerning these deductions
will be in addition to the above provisions.
- Palestinians employed in Israel will have the right to bring disputes
arising out of employee - employer relationships and other issues before the
Israeli Labor Courts, within these courts' jurisdiction.
- This Article governs the future labor relations between the two sides
and will not impair any labor rights prior to the date of signing of the
- There will be free movement of agricultural produce, free of customs
and import taxes, between the two sides, subject to the following exceptions
- The official veterinary and plant protection services of each side will
be responsible, within the limits of their respective jurisdiction, for
controlling animal health, animal products and biological products, and
plants and parts thereof, as well as their importation and exportation.
- The relations between the official veterinary and plant protection
services of both sides will be based on mutuality in accordance with the
following principles, which will be applied in all the areas under their
- Israel and the Palestinian Authority will do their utmost to
preserve and improve the veterinary standards.
- Israel and the Palestinian Authority will take all measures to reach
equivalent and compatible standards regarding animal disease control,
including mass vaccination of animals and avians, quarantines, "stamping
out" measures and residue control standards.
- Mutual arrangements will be made to prevent the introduction and spread
of plant pests and diseases, for their eradication and concerning residue
control standards in plant products.
- The official veterinary and plant protection services of Israel and the
Palestinian Authority will coordinate and regularly exchange information
regarding animal diseases, as well as plant pests and diseases, and will
establish a mechanism for immediate notification of the outbreak of such
- Trade between the two sides in animals, animal products and biological
products will be in keeping with the principles and definitions set out in
the current edition of the OIE National Animal Health Code as updated from
time to time (hereinafter - I.A.H.C.).
- Transit of livestock, animal products and biological products from one
side through the area under the jurisdiction of the other side, should be
conducted in a manner aimed at the prevention of diseases spreading to or
from the consignment during its movement. For such a transit to be
permitted, it is a prerequisite that the veterinary conditions agreed upon
by both sides will be met in regard to importation of animals, their
products and biological products from external markets. Therefore the
parties agree to the following arrangements.
- The official veterinary services of each side have the authority to
issue veterinary import permits for import of animals, animal products and
biological products to the areas under its jurisdiction. In order to prevent
the introduction of animal diseases from third parties, the following
procedures will be adopted:
- The import permits will strictly follow the professional
veterinary conditions for similar imports to Israel as prevailing at the
time of their issuance. The permits will specify the country of origin and
the required conditions to be included in the official veterinary
certificates which should be issued by the veterinary authorities in the
countries of origin and which should accompany each consignment.
Each side may propose a change in these conditions. The change will come
into force 10 days after notice to the other side, unless the other side
requested that the matter be brought before the Veterinary Sub-Committee
specified in para 14 (hereinafter - VSC). If it is more stringent than the
prevailing conditions - it will come into force 20 days after the request,
unless both sides decide otherwise through the VSC, and if more lenient - it
will come into force only if agreed upon by both sides through the VSC.
However, if the change is urgent and needed for the protection of animal and
public health, it will come into force immediately after notice by the other
side and will remain in force unless and until both sides agree otherwise
through the VSC.
- The official veterinary certificates will include the provisions
regarding OIE Lists A & B Diseases as specified in the I.A.H.C. When the
I.A.H.C. allows alternative requirements regarding the same disease, the
most stringent one will be adopted unless otherwise agreed upon by the
- When infectious diseases which are not included in Lists A & B of the
I.A.H.C. exist or are suspected, on scientific grounds, to exist in the
exporting country, the necessary veterinary import conditions that will be
required and included in the official veterinary certificates, will be
discussed in the VSC, and in the case of different professional opinions,
the most stringent ones will be adopted.
- The import of live vaccines will be permitted only if so decided by the
- Both sides will exchange, through the VSC, information pertaining to
import licensing, including the evaluation of the disease situation and
zoosanitary capability of exporting countries, which will be based upon
official information as well as upon other available data.
- Consignments which do not conform with the above mentioned requirements
will not be permitted to enter the areas under the jurisdiction of either
- Transportation of livestock and poultry and of animal products and
biological products between areas under the jurisdiction of one side through
areas under the jurisdiction of the other side, will be subject to the
following technical rules:
- The transportation will be by vehicles which will be sealed
with a seal of the official veterinary services of the place of origin and
marked with a visible sign "Animal Transportation" or "Products of Animal
Origin" in Arabic and Hebrew, in coloured and clearly visible letters on
- Each consignment will be accompanied by a veterinary certificate issued
by the official veterinary services of the place of origin, certifying that
the animals or their products were examined and are free of infectious
diseases and originate from a place which is not under quarantine or under
animal movement restrictions.
