A History of Money in Palestine: The Case of the Frozen Bank Accounts of 1948

Video and Edited Transcript
Sreemati Mitter
Transcript No. 406 (20 May 2014)

“A History of Money in Palestine: The Case of the Frozen Bank Accounts of 1948“

with

Sreemati Mitter
Ernest May Fellow,
Harvard University

Yousef Munayyer: Moving in to today’s event, I have to say I’m really looking forward to the presentation today. The title of the event is “A History of Money in Palestine: The Case of the Frozen Bank Accounts of 1948.” When I first came across the topic of the research that will be presented here, I really was struck by the topic in general, because despite all we hear and talk about the narrative and the history of the events of 1948, so much of it is dominated by the loss of land and the expropriation of land and the acquisition of land and so on, but rarely do we hear about the question here which is the question of money and bank accounts. So what was the case of the frozen bank accounts of 1948?

We are very fortunate to have with us today Sreemati Mitter who has done research on this very question as part of her doctoral work and is working on putting that into a book for publication. She is the Ernest May Fellow at Harvard University and she will discuss this episode in Palestinian history which has never before been written about. She will use it as well as a prism through which to explore how the fact of statelessness, which is generally thought of as a political condition, directly affects the economic and monetary lives of ordinary people. She is as I mentioned working on a book based on this title, “The History of Money in Palestine: From the 1900s to the Present.” Please join me in welcoming Dr. Sreemati Mitter.

Sreemati Mitter: Thank you so much, it’s really lovely to be here. It’s an honor, thank you Yousef. Yousef’s sort of given the whole game away he’s already explained my entire argument so I might as well make this very short and go home.

The story that I’m going to tell you today begins on a particular date and with a particular event. On June 12, 1948 the new government of the new state of Israel issued an order to all banks still operating within its territory to freeze the accounts of all their Arab Palestinian customers and to stop all transactions on all Arab accounts. The Israeli government gave the banks one month to comply with this order and threatened to revoke the banking licenses of all those banks which were found to be in noncompliance with it. By December 1948, six months after the termination of the British Mandate for Palestine and six months after the formation of this new state of Israel, every single bank which was operating in Israeli territory had complied with this order. And thus, by December 1948, six months after the termination of the Mandate for Palestine, every single Arab Palestinian who had a bank account had lost access to the money and valuables which they had kept for safe keeping in their banks. Six months.

How could this have happened? Why did the banks comply with this order when the protection of their customers’ accounts and valuables and money, is the principle most sacred to all banks? Why was the order issued in the first place, and what did the Arab Palestinian customers do about it? In answering these questions I’m going to take you through the story of the frozen bank accounts of 1948, and I’m going to use it to pose a larger question about what it means to be stateless. I’m going to suggest that the condition of statelessness, which is generally thought of as a political problem and it’s treated as such in all the literature on the subject. It’s a question of political rights, legal rights, that sort of thing. What I’m going to suggest is that statelessness also has a very economic dimension, and that’s really what my work focuses on, what I really try to highlight in my broader project.

So, while I’m going to talk about this episode of the frozen funds of 1948 today, I’d like to take just a minute to talk about my book project in general so that you could put it in context. As Yousef mentioned, I start in the early 1900s, it’s a historical work and I start in the waning years of the Ottoman Empire and I focus on what happened to the bank accounts and particular financial assets of the Palestinian people who were living in Palestine at the time, particularly during the moment of transition during the World War I years. That’s when my book opens. I look at what happens to the money and the assets of the Palestinians when the Turkish government, which at that point was running Palestine, is basically issuing all these orders ordering all the Palestinians to switch to a new Turkish paper currency. Palestinians still at that point had been using silver and gold coins. During World War I, the Turkish government desperately trying to fight the war, basically issues all this paper currency and I focus on that moment in time because that gets very much of this question that I am really interested in, which is what happens to ordinary people, what happens to their economic and financial lives during these moments of transition over which they have no control?

I start in the Ottoman period, my second chapter looks at the British Mandate period, and the third chapter which is really the central chapter of my work is what I will talk about today, which is 1948 and it’s really the central transition in Palestinian history. Then I look at 1967 and then I look at 1993. And through all these moments of big transition, when the state on the top is changing, I focus on two questions. What happened to people’s economic and financial lives through these transitions? People had to go to work the next day, no matter what’s happening whether it’s the Ottomans or the British or the Israelis or the Jordanians or Egyptians or whoever is in charge. What happened to their economic behavior, what happened to their financial lives? And the second question is what happened to their assets? I will get back to this question of what happened in 1948, but I’m going to use these stories of what happened to their assets and what happened to their financial lives to make two broad arguments about the economic dimensions of statelessness.

