UK expands sanction powers, enabling action against companies supporting West Bank settlements

Britain brought new regulations into force on Thursday, significantly expanding its sanctions powers in a move that could enable action against construction companies, developers, and financial institutions supporting settlement expansion in the West Bank.

The measures took effect four days before the deadline for submitting bids for construction in the E1 area between Jerusalem and Ma'aleh Adumim, amid a diplomatic dispute between Israel and Britain over the closure of the British consulate in east Jerusalem.

The new regulations expand Britain's sanctions framework concerning human rights and international humanitarian law. They allow sanctions against individuals and entities directly involved in activities classified as serious violations of international law, as well as those financing, facilitating, or promoting such activities, subject to specified legal conditions.

Possible measures include asset freezes, financial restrictions, travel bans, and disqualification from serving as company directors. The regulations could also allow sanctions against entities involved in settlement-related activities if they meet the established criteria, but do not impose blanket restrictions on all companies operating in the area.

The timing is particularly significant as Israel advances construction plans in the E1 area. The deadline for submitting bids for 1,234 housing units, part of a broader plan involving approximately 3,400 units, is scheduled for October 19, while consideration of the bids by the tender committee has been postponed until after November 19.

Britain opposes the project, arguing that construction in the area would undermine the territorial continuity required for a future Palestinian state. Israeli officials view the development as part of settlement expansion and efforts to strengthen continuity between Jerusalem and Ma'aleh Adumim, rejecting the argument that international opposition should prevent the project from proceeding.

The tender is expected to close in the coming days despite the postponement of the committee's review. Companies seeking to participate must therefore submit their bids before it becomes clear whether Britain intends to exercise its new sanctions powers against entities connected to the project.

British advocates of expanded sanctions are seeking to deter companies and financial institutions from participating at the bidding stage, before contractors are selected and construction begins.

Political figures and organizations in Britain opposed to settlement construction have also been working to increase pressure on businesses that could participate in the project.

Last month, members of Parliament contacted banks and financial institutions, warning of the risks associated with financing construction in E1. This week, the Britain Palestine Project, an organization supporting measures against settlements, warned that companies and contractors participating in the development could jeopardize their international business relationships.

In letters sent to financial institutions, lawmakers called on banks to assess their potential exposure to the E1 project and raise the issue at board level, including the legal, economic, and reputational risks involved.

Although the letters represent requests from lawmakers rather than binding government directives, they are intended to increase pressure on banks and other institutions providing financing and guarantees, encouraging them to avoid involvement in the project.

Concerns over possible future sanctions could influence commercial decisions even before Britain announces restrictions against specific companies.

The Israeli settlement watchdog Peace Now responded sharply to the regulations taking effect on Thursday, warning that their consequences could extend beyond companies directly involved in settlement construction.

"This is a real alarm. Today, it is already clear that settlements are not only an obstacle to peace and a danger to security, but also an economic threat to the country's future," the organization said.

Peace Now accused Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich of advancing construction in E1 and warned that the consequences of sanctions could eventually affect the broader Israeli public.

"The price of this messianic adventure could be paid not only by settlers, but by millions of law-abiding Israeli citizens," the organization said. "Today, these are sanctions on settlements. Tomorrow, they will reach every household in Israel."

Concerns about broader economic consequences were also raised last month. According to concerns expressed within the Israeli government, foreign importers and financial institutions could struggle to distinguish between companies operating in settlements and other Israeli businesses, potentially imposing stricter commercial conditions on companies that are not themselves subject to sanctions.

For now, these remain assessments of possible consequences, and the scale of any economic damage, if it occurs, remains unknown.

The regulations could also have further implications for the financial sector.

If sanctions are imposed on a particular company or entity, financial institutions subject to British law would be required to comply with the applicable restrictions, including asset freezes and prohibitions on making funds or economic resources available.

Companies not included on sanctions lists could also face additional information requests and more stringent reviews by banks and business partners, as part of compliance and risk-management procedures intended to ensure that transactions do not violate the restrictions.

However, business ties with the West Bank do not, in themselves, automatically constitute grounds for sanctions against a company or bank.

The new regulations also cover matters unrelated to settlements. Britain will be able to impose sanctions for obstructing humanitarian assistance and for serious violations of the right to liberty and personal security, including unlawful detention.

The regulations also introduce a mechanism allowing London to temporarily adopt sanctions already imposed by partner countries for up to 112 days while considering whether to introduce independent British sanctions.

The mechanism will allow the British government to apply restrictions through an accelerated procedure based on decisions already taken by other countries.

The British move forms part of a broader plan presented by Foreign Secretary Ed Miliband on September 8, which also includes a proposed ban on imports from settlements and restrictions on related commercial activities.

Separate legislation introducing the import ban has not yet been completed. In recent months, Britain has also coordinated with other countries in taking action against individuals and entities accused of involvement in settler violence and its financing.

According to London's plan, the separate trade legislation also includes restrictions on advertising and marketing settlement real estate in Britain.

In September, 12 European and Western countries, including Britain, France, and Canada, announced support for advancing trade restrictions concerning settlements, each in accordance with its domestic procedures. In some countries, the measures remain in the drafting and legislative stages.

The sanctions have also generated debate within Britain.

The opposition Conservative Party has previously warned that economic restrictions could harm Palestinian workers and businesses not involved in the activities targeted by the government.

Conversely, Emily Thornberry, chair of Parliament's Foreign Affairs Committee, has supported measures against settlements while criticizing the time required to complete the legislation.

British Prime Minister Andy Burnham clarified in Parliament this week that security and intelligence cooperation with Israel continues despite the political disagreements.

The potential impact on Palestinian workers was also raised in a parliamentary question submitted to the British government.

In a response issued earlier this month, the government emphasized that its measures target settlement activity it considers illegal, as well as violence and extremism, while Palestinian businesses will continue to benefit from existing preferential trade arrangements.

However, the response did not include an estimate of the number of Palestinian workers who could be affected by restrictions on economic activity in settlements.

The British government has not yet presented data that would allow an assessment of the potential impact on those workers.

The regulations took effect one week after understandings were reached between Israel and Britain concerning the British consulate in east Jerusalem.

Israel reduced Britain's diplomatic presence and halted additional activities in response to London's measures, but Britain has not reversed its sanctions policy.

Although the new regulations are now in force, no new sanctions have been announced under them against companies, developers, or financial institutions involved in E1 construction.

A spokesperson for the British Foreign Office clarified that the updated regulations represent a change in global sanctions policy rather than a measure specifically targeting Israel or settlements.

According to the spokesperson, the existing framework had allowed Britain to impose sanctions on individuals and entities involved in serious human rights violations or breaches of international humanitarian law worldwide.

The updated policy expands the range of serious violations that could trigger sanctions, regardless of where they occur.

The spokesperson stressed that the regulations are separate from the legislative process and sanctions measures concerning settlements considered illegal under international law, and do not introduce any trade-related restrictions.

The Foreign Office also emphasized that the updated policy does not target any specific country.

Rather, it is intended to allow Britain to respond more quickly to individuals and organizations involved in serious human rights violations or breaches of international humanitarian law anywhere in the world.