VATICAN NEGOTIATIONS CONTINUE ON JERUSALEM

C O N F I D E N T I A L SECTION 01 OF 02 JERUSALEM 001491

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE AND IPA, NSC FOR ABRAMS/SINGH/WATERS

E.O. 12958: DECL: 07/19/2017
TAGS: KIRF IS PBTS VT KWBG
SUBJECT: VATICAN NEGOTIATIONS CONTINUE ON JERUSALEM
PROPERTY, LEGAL/FISCAL MATTERS

REF: A. VATICAN 106


B. VATICAN 93

C. 06 VATICAN 247

D. 05 JERUSALEM 4770

E. 05 JERUSALEM 311

F. 04 JERUSALEM 2763

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Classified By: Consul General Jake Walles, for reasons 1.4 (b) and (d)


1. (C) Summary. Chief Vatican negotiator Fr. David Jaeger
told PolOff July 12 that his team had just wrapped up a
"positive but incomplete" negotiating session with the GoI on
a general legal/fiscal agreement and made some progress on
tax exemptions, judicial remedies and property claims.
Jaeger said the GoI agreed in principle to treat the Catholic
church as a non-profit organization for taxation purposes,
but did not commit to specific language or address Vatican
concerns on local taxation. He said the parties are close to
agreement on judicial panels for religious property disputes
that would operate like courts but be responsible to the
Cabinet, not the judiciary. He said the GoI tentatively
agreed to transfer possession of most of the Cenacle (Last
Supper room and adjoining property) and provide restitution
for Jerusalem church properties. He said the Holy See wants
the GoI to agree to a set timetable for future meetings and
proceed with the written draft, not discuss possible
solutions. End summary.

Some Progress in Latest
Round of GoI-Vatican Talks
--------------


2. (C) The Vatican's chief negotiator with Israel, Fr. David
Jaeger, told PolOff July 12 that his team had just wrapped up
a "positive but incomplete" negotiations at the GoI MFA (led
by GoI MFA Legal Advisor Ehud Keinan and including the
Justice and Finance Ministries and National Insurance office
representatives) on a general legal/fiscal agreement. This
session built on progress from the May plenary session at the
Vatican (Ref B) on draft provisions for national/local tax
exemptions, access to Israeli courts on religious property
matters, and historical property disputes. Jaeger said he is
frustrated with the "glacial pace of negotiations" (talks on
a legal/fiscal agreement began in 1995) and the Israeli
team's apparent lack of empowerment and tendency to avoid
written commitments. But, he said he is nonetheless pleased
with recent progress on tax exemptions, court access and
property restitution.

Narrowing Differences on
Tax Exemptions
--------------


3. (C) Jaeger said the GoI agreed in principle to treat the
Catholic church as a non-profit organization for taxation
purposes, but did not commit to specific language to effect
this fact. Jaeger said he wants the GoI to exempt the
Catholic church from any future tax system changes (arguing
that without such a proviso, the Knesset can undermine the
legal/fiscal agreement by introducing a new tax system not
contemplated in the agreement being negotiated). He said the
GoI has thus far balked at this suggestion, but a possible
compromise is to exempt the church from new taxes unless they
are mutually-agreed and revenue neutral. Jaeger said he is
also asking the GoI to agree that the legal/fiscal agreement
is a permanent settlement of all tax claims against the
church. (Note: the GoI continues to assess taxes against the
Catholic and other Christian churches in Jerusalem, but
generally does not attempt to enforce payment. End note).


4. (C) Jaeger said he expects the GoI to propose a formula
for local tax exemptions, but he has not seen details. He
said the GoI team said it would propose to exempt church
properties from the Arnona (Jerusalem's local property tax)
and clear local tax debts that the GoI claims have
accumulated on religious property. Jaeger said he does not
expect local governments to try to collect accrued tax debts,
but the church is not comfortable with the power relationship
(in the GoI's favor) created by potential tax liabilities,
usually in millions of shekels, that the Municipality keeps
tallying up on Jerusalem's churches, monasteries and other
Catholic properties.

Court Access: Tentative Agreement
on Executive Judicial Panels
--------------


5. (C) Jaeger said the Vatican and GoI teams are close to

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agreement on establishing judicial panels for religious
property disputes that would operate like courts and rely on
Israeli precedents and rules of discovery/evidence, but would
be responsible to the Cabinet, not the judiciary. He said
the GoI will not allow, and he will not insist on, access to
the Israeli justice system for property disputes.

Jerusalem Church Properties: Holy See
Seeks Restitution, Immunity from Taking
--------------


6. (C) The GoI tentatively agreed to transfer possession of
most of the Cenacle (Last Supper room and adjoining property)
to the Catholic church and provide restitution for Jerusalem
church properties taken in 1948 and 1967, Jaeger said. He
said the Vatican wants to move beyond discussion of
individual properties, however, and establish a rules-based
relationship with the GoI on church property matters. He
said the rules would include limits on the GoI's power of
eminent domain over church properties. Jaeger said he
believes churches should be immune from any government
takings, but he will be satisfied if the GoI is required
demonstrate a "compelling state interest" to Israeli courts
before it can take possession

Next Steps in Negotiations
--------------


7. (C) The GoI and Holy See have much work to do before a
scheduled December plenary session, Jaeger said, but have
thus far only committed to a September 3 negotiating session
before then. He said the Holy See wants the GoI to agree on
a timetable for future meetings and make progress on the
"incremental draft" agreement rather than explore possible
solutions without written commitments. He also said the Holy
See is eager for the Knesset to ratify the 1993 Fundamental
Agreement, noting that the Vatican is reluctant to continue
steps to build GoI-Vatican ties until the Fundamental
Agreement is a binding treaty, not just an informal statement
of principles.
WALLES