The first is stateless people like the Palestinians, but not only the Palestinians, and that’s a really important part of my work too which is putting the Palestinians in context with stateless people everywhere. Our tendency is to think of Palestine and Palestinians as a very unique situation, and partly what I’m trying to show is that it’s not; this is what happens to stateless people everywhere. And this is because stateless people are particularly vulnerable to dispossession because they don’t have the protection of sovereign banking institutions of their own, and that’s the first reason why they’re so vulnerable to this sort of dispossession.

The second reason is because they don’t have a sovereign legal regime of their own. So they can’t go to law courts as we’ll see in this story, they can’t go to a court and say, “The bank’s taken my money, can you help me?” because the law courts are siding with the entity which has ordered the confiscation of their assets in the first place.

The third reason is that stateless people like the Palestinians don’t have the right to directly represent themselves at international fora such as the United Nations. They don’t get a seat at the table in other words, they are represented by other people: the Jordanians or the Egyptians or the Arab League or whatever. There was no Palestinian seat at all these discussions at the UN at this moment in time. So for these three reasons, the lack of sovereign banking institutions, the lack of a sovereign legal regime and the inability to directly represent themselves at international fora of diplomacy, stateless people are particularly vulnerable to being dispossessed of their financial assets. And that is a central argument I’ll make today and is a central argument I make in all my work.

But there is a second argument no less important that I’ll make today and that I really want you to take away with you, and that is despite this vulnerability to dispossession, the Palestinians in this story nevertheless really fought for their rights. And they used many strategies to fight for their rights, but one of the really surprising things that emerges from my research is the extent to which they turned to the law for the protection of their assets. And I will tell you why I say this is surprising. It’s partly because as Yousef mentioned, we hear a lot about 1948 and the dispossession of Palestinian land. We hear about the houses, we hear about the property, but literally no one talks about this question of the bank accounts.

And the reason why I was so surprised when I was doing my research is not only does nobody talk about the bank accounts, nobody talks about this story which is that the Palestinians sued the banks. They turned to the law courts to fight for their rights. And this in many ways goes against the grain of Palestinian historiography of this period, where the general tendency is to present the Palestinians as victims: they were steadfast (“sumoud“), they stood, they tried to be dignified but they were victims. The central story is one of loss. Or we have other narratives. They were fighters, they were terrorists, they were guerrillas, they turned to arms or whatever word you want to use. We have those two narratives, they were victims or they were fighters. Yes they were victims, and yes they did fight, but they fought through law. And this fighting for law, this is what historians call agency and what I’ll call legal agency, is really an important conclusion of my work and I’d really like you to take that away with you while keeping in mind the story of this greater loss. So these are the two arguments I’ll make today. Without further ado, let me turn to the story of the frozen bank accounts.

If you’d like, you can take a look at the handout that all of you have just so that you get a sense of the speed and rush of events. I’ll take you through this very quickly because I don’t have much time. I’ll begin the story in November 1947 because this is the date of the UN Partition Plan for Palestine. At this point in time in November 1947, fighting breaks out throughout the land of Palestine between Arab and Jewish militias. In February 1948 the British Mandate authorities declared their intention to terminate the Mandate for Palestine without specifying what institution is going to take over, without saying anything about who is really going to take over this country of Palestine, without saying what’s going to happen to anything. And very interestingly, they don’t say much about anything, but the British do actually say that the Palestinian currency, which had been the currency in place in Palestine for the last 20 years, is going to be folded up. So they do that say that, they say almost nothing else about the termination of the Mandate for Palestine but they do say there’s no longer going to be a Palestine pound. That’s in February 1948.

Between February 1948 and May 1948, the land of Palestine is absolutely riven by fighting and by war. Also as some of you might know, this is the start of the Palestinian refugee crisis. We have hundreds and thousands of people fleeing their homes, in some cases being forced out in some cases fleeing, literally just fleeing for their lives. The UN has estimated there were about 800,000 Arab Palestinians who fled between November 1947 and May 1948. The Arab Palestinian population of Palestine in 1947 is one million. So if 800,000 people have fled you can just imagine the massive displacement of people. That’s all happening during this time. On May 14, 1948, David Ben-Gurion declares the independence of the state of Israel and a provisional government of this new state of Israel is formed. That night itself, Arab armies invade Palestine, invade this new country of Israel, and so the fighting which had already been widespread becomes even more so at that point in May 1948. On June 11, 1948, the first ceasefire is brokered between Jordan, Egypt and Israel. On June 12, one day after that first ceasefire, the Israeli government issues that freeze order to all the banks to freeze the accounts of all the Arab Palestinian customers.