- Transportation of livestock and poultry, animal products and biological
products destined for Israel from the Areas and vice versa will be subject
to veterinary permits issued by the official veterinary services of the
recipient side, in keeping with the OIE standards used in international
traffic in this field. Each such consignment will be transported by a
suitable and marked vehicle, accompanied by a veterinary certificate in the
form agreed upon between the official veterinary services of both sides.
Such certificates will be issued only if permits of the recipient side are
- In order to prevent the introduction of plant pests and diseases to the
region, the following procedures will be adopted:
- The transportation between the Areas and Israel, of plants
and parts thereof (including fruits and vegetables), the control of
pesticide residues in them and the transportation of plant propagation
material and of animal feed, may be inspected without delay or damage by the
plant protection services of the recipient side.
- The transportation between the Areas through Israel of plants and parts
thereof (including fruits and vegetables) as well as of pesticides, may be
required to pass a phytosanitary inspection without delay or damage.
- The official Palestinian plant protection services have the authority to
issue permits for the import of plants and parts thereof as well as of
pesticides from external markets. The permits will be based on the
prevailing standards and requirements.
The permits will specify the required conditions to be included in the
official Phytosanitary Certificates (hence P.C.) based upon the standards
and the requirements of the International Plant Protection Convention
(I.P.P.C.)and those of the European and Mediterranean Plant Protection
Organization (E.P.P.O.) which should accompany each consignment. The P.C.'s
will be issued by the plant protection services in the countries of origin.
Dubious or controversial cases will be brought before the sub-committee on
- The agricultural produce of both sides will have free and unrestricted
access to each others' markets, with the temporary exception of sales from
one side to the other side of the following items only: poultry, eggs,
potatoes, cucumbers, tomatoes and melons. The temporary restrictions on
these items will be gradually removed on an increasing scale until they are
finally eliminated by 1998, as listed below:
Note: The above figures refer to the combined quantities marketed from the
West Bank and Gaza Strip to Israel and vice-versa. The Palestinian Authority
will notify Israel the apportioning of these quantities between these areas
concerning the quantities pertaining to the Palestinian produce.
- The Palestinians will have the right to export their agricultural
produce to external markets without restrictions, on the basis of
certificates of origin issued by the Palestinian Authority.
- Without prejudice to obligations arising out of existing international
agreements, the two sides will refrain from importing agricultural products
from third parties which may adversely affect the interests of each other's
- Each side will take the necessary measures in the area under its
jurisdiction to prevent damage which may be caused by its agriculture to the
environment of the other side.
- The two sides will establish sub-committees of their respective official
veterinary and plant protection services, which will update the information
and review issues, policies and procedures in these fields. Any changes in
the provisions of this Article will be agreed upon by both sides.
- The two sides will establish a sub-committee of experts in the dairy
sector in order to exchange information, discuss and coordinate their
production in this sector so as to protect the interests of both sides. In
principle, each side will produce according to its domestic
- There will be free movement of industrial goods free of any
restrictions including customs and import taxes between the two sides,
subject to each side's legislation.
- The Palestinian side has the right to employ various
methods in encouraging and promoting the development of the Palestinian
industry by way of providing grants, loans, research and development
assistance and direct-tax benefits. The Palestinian side has also the right
to employ other methods of encouraging industry resorted to in Israel.
- Both sides will exchange information about the methods employed by them
in the encouragement of their respective industries.
- Indirect tax rebates or benefits and other subsidies to sales shall not
be allowed in trade between the two sides.
- Each side will do its best to avoid damage to the industry of the other
side and will take into consideration the concerns of the other side in its
- Both sides will cooperate in the prevention of deceptive practices,
trade in goods which may endanger health, safety and the environment and in
goods of expired validity.
- Each side will take the necessary measures in the area under its
jurisdiction to prevent damage which may be caused by its industry to the
environment of the other side.
- The Palestinians will have the right to export their industrial produce
to external markets without restrictions, on the basis of certificates of
origin issued by the Palestinian Authority.
