Municipal finance and divestment
Since I last wrote about university anti-genocide organizers’ disclose and divestment demands, the New School agreed to some of those demands and will vote on divestment. This happened in the wonky way that I expected: a special subcommittee of the Investment Committee of the Board of Trustees agreed to bring the matter to a vote. (San Francisco State University is actually divesting too, and there are a number of similar initiatives elsewhere in the country).
In that earlier newsletter, I mentioned another path to divestment focusing on Israel bonds—basically direct loans to the Israeli government that other governments and firms can give them—that didn’t require a disclosure step (private universities don’t disclose their investments), and one that organizers could take beyond the campus to local and state governments. I wanted to elaborate schematically on this potential path here.
There are two ways anti-genocide organizers could follow this Israel bonds strategy. One way is already in process in Florida and the other is a long shot but interesting nevertheless. I’ll look at Florida first.
Safe Investments: Break the Bonds South Florida
On May 15th, residents of Palm Beach County sued the county’s investment arm for investing $700 million of their taxpayer dollars in Israel bonds. This county happens to be the world’s largest investor in Israel bonds. Here’s a great roundup of the situation from Naked Capitalism.
Residents, organizing with a group Break the Bonds, claim that the bonds aren’t a “safe” investment. One of the organizers says it more plainly: “Our tax dollars should go to our needs and not fund the genocide."
Even the Bond Buyer found an investment manager that supports their legal action:
In the Florida lawsuit, the plaintiff's request for an assessment of the future risk and repayment of bonds linked to Israel is a reasonable ask as an investor, especially during an ongoing war," said R. Paul Herman, chief executive officer of HIP Investor, an impact investment advisory and investment firm. "For the upper limit on bond allocations to range up to 15% for a high risk geopolitically is a big bet by Palm Beach County."
There are some great details in this case, namely how organizers are exploiting a recent DeSantis-era law in Florida that strictly forbids state and local investment in products for anything other than good returns. The law was written with ‘anti-woke’ investment in mind, basically saying that public investors can’t be thinking about environmental, social, or governance goals when investing. But Break the Bonds (BTB) organizers claim that Israel bonds are a clear violation of that law, since investing in them can’t solely be based on fiduciary thinking. They’ve taken on this ‘anti-woke’ for anti-genocide purposes. These organizers have deftly asked what constitutes a safe investment.
Meanwhile, the School Board of Palm Beach County is a related local government entity whose finances are mixed with the County government itself. These county investments and returns end up coming from and going to public schools, as much as other services. To the extent that state and local governments, as well as private firms that pay taxes to school districts, invest in Israel bonds, then US school finance is implicated in the war machine and divestment campaigns might focus on this.
I wonder whether this model is replicable across the country with local and state governments and pensions who have Israel bonds. Are school districts investing in Israel bonds somehow? In general, as the semester starts up and campus activism reignites, might student organizers shift their attention to larger-scale divestment campaigns, taking the focus off universities explicitly and then moving to the university’s surrounding political economy?
I think the answer is maybe, given BTB’s work. But, when considered as commodities on the market, Israel bonds are indeed very ‘safe’ investments given high demand for them in governments and the private sector, so it’s not clear how viable BTB strategy is given the market for the bonds.
I did notice another potential path for divestment organizers if they focus on Israel bonds. They might take advantage of a clause in US sovereign immunity policy to try and force the calling of Israel bonds, which more or less means canceling them.
The FSIA path
Recently, an Israeli soldier shot an American-Turkish activist named Aysenur Eygi in the head, killing her. There’s a history of Israeli soldiers killing American citizens as part of their recent operations. Shireen Abu Akleh, a Palestinian-American journalist, was shot dead in 2022, and then there was the case of Rachel Corrie, bulldozed to death in 2003 while protesting the construction of new encampments.
Most famously though, in a moment that significantly turned moderates against Israel’s retaliations in Gaza after Oct. 7th, a handful of World Central Kitchen (WCK) employees were bombed by the Israeli army in Gaza. One of the WCK employees was Jacob Flickinger, a dual Canadian and American citizen, whose father, John Flickinger