Now which were the banks that were affected by this order on June 12, 1948? There were basically three banks at this point in time that had Arab Palestinian customers. There were many banks in Palestine during the mandate period but there were three banks which had Arab customers. So these were the three banks that were affected by the order. Two of the banks were large international commercial banks. There was Barclays Bank, which was a big British bank and it was also the quasi-official bank of the British Mandate government. At this point in time in June 1948 it is the largest bank in Palestine in terms of number of branches and number of account holders. And then there is the Ottoman Bank, which was also a very large international bank. As its name suggests, it used to be an Ottoman bank and in fact used to be the quasi-official bank of the Ottoman government, but by this point in the story in June 1948 it’s actually been bought by British and Fresh interests. It is a large commercial bank headquartered in London by this point.

So both Barclays and Ottoman banks have Arab customers and Jewish customers and are therefore affected by this freeze order. And then there is a third bank, a smaller bank called the Arab Bank, which is actually owned by an Arab Palestinian, run by an Arab Palestinian and has only Arab Palestinian customers. So these are the three banks which are affected by the Israeli freeze order, and the freeze order is issued on June 12, 1948 and all it says is to stop all transactions on all Arab accounts and freeze all Arab Palestinian account holders.

You get a sense of what it meant to be a bank employee in one of these branches of Barclays or Ottoman Bank at this time in June 12, 1948. As I’ve said, the country is absolutely riven by war. The management of the banks are usually British but they’ve all been evacuated by this time. They’ve all fled to Cyprus by February 1948. People who are left in the branches are Arab and Jewish workers; they’re clerks in the banks, both Arabs and Jews. They are dealing with this situation of war; they’re sort of deciding, “Well, should we go to work today? If we go to work, what do we do about our customers? What do we do about our Arab customers? What do we do about our Jewish customers? Do we separate the accounts? Do we keep them together? What do we do about our bank branches where everyday windows are being shattered because there is a bomb outside on the streets?” This is the situation in which this order arises at their branches from this Israeli government.

On June 12, 1948 the Israeli government has not been recognized by any international entity except the United States. So these branch managers in the Jaffa branch and Jerusalem branch get this order and they absolutely don’t know what to do about it. I was very lucky to be able to work in Barclays Bank archives in Wythenshawe in England and I was able to see the correspondence that comes out of this period. I was able to see the letters that branch officials in Jerusalem, Jaffa, Akka and Haifa were sending back to their managers in head office in London saying, “We don’t know what to do, we’ve got this order by this Israeli government and what should we do?” The response that comes back from London, which is a classic banker-ly evasion of any sort of trouble, is, “Do nothing. Ignore the order, do nothing.” So, between June 1948 and October 1948, that’s exactly what happens. The banks, Barclays and Ottoman banks, absolutely do nothing in the sense that they ignore this order. In fact, the Ottoman Bank’s manager is actually a British man who has not been evacuated and refused to leave, he is a bit of a cowboy, and he takes the entire Jerusalem branch’s safe and all the money that they had in all the vaults and puts it in a truck and drives to Amman. He basically starts operating the Jerusalem branch of the Ottoman Bank out of a truck in Amman and he basically says, “Anybody who can come to my branch, this truck, I’m paying them out. You have to be able to come here; if you can’t come I can’t help you but if you can come to Amman I’m paying you out.” So this goes in October.

At the end of October 1948, the Israeli government catches wind of this, that none of the banks are actually obeying its order and that people are being paid out and the banks are actually quite overrun with customers withdrawing their money at this time. The Israeli government is absolutely furious at having been defied in this way. What do they do? They revoke the trading license of the Ottoman Bank as they had threatened to do in June. They said you can no longer operate within Israel. You have lost your license. This is when the Ottoman Bank’s headquarters in London said, “Oh my God, we’ve lost our trading license in Israel and this is a very big part of our business, what are we going to do?” They issue a reprimand to this cowboy of a bank manager in Amman saying, “Stop paying out your customers.” Barclays Bank is watching what’s happening with its colleagues in the Ottoman Bank and realizes that the Israeli government is actually serious about revoking trading licenses. So Barclays Bank by October 1948 also stopped paying out customers. Arab customers come to the bank branches and they are told, “Sorry we can’t pay you out, we’ve been ordered by the Israeli government to freeze your accounts.” That’s in October 1948.

