British banks and financial institutions have been formally urged by Members of Parliament to refrain from investing in Israel’s contested E1 settlement project, amid ongoing concerns about the legal and reputational risks involved. The warnings were conveyed in a letter sent Tuesday by the all-party Britain-Palestine group, highlighting the urgency of the issue despite the fact that new UK legislation banning trade with illegal settlements has yet to come into effect.
The Foreign Secretary, Ed Miliband, announced plans two weeks ago to implement a comprehensive ban on trade with Israeli settlements deemed illegal under international law, alongside sanctions targeting entities involved in their construction. However, the secondary legislation necessary to enforce these measures is expected to take between six and nine months to navigate through Parliament.
The concern is immediate because the Israeli government is currently soliciting bids for two tenders related to the construction of approximately 3,400 housing units in the E1 area, with a key tender deadline set for October 25—just two days before Israel’s upcoming elections. Among these units, over 1,300 are part of the tender closing on that date.
Finance Minister Bezalel Smotrich has previously characterized the E1 settlement as a project that effectively “erases the two-state delusion,” referring to its potential to fragment territory envisioned for a future Palestinian state. The E1 plan has long been a source of international contention due to its significant implications for the viability of a two-state solution, which remains the primary framework endorsed by Western governments and several Gulf states for resolving the Israeli-Palestinian conflict.
Before construction can begin, financial guarantees and insurance must be secured, placing institutions that provide such services at the center of the dispute. One motivation for Miliband’s announcement prior to the elections was reportedly to dissuade UK financial institutions from supporting these tenders amid escalating settler violence in the West Bank. Reports suggest that Miliband may have advanced his announcement despite some reservations expressed within diplomatic circles.
The letter from the Britain-Palestine group, signed by Labour MPs Debbie Abrahams and Andy McDonald, urges financial institutions to assess their current commitments carefully, noting that agreements made before the enforcement of the sanctions could prove difficult to reverse. The letter states that institutions should consider the legal and reputational risks associated with involvement in settlement-related projects and incorporate these concerns into their risk management frameworks.
The MPs call on bank boards to prioritize potential exposure to the E1 settlement on their risk registers and to determine whether related sanctions and liabilities align with their stated risk appetites.
Officials emphasize that the new measures are not intended to disrupt trade with Israel broadly; rather, the focus is specifically on products and services linked to settlements, which are identifiable through postcodes indicating their location.