- The JEC will meet and review issues pertaining to this Article.
- The Palestinian Authority will establish a Palestinian Tourism
Authority which will exercise, inter alia, the following powers in the
- Regulating, licensing, classifying and supervising tourist
services, sites and industries.
- Promoting foreign and domestic tourism and developing the Palestinian
tourist resources and sites.
- Supervising the marketing, promotion and information activities related
to foreign and domestic tourism.
- Each side shall, under its respective jurisdiction, protect, guard and
ensure the maintenance and good upkeep of historical, archaeological,
cultural and religious sites and all other tourist sites, to fit their
status as well as their purpose as a destination for visitors.
- Each side will determine reasonable visiting hours and days for all
tourist sites in order to facilitate visits at a wide variety of days and
hours, taking into consideration religious and national holidays. Each side
shall publicize such opening times. Meaningful changes in the opening times
will take into consideration tourist programs already committed to.
- Tourist buses or any other form of tourist transport authorized by
either side, and operated by companies registered and licensed by it, will
be allowed to enter and proceed on their tour within the area under the
jurisdiction of the other side, provided that such buses or other vehicles
conform with the EEC technical specifications [I. currently adopted.] All
such vehicles will be clearly marked as tourist vehicles.
- Each side will protect the environment and the ecology around the
tourist sites under its jurisdiction. In view of the importance of beaches
and maritime activities for tourism, each side will do its best efforts to
ensure that development and construction on the Mediterranean coast, and
especially at ports (such as Ashqelon or Gaza), will be planned and carried
out in a manner that will not adversely affect the ecology, environment or
the functions of the coastline and beaches of the other side.
- Tourism companies and agencies licensed by either side shall enjoy equal
access to tourism - related facilities and amenities in border points of
exit and entry according to the regulations of the authority operating
- Each side will license, according to its own rules and
regulations, travel agents, tour companies, tour guides and other tourism
businesses (hereinafter - tourism entities) within its jurisdiction.
- Tourism entities authorized by either side, will be allowed to conduct
tours that include the area under the jurisdiction of the other side,
provided that their authorization as well as their operation will be in
accordance with rules, professional requirements and standards agreed upon
by both sides in the sub-committee mentioned in para 9.
Pending that agreement, existing tourism entities in the Areas which are
currently allowed to conduct tours that include Israel, will be allowed to
continue to do so, and Israeli authorized tourism entities will continue to
be allowed to conduct tours that include the Areas.
In addition, any tourism entity of one side that the tourism authorities of
the other side will certify as fulfilling all its rules, professional
requirements and standards, will be allowed to conduct tours that include
that other side.
- Each side will make its own arrangement for compensation of tourists for
bodily injury and property damages caused by political violence in the areas
under its respective jurisdiction.
- The JEC or a tourism sub-committee established by it shall meet upon the
request of either side in order to discuss the implementation of the
provisions of this Article and resolve problems that may arise. The
sub-committee will also discuss and consider tourist issues of benefit to
both sides, and will promote educational programs for tourism entities of
both sides in order to further their professional standards and their
ethics. Complaints of one side against the behaviour of tourism entities of
the other side will be channelled through the committee.
Note: It is agreed that the final wording in the last sentence in para 4
will be adopted according to the final wording in the relevant provisions of
- The authorities, powers and responsibilities in the insurance sphere
in the Areas, including inter alia the licensing of insurers, insurance
agents and the supervision of their activities, will be transferred to the
- The Palestinian Authority will maintain a compulsory
absolute liability system for road accident victims with a ceiling on the
amount of compensation based upon the following principles:
- Absolute liability for death or bodily injury to road accident
victims, it being immaterial whether or not there was fault on the part of
the driver and whether or not there was fault or contributory fault on the
part of others, each driver being responsible for persons travelling in his
vehicle and for pedestrians hit by his vehicle.
- Compulsory insurance for all motor vehicles, covering death or bodily
injury to all road accident victims, including drivers.
- No cause of action in tort for death or bodily injury resulting from
- The maintenance of a statutory fund (hereinafter - the Fund) for
compensation of road accident victims who are unable to claim compensation
from an insurer for the following reasons:
- the driver liable for compensation is unknown;
- the driver is not insured or his insurance does not cover the liability
- the insurer is unable to meet his liabilities.