In December 1948, there’s a big turning point because the Israeli government in December issues these “emergency proclamations,” which we know about them later because in March 1950 they are codified into law. These are the famous “absentee property” legislations. But in December 1948, they’re just called “emergency regulations concerning the property of absentees.” That’s the terminology. It is these emergency proclamations that are given status in law; they are codified in law because they’ve been passed by the Knesset, the Israeli parliament. At that moment, when the military order of June 11, 1948 becomes a law in December 1948, that’s when the banks really begin to obey and they say, “As of December 1948, we have frozen all our Arab Palestinian customers’ accounts and we’ve stopped all transactions on all Arab accounts.” In February 1949, there’s another turning point. The Israeli government issues a new order to all the banks yet again, saying, “You can’t just freeze the accounts, you can’t just stop the transactions, you have to transfer all Arab accounts, everything including cash, valuables and safety deposit boxes over to a new branch of the Israeli government, which is called the ‘Israeli Custodian of Absentee Property.’ We’ve created this new bureaucracy and all the Ottoman and Barclay bank branches have to transfer over all the accounts that have been frozen since October into this new bureaucracy.”

The banks, when they get this order, are actually quite relieved because until February 1949, what’s happened is they’re listing all these things on their books. They’re still showing that they still have all these account holders on their books so they have this weird cash position where they are showing that they have these accounts, but they are not paying them out, they’re frozen. For those of you who know banking law or banking and accounting rules, this is the worst nightmare for any bank: to have something on your books as a liability but you can’t actually solve that liability. In February 1949, when they’re asked to basically transfer all those accounts to the Israeli Custodian of Absentee Property, they’re very happy to write checks because that means that it resolves the cash position. The money is no longer in their books; it’s gone over to the Israeli government. So in February 1949, Barclays and Ottoman banks write checks transferring all the accounts of all Arab Palestinian customers to the Israeli Custodian of Absentee property. And thus, in February 1949, the dispossession of the Palestinians is completed.

Now I’ll talk a bit about the Arab Palestinian customers themselves. I’ll talk about how they reacted to this moment of having their bank accounts frozen. Before I do that let me talk a bit about how much money are we talking about so that you can think about who were these people who were affected by this order. It’s actually very difficult to get at the numbers. I did a lot of work in Barclays Bank archives, I worked a lot in the Israeli State Archives and in the British National Archives, but it’s actually quite difficult to get at exactly how much money was frozen. So the number I’m going to tell you is a number that I feel comfortable estimating but it’s not set in stone. Based on the piecemeal archival evidence looking at Barclays’ correspondence, looking at UN correspondence and looking at Israeli government correspondence, I feel comfortable saying that it was about six million pounds that was frozen in 1948. This corresponds to 10,000 to 50,000 bank accounts. That’s a big range, but it seems to be about right; on the low end it’s 10,000 and on the high end it’s 50,000.

To put this number in some sort of context, six million Palestinian pounds in 1948 is about 43 percent of the total Palestinian exports in 1945, Arab and Jewish economy combined. Total exports were worth fourteen million in 1945. This is about 43 percent, so it’s a huge amount; it’s not an insignificant amount. To put it in present-value terms, what would the six million pounds be worth today? Again, that’s a very imprecise calculation and it’s very difficult to get at the number, but it’s about using the World Bank’s present-value calculator. Six million Palestinian pounds in 1948 is about 800 million pounds today in 2013 terms. So, it’s not an insignificant amount of money.

Now who are the Arab Palestinians to whom these six million pounds belong, who were the account holders of these 10,000 to 50,000 bank accounts? I’m going to make an argument that they were ordinary people. They were neither the political elites – which has been the obsession of much of Palestinian historiography – nor were they the peasants – which has been the other obsession of Palestinian historiography. We hear a lot about these two classes of people, the elites or the peasants. We don’t actually hear about the people in the middle, who were neither of these two groups. And I’ll tell you why I think these were the people who are concerned by this story.

The financial elites, firstly, by June 1948 have actually left. They read the writing on the wall and they’d left. The freeze order is issued in June 1948. By then those who could, had really left, taking their money with them. So, financial elites are out of the picture. Political elites who stayed didn’t bank with Barclays Bank or the Ottoman Bank because they were nationalists and it was sort of impolitic to be banking with Barclays Bank if you’re a Palestinian nationalist fighter fighting against the British. These people banked with the Arab Bank. Remember I told there was a third bank in the story and that was the Arab Bank.

