Ireland's Central Bank said it cannot stop the sale of Israel's war bonds
That Approve Gabriel Bank The Makhlouf The Said Central Offers A Legally, Securities Prospectus Governor Public To Must
From outspoken condemnations of Israeli policies to recognising the State of Palestine, Ireland has long been one of Europe’s most vocal supporters of Gaza and the West Bank.
From the top down, the Irish Government has been strong in its opposition to the war in the Middle East, with Simon Harris calling the events in Gaza “a humanitarian catastrophe” where “innocent children, women and men are being starved and slaughtered.”
In a similar vein, Fianna Fáil leader Micheál Martin said Israel was behaving like a “monster,” calling its response in Gaza “without a doubt, a violation of international humanitarian law.”
Despite its unwavering support, the past 12 months have highlighted the inextricable economic links between Ireland and Israel, from dual-use exports, Ireland’s investments in Israeli companies operating in illegal settlements, and most recently, the Central Bank of Ireland’s role in the approval of Israeli Bonds in the European Union (EU).
Ireland is the home country of Israeli bonds sold in the 28-member bloc, with the Central Bank of Ireland designated as the competent authority to approve prospectuses for the securities.
Third-country issuers, those being countries outside the EU, must choose the Central Bank of a country within the EU as its Home Member State. The choice is up to the issuer, with the Central Bank only able to object if it believes it does not have legal jurisdiction for the approval.
Before 2021, the UK was the EU Home Member State for Israel. Following their exit from the bloc, Ireland was chosen by Israel as the new Home Member State.
The Central Bank of Ireland approved the first prospectuses for the bond issuance program in 2021, with the securities offered in Ireland, Austria, France, Germany and the Netherlands through the EU passport.
In the past 12 months, Israel Bonds have been used as a means to support the country’s war efforts in Gaza and the Middle East.
The Central Bank’s role in approving these prospectuses for the European market has been a source of conflict and contention. Just this week, a letter to the Irish Examiner signed by trade union leaders and pro-Palestine groups said the Central Bank was “complicit in funding genocide and apartheid” by providing the gateway to Europe for Israel bonds.
“We are deeply concerned that the Central Bank of Ireland is acting as the regulator of Israel bonds in Europe, thereby facilitating their sale,” the letter said.
It added that under EU law (Regulation 2017/18, Article 32), The Central Bank has the power and responsibility to refuse to validate Israel bonds on the grounds that the International Court of Justice (ICJ) found Israel “is plausibly committing genocide, and on the technical grounds that the Israel bonds prospectus lacks ‘completeness,’ given that the funding of genocide, a core function and risk factor, was omitted.”
In an Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach in October, Sinn Féin’s finance spokesperson Pearse Doherty said more should be done to prevent the sale of Israeli bonds through Ireland, calling on the Central Bank to add further conditionality to the sale of these financial products.
Addressing Central Bank Governor Gabriel Makhlouf, Mr Doherty said that current regulation allows for the regulator to include supplementary information when necessary to protect investors.
“[The regulation] allows you to say, to protect investors and those buying Israeli bonds, that these bonds are for a war,” Mr Doherty said.
“I do not doubt that nobody in the Central Banks wants Ireland to be selling these bonds, but you have enough wiggle room to make sure that that doesn’t happen.”
Since October 7th 2023, Israel Bonds have seen more than $3bn in sales, nearly triple its annual average.
The website Israelbondsintl.com, which is used for the promotion of bonds issued under the Central Bank-approved programme, includes phrases such as “Israel is at war,” “Stand with Israel now,” and a quote from Israeli President Isaac Herzog rallying for “unwavering support for the Jewish state” emphasising the “crucial role of Israel Bonds during this time of conflict and war.”
Responding to Mr Doherty, the Central Bank Governor said the law was clear, adding that legally, the Central Bank must approve a prospectus that offers securities to the public.
However, he noted to Mr Doherty that he was “very happy” to take this away, adding that he would think “very hard” about the ability he has to do what was of asked him.
This week, The Central Bank sent an analysis of the issues discussed at the October Joint Oireachtas Committee meeting, with Mr Makhlouf once again reiterating: “In my view, the law is clear and the Central Bank has to approve a prospectus for the offer of securities to the public.”
“The law is also clear that our approval should not be considered an endorsement of the issuer or of the securities.”
Responding to a query asked in the meeting if the Central Bank reached out to Israel in 2021 when it was choosing a new EU member state to approve its bonds, it said that it did not, with this decision being made in full by Israel.
Israel Bonds declined to comment when asked why Ireland was chosen as the regulator of Israeli Bonds in the EU in 2021.
Addressing the ICJ ruling, the Central Bank said it did consider the geopolitical developments relevant to the prospectuses, but noted that the regulation it must adhere to is a disclosure regime.
“The Central Bank ensured that the geopolitical situation and its potential impact on investors was disclosed in the prospectus. The Central Bank will adhere to any financial sanctions or restrictive measures that are imposed under law.
“The Central Bank could not refuse to approve the Israeli Bonds programme on the basis of the ICJ Advisory Opinion.”
Noting the Israel Bonds website, which includes phrases such as “Israel is at war,” and “Stand with Israel now,” the Central Bank said that it reviewed the website but did not consider the advertisement material to be inconsistent with the disclosure in the prospectus.
In its correspondence, The Central Bank said it can only refuse the approval where it has a legal basis to do so.
Other than insufficient prospectus disclosures, it acknowledged a legal basis for refusal being either the existence of the EU financial sanctions that would prohibit the provision of securities by the Israeli government, or national restrictive measures to the same effect.
While it remains highly unlikely that the EU will enact such sanctions, the Irish Government could and has already come close to doing so.
In its response to the Oireachtas Committee, the Central Bank noted the last Government’s consideration to progress the Control of Economic Activity (Occupied Territories) Bill 2018, which proposes to make it an offence for a person to import or sell goods or services originating in an occupied territory.
“The Central Bank understands from statements of the last Government on the matter that this is being considered but challenges remain that the 2018 Bill needs to be re-drafted and amended substantively,” it noted.
It added that it was monitoring the progress of the Bill, in particular as to whether any national restrictions are placed on the issuance of securities.
While initially opposed due to legal and diplomatic concerns, Fine Gael’s Simon Harris and Fianna Fáil’s Micheál Martin have both said the circumstances that previously blocked the draft legislation had now changed due to the ICJ’s opinion that Israeli settlements in the West Bank and East Jerusalem were in breach of international law.
In the weeks before the general election was called, the Government committed to supporting the Bill, following substantial amendments and changes.
However, passing the revised legislation and providing national restrictive measures prohibiting the sale and provision of Israeli bonds will be a matter for the incoming government.