- Terms in this Article will have the same meaning as in the legislation
prevailing at the date of signing of the Agreement concerning compulsory
motor vehicle insurance and compensation of road accident victims.
- Any change by either side in the rules and regulations regarding the
implementation of the above mentioned principles will require prior notice
to the other side. A change which might substantially affect the other side
will require prior notice of at least three months.
- Upon the signing of the Agreement the Palestinian
Authority will establish a Fund for the Areas (hereinafter - the Palestinian
Fund) for the purposes detailed in para 2(a)(4) above and for the purposes
detailed below. The Palestinian Fund will assume the responsibilities of the
statutory Road Accident Victims Compensation Fund in the West Bank and the
Gaza Strip (hereinafter - the Existing Fund) regarding the Areas, according
to the prevailing law at that time. Accordingly, the Existing Fund will
cease to be responsible for any liability regarding accidents occurring in
the Areas from the date of signing of the Agreement.
- The Existing Fund will transfer to the Palestinian Fund, after the
assumption of the above mentioned responsibilities by it, the premiums paid
to the Existing Fund by the insurers for vehicles registered in the Areas,
pro-rata to the unexpired period of each insurance policy.
- Compulsory motor vehicle insurance policies issued by
insurers licensed by either side will be valid in the territories of both
sides. Accordingly, a vehicle registered in one side covered by such a
policy will not be required to have an additional insurance coverage for
travel in the areas under the other side's jurisdiction. These insurance
policies will cover all the liabilities according to the legislation of the
place of the accident.
- In order to cover part of the liabilities which may incur due to road
accidents in Israel by uninsured vehicles registered in the Palestinian
Authority, the Palestinian Fund will transfer to the Israeli Fund, on a
monthly basis, for each insured vehicle, an amount equal to 30% of the
amount paid to the Israeli Fund by an insurer registered in Israel, for the
sat-ne type of vehicle, for the same period of insurance (which will not be
less than 90 days).
- In cases where a victim of a road accident wishes to claim compensation
from an insurer registered by the other side or from the Fund of the other
side or in cases where a driver or an owner of a car is sued by a victim, by
an insurer or by the Fund of the other side, he may nominate the Fund of his
side as his proxy for this purpose. The Fund so nominated may address any
relevant party from the other side directly or through the other sides'
- In the case of a road accident in which neither the registration number
of the vehicle nor the identity of the driver are known, the Fund of the
side which has jurisdiction over the place of the accident will compensate
the victim, according to its own legislation.
- The Fund of each side will be responsible towards the victims of the
other side for any liability of the insurers of its side regarding the
compulsory insurance and will guarantee their liabilities.
- Each side will guarantee its Fund's liabilities according to this
- The two sides will negotiate within three months from the date of the
signing of the Agreement a cut-off agreement between the Existing Fund and
the Palestinian Fund concerning accidents which occurred in the Areas prior
to the date of the signing of the Agreement, whether claims have been
reported or not. The cut-off agreement will not include compensation for
Israeli victims involved in accidents which occurred in the Areas prior to
the date of the signing of the Agreement.
- The two sides will establish immediately upon the signing
of the Agreement, a sub-committee of experts (hereinafter - the
Sub-Committee) which will deal with issues regarding the implementation of
this Article, including:
- Procedures concerning the handling of claims of victims of the one
side from insurers or from the Fund of the other side;
- Procedures concerning the transfer of the amounts between the Funds of
both sides as mentioned in para 4(b) above;
- The details of the cut-off agreement between the Existing Fund and the
Palestinian Fund, as set out in para 9 above;
- Any other relevant issue raised by either side.
- The Sub-Committee will act as a continuous committee for issues
regarding this Article.
- The two sides will exchange, through the Sub-Committee, the relevant
information regarding the implementation of this Article, including police
reports, medical information, relevant statistics, premiums, etc. The two
sides will provide each other with any other assistance required in this
- Each side may require the re-examination of the arrangements set out in
this Article a year after the date of the signing of the Agreement.
- Insurers from both sides may apply for a license to the relevant
authorities of the other side, according to the rules and regulations
regarding foreign insurers in the latter side. The two sides agree not to
discriminate against such applicants.
Done in Paris, this twenty ninth day of April, 1994
For the Government of Israel
Finance Minister Avraham Shohat
For the PLO
Abu Ala (Ahmed Korei)