The Arab Bank was actually founded by a Palestinian, Abdel Hamid Shoman, whose whole shtick was that we are a Palestinian nationalist bank, and if you are a Palestinian nationalist leader you better bank with us and not with Barclays or the Ottoman Bank. The Arab Bank refused to obey this freeze order. So political elites had their money in the Arab Bank, and they were fine because the Arab Bank never obeyed the order. Financial elites have left. The peasants, the vast majority of the Palestinian population at this time, I don’t think they would have had bank accounts. I have no proof of that but I just don’t think they would have been the customers of Barclays and Ottoman Bank. That leaves the people largely in the middle, the people who are sort of the forgotten Palestinians in this story. I don’t want to make this too much of a class story because the bank wouldn’t release the names of the customers or anything like that, but I could come across the range of the accounts and how much money was in individual accounts, and it’s a wide range. There was an account of 50,000 pounds, which is huge in those days.

But there are also accounts for ten pounds. Many of the accounts I came across were signed by thumbprints, not by signatures. So it gives you a sense that this is not overtly a middle-class story necessarily. There are illiterate people who, for whatever reason would have banked with Barclays Bank. I’ll give you one example. I was very lucky to be able to work with the American Colony’s archives. For those of you who’ve been to the region, the American Colony is a really fancy hotel in Jerusalem. At that point in time it was a pilgrim guest house and it employed many Palestinian-Arab staff. One of the staff was a cook by the name of Helweh, no last name. She had been told by her bosses, who were all American, Scandinavian or whatever church-going people, that, “You should put your money in a bank. That’s how you keep your money safe, that’s how you become modern. You don’t give it to your dad, you don’t give it to your husband. You open a bank account, we’ll open it for you. We’ll go with Barclays Bank because that’s where we bank.” So in Barclays Bank registers, I found an account that literally says, “The maid Helweh,” signed by a thumbprint. And she had ten pounds in her account. And those ten pounds were frozen, which probably constituted her entire life’s savings. This is just to give you a sense of the texture of who are these people whose bank accounts are frozen. It’s not just upper middle-class people. It isn’t even just middle-class people; it’s often these kinds of poorer people.

So how did these people react to this experience of having their bank accounts frozen? I’ll give you a couple of anecdotes so that you can get to the heart of the story. The first is a story of a man called Michel Karkar. Michel Karkar was in 1948 a boy aged 14. He came from the town of Lydda in central Palestine, and he along with his family were among the famous Lyddawis who went on this forced march. They were thrown out of their houses and made to march eastwards towards Ramallah. The New Yorker article that came out in October 2013 really talks about this story of what happened to the Arab families of Lydda. Michel’s father and his uncle were gold merchants. They weren’t very rich, they were illiterate people, but they had a lot of cash on them because that’s what they did, they were gold merchants. They were actual sarrafs, they were money-changers and gold merchants. So they had an account with the Ottoman Bank. Michel’s father and uncle were killed in the course of that long march from Lydda to Ramallah in 1948.

Michel was 14 years old and he was the oldest boy in the family. When the family reached Ramallah, he realized that their situation is absolutely desperate. The father and uncle have been killed, they have no money and they literally just have their possessions on their backs. He thought, “I’ve got to step up, I’ve got to be the man here.” As a 14 year-old boy, he marches into the Ottoman Bank’s branch in Jerusalem and asks to see the branch manager, who till this day he remembers his name, it’s a Mr. Whitfield. He says, “My father and uncle have died, they have an account with the Ottoman Bank, it has 700 pounds (he knows exactly how much money they had) and I need it because my family is desperate.”

The Ottoman branch manager look at this boy and he says, “I’m really sorry, your money is there (this is before the money is transferred in February, this is still in October 1948) but it’s frozen.” The word frozen in Arabic is mujammid. Michel tells me this story recently, I’ve known him over the last few years. He’s now an 80-something year-old man who lives in Ramallah. This story happened 60 years ago when he was a boy of 14. He told me this story over and over and over again and each time he tells me the story, the details are so precise. He remembers it exactly and he keeps telling me, “Mujammid, mujammid, what is this word?” Just the bafflement caused by that word and being told by the branch manager that, “Your father’s account is there. It’s safe, we’ve got it. But you can’t touch it. Mujammid. It’s frozen.” Every time Michel tells me this story he always insists on one detail, and that is that he was wearing shorts when he went into the bank branch. He says, “I was just a little boy! I was wearing these shorts!” And he starts shouting and screaming at the branch manager, the shock is so great that he just starts crying and throwing a tantrum in the branch, to the extent that the bank throws him out. And that’s Michel’s story. You can get a sense of the trauma that this caused this young boy of 14 years old who has lost his family.

I’ll tell you another story, and this is a story of a man called Theodore Sarrouf. It’s a very different kind of story from Michel. So in Michel’s story you can get a sense of the class background of this person, he’s not necessarily illiterate but he’s not very wealthy. Theodore Sarrouf’s story is a very different kind of story. He was a young, sparkling entrepreneur in Jaffa. He was in his twenties and he was apparently very given to wearing beautiful clothes. He always used to wear white suits and a hat and was a very beautifully-dressed man. He was an entrepreneur; he was one of the first entrepreneurial class of Palestine that really flourished in the twenties and thirties in the cities of Jaffa and Haifa and Jerusalem. He established the first Arab advertising agency in Jaffa in 1927 and was called Sarrouf’s Advertising Agency. Theodore had a bank account with Barclays. Like many people from Jaffa, he actually fled to Beirut during the fighting, taking 200 pounds with him. After the 200 pounds had finished, and he’s in Beirut and realizes he can’t go back to Jaffa, he walks into Barclays’ branch with his beautiful suit and hat and all of that and says, “Please can I withdraw my money – the rest of my money that I have in my branch in Jaffa?” The Barclays branch manager in Beirut looks at Theodore Sarrouf and says, “Sorry Mr. Sarrouf, your money is there, but it’s frozen.” Theodore had actually died by the time I was doing my research. This story was told to me by his son. His son told me that this was such a trauma in his father’s life. Now, his father was actually fine; like a lot of these quite wealthy entrepreneurial people, he found his feet in Beirut. He had family and he wasn’t destitute like many other Palestinians; he was OK. He built his life and was fine. When he died, his son told me that they discovered that he had 27 different bank accounts in Beirut and each one had a tiny amount of money squirrelled away in it, because he never trusted banks again.

My book is actually full of these stories, I really hope I can write it firstly and I hope that many of you will turn and read it. But it just gives you a sense of how the Palestinians and the trauma that this experience caused to these very different kinds of Palestinians. But you know, it’s not just a story of trauma. The Palestinians didn’t just sit and cry as Michel Karkar did. They actually, in this case, really fought for their rights.

First, they started by writing letters to the banks. And because I was able to work in the banks’ archives, I was able to come across these and the bank archives are full of these letters written by their customers making claims. Not making political claims, not talking about Zionism, not talking about Israel. They’re writing as customers to banks, saying, “We’re a customer of Barclays Bank,” or, “We’re a customer of Ottoman Bank,” “We have a contract, I put my money for safekeeping in the bank and you are supposed to release it whenever I come.” This is how banks work. And it’s very interesting to read the wording of these letters because it also gives us a sense of who are the customers of the banks. These are people who really bought into that project of modernity that banks represent. I have a feeling their fathers and their grandfathers would have been the sort of people who put money in grounds or in holes in the walls in their houses. These people went with banks. So it really actually hurt the very people who believed in it most, in this project of modernity. These were the people who suffered most from this confiscation of their accounts.

So they wrote all these letters saying, “Release our money, how can you do this? How can you be a bank, a British bank and do this?” The banks always responded, they took a lot of time to respond but they did always respond. The letters, again, follow this model of bank evasive language, they sort of said that, “We’ve very sorry, we don’t want to freeze your accounts but we’re obeying the laws, those of the state of Israel and until we are allowed by the sovereign entity of the state of Israel to release your accounts, we can’t do anything. Please know that you are a valued customer and we’d really appreciate your business and we hope you will continue banking with us, blah blah blah,” you know? This is every single letter, almost following the same model of, “We can’t do anything, our hands are tied and we’re very sorry. This is a bad situation for us as well.”

So the letter-writing campaign to the banks doesn’t work. Palestinians then take it to the British government. I worked in the British National Archives in London and I found a lot of letters written to British foreign offices by Arab Palestinians again making very similar claims, not making political claims. Making a claim about what it means to be a customer of a British bank and saying, “As the British government, you should intervene and you should help us.” Some of the letters are actually quite interesting because they employ this quite flattering language. They write to the British government, “We know the British are the champions of the Arabs in Palestine (no mention of Israel), can you please write to the Barclays Bank and Ottoman Bank? Can you tell your country’s bank?” It was sort of that kind of language. This is 1949 already; the British government is really troubled by this whole thing, this episode of the frozen accounts. They’re really embarrassed, because they’re British banks. They wouldn’t care if it was Egyptian banks or something. They were British banks, a British name and model that many people in British foreign offices at that point in time and actually today are obsessed with this idea of Britain’s name and reputation in the world. So the British government is very, very divided. There are their foreign office officials who feel they should lean on the banks and make the banks release the accounts. And there are people who feel, in the British foreign office, that it’s really not Britain’s place, that this is the matter of a sovereign country, which is Israel, and Britain can’t do anything.

To give you some context, at this point Britain and Israel have a very sort of awkward, uneasy relationship. The British and the Israelis and the Jordanians at this point are negotiating with each other on all the end-of-mandate stuff. So there’s this whole vast machinery of the mandate government which has just sort of been left, and there’s all sorts of odds and ends that need to be tied up. Things like who pays the pensions of the people who work for the British mandate? What happens to the tables and chairs of all the offices? What happens to the infrastructure of the mandate government? Who pays out the bonds? So the British government is actually at this point in time undergoing these lengthy negotiations with the Israeli government all over this stuff. And they feel that they just can’t bring up the frozen bank accounts because it would complicate matters too much and the Israelis would say, as the Israelis did say, that this is, “a matter for us. That this is our internal state sovereignty and what does Britain have to do with this?”

So what the British government eventually does officially is that they advise all the Arab Palestinians who are writing to them, “Take up this matter directly with the Israelis.” The Israelis have said this is a matter for Israeli sovereignty, take it up with them. And that’s what in fact many Arab Palestinians do. I did some work in the Israeli state archives and I found letters written in quite broken Hebrew, you can tell it’s been translated from Arabic or English into Hebrew, literally written to David Ben-Gurion. Writing things very similar to the letters that have been written to the British government, not making political claims, very carefully sort of, “Can you release our money?”

One of the really interesting letters I found was a letter written from a Haifa merchant. This proves that it wasn’t only the absentees, the people who left, it was also a Haifa merchant, somebody who had never left, whose money had been frozen. He wrote in Hebrew to David Ben-Gurion saying, “Can you release my money?” But of course, the Israeli government writes back saying, “We’re really sorry, we can’t release the money because we’re fighting a war with the Arabs and when there’s peace, we’ll release the money.” This is sort of the Israeli rhetoric, which is, “This is a wartime measure and this is what countries do in times of war. The moment there’s peace, we’ll release the money and we look forward to that,” and all of that.

So writing to the Israelis doesn’t go anywhere either. The UN gets involved from very early on in this story; there is actually a working group within the UN Conciliation Committee for Palestine (UNCCP) that’s actually created to deal with this bank accounts issue but they just keep meeting all over the place, all the time but nothing is resolved because it always comes up against this problem of the Israelis saying, “Until there’s peace, we’re not going to release the accounts.” So by 1953, the Palestinians are absolutely fed up. They’re fed up because nothing is working. The UN isn’t helping. The British aren’t helping. The banks aren’t doing anything and they finally decided to take matters into their own hands. So what do they do? They decide to sue the banks.

They know that they can’t sue the Israelis so they sue the banks. The first is the Arab Bank. Remember I told you there was this third bank, the Arab Bank? It’s actually the Arab Bank which had a big account with Barclays Bank because Barclays Bank was the biggest bank during the mandate so it was sort of like a central bank. So a lot of the smaller banks also had accounts with Barclays Bank. The Arab Bank had 500,000 pounds with the Barclays Bank, which had also been frozen. So the Arab Bank is actually the first Palestinian entity to sue a British bank. They sue in the British courts in April 1953. And in fact this lawsuit becomes a seminal lawsuit in banking history because it really becomes an interesting issue of what are the rights and duties of banks to their customers in times of war? The lawsuit goes all the way from the court to the British House of Lords, which is the highest court in Britain. At each stage of the case, the courts decide in Barclays’ favor saying that Barclays in this situation was right to freeze the accounts of the Arab Bank because an order had been issued to the banks and banks are supposed to obey orders. Banks aren’t supposed to opine on the legalities of anything, they’re just supposed to obey the orders if the order is coming from a sovereign state. That’s why I started my talk by saying this has so much to do with statelessness because it really revolves around this question of Israel’s sovereign legal status in British courts.

