Background
The Jerusalem Municipality adopted Procedure No. 09.04.11, “Joint Ventures and Activities,” allowing it to contract without a public tender for a joint venture when another participant contributed at least 50% of the venture’s cost. The procedure drew on Regulation 3(30) of the Mandatory Tenders Regulations, which applies to state contracting, and established similar—but not identical—criteria.
The municipal tender regulations provide a narrower exemption for a nonprofit joint venture. Among other conditions, the municipality must hold at least 40% of the nonprofit’s capital or voting power, or have authority to appoint at least 40% of its governing body, and the nonprofit must contribute at least half of the project’s cost. The Jerusalem District Court, sitting as the Court for Administrative Matters, held that the Municipality could not import the state exemption by analogy or expansive interpretation, nor derive an exemption from its general statutory powers. It invalidated the procedure, under which tens of millions of shekels had been transferred to private entities without tenders, while delaying the invalidation’s effect until October 15, 2023.
On appeal, the Municipality emphasized the broader consequences for Jerusalem and other municipalities. It argued that the arrangements amounted in substance to municipal self-performance assisted by members of the public and that its procedure incorporated central procurement principles such as publicity, equality, and transparency. The Hitorerut faction and Adir Schwartz opposed the appeal, as did the Ministry of the Interior.
The Court’s Holding
The Supreme Court unanimously dismissed the appeal and adopted the District Court’s judgment under the applicable summary-affirmance rule. It held that the Municipality must comply with the principle of administrative legality and has no authority to create an exception or exemption from competitive-tender requirements contrary to the procurement law governing local authorities. The Municipality’s procedure lacked a lawful basis, and the appeal did not meaningfully answer that conclusion.
The Court clarified that its ruling does not affect municipal contracts that actually qualify for an exemption under the municipal tender regulations and satisfy their conditions. But the Municipality could not rely on the Ministry of the Interior’s supposed oversight or on a 2023 ministerial instruction to examine a possible regulatory amendment. No amendment had been enacted, and a general intention to consider legislative change could not itself supply legal authority.
The Court ordered the Municipality to pay the first and second respondents’ costs of NIS 20,000.
Key Takeaways
- An Israeli municipality cannot import a tender exemption applicable to state agencies when the municipal procurement regulations prescribe different and narrower conditions.
- General municipal powers, procedural safeguards, or substantial private participation cannot substitute for a lawful statutory or regulatory exemption from public tendering.
- A proposal or instruction to consider amending procurement regulations creates no present legal authority; qualifying exemptions under the existing municipal regulations remain unaffected.
Why It Matters
The decision reinforces a strict legality principle in Israeli local-government procurement: municipalities may use only those tender exemptions that the governing municipal rules actually authorize. Even a procedure designed to promote transparency and shared funding cannot expand those exemptions administratively.
The ruling has implications beyond Jerusalem because similar joint-venture arrangements may be used by other municipalities. Unless the regulations are amended, local authorities must structure such projects within an existing municipal exemption or conduct a public tender.