So the British lawsuit goes all the way to the British House of Lords. It doesn’t work out. Palestinians lose their case. But there are two Palestinian lawyers watching the proceedings from afar and they realize that that’s exactly the problem, that the British courts are going to agree with the banks because the British courts are going to say that the Israeli order was what was issued and the banks have to obey the Israeli order. These two young Palestinian lawyers, Fuad and Aziz Shihadeh, they realize that if they can find a legal regime which is not going to recognize Israel then they have a chance of winning. And that’s exactly what they do.

Barclays Bank and Ottoman Bank both have branches all over Jordan, including Jerusalem, which is half under Jordanian rule. They decide to find a group of Palestinian plaintiffs. They gather together 50 Arab Palestinians of varying class and background and they file 50 different lawsuits on the same day in various different courts (Nablus, Jerusalem, Amman) against Barclays and Ottoman Bank at the same time. So Barclays’ management the next day wakes up and they find they have 50 different lawsuits that have been filed against them in 50 different courts in Jordan. The lawsuits take a very, very long time but in the end, the lawsuits go exactly as the lawyers had predicted. They go in the Palestinians’ favor because the Jordanian courts – and it’s the exact same question that the British courts were deciding on – which is: should the banks have obeyed this order? The Jordanian courts decided, “No. The banks should not have obeyed this order because the order was not issued by a sovereign entity. It was issued by an illegal entity. The state of Israel is not recognized at this point by Jordanian courts.”

And so Barclays Bank and Ottoman Bank find themselves one fine morning in 1956 with 50 different lawsuits that have gone against them ordering them to pay back their customers. But they’ve won the lawsuit in Britain so they’re in this weird position where they’ve won in Britain and they’ve lost in Jordan. They don’t know what to do and they’re absolutely fed up at this point. So the Barclays and Ottoman banks decide to get together a delegation. They fly to Israel and they meet the Israeli government and they say, “This is embarrassing. We spent so much money fighting these lawsuits. We’ve lost the lawsuits and you have to release the money.” And the Israeli government says, “No way, we’re not going to release the money, wartime,” all this stuff that the Israeli government has been saying. And the banks say, “Okay, fine. Don’t release the money. We’re pulling out of Israel.” And then the Israeli government says, “Okay, wait. We’ll be willing to unfreeze the money but the problem is that we’ve spent all the money.” This is Israel in 1956. It’s in a very, very difficult situation itself. It’s absolutely overrun by refugees, people fleeing the Holocaust. It’s applied for loans to Britain and hasn’t got any money. It’s absolutely cash-strapped. It’s not the Israel of today. It is this country that’s struggling for its own survival. It says, “These six million pounds – we spent it five years ago. So if you give us a loan for that amount, interest free, payable over a long period of time, we’ll be willing to release the accounts.” The banks agree. And that’s in the end what happens. Ottoman Bank and Barclays Bank form a loan syndicate and issue a loan for twelve million pounds to the Israeli government; it was very low interest, payable over a 20 year period. The Israeli government in return releases in principle of those six million pounds and in principle, Barclays and Ottoman Bank then proceed to pay out all their customers.

I want to end this story here because I want to end on a happy note and this is a really, really rare case in Palestinian history which almost never happens, which is that everybody is happy. The Israelis, who are cash-strapped and really desperate and struggling at this point in time, get a loan. They’ve applied for loans all over the place, they’ve been refused by everyone, but they get a loan and a significant, twelve million pound loan from Barclays and Ottoman Bank. The banks manage to get rid of this headache of this lawsuit and bad publicity that all of this had been generating and they get to walk away with this story of, “Look, we’re British banks and we’re so reliable because after all, we released the money.” The British government gets to say, “Look, this is the British idea of fairness and we’ve released the money in the end.” The Arab Palestinians who lost every single battle since 1936 and so much more since 1948 won this one and they got their money back. Thank you.

Sreemati Mitter is an Ernest May Fellow in History and Policy at the Harvard Kennedy School’s Belfer Center and the College Fellow in Middle Eastern History at Harvard’s History Department. She is working on a book based on her doctoral dissertation, titled “A History of Money in Palestine: From the 1900s to the Present.” Her work examines the economic and monetary dimensions of statelessness. Her broader academic interests include the economic, social, and political history of the modern Middle East. Miss Mitter completed her Ph.D. in history from Harvard University’s history department in January 2014. She has a Master’s in Public Policy from the Harvard Kennedy School and a B.A. in Economics and French from Middlebury College. She previously worked for the Palestine Investment Fund, the investment arm of the Palestinian Authority, in Ramallah, Palestinian Territories and at Credit Suisse in New York, at the Energy and Project Finance Group of the Investment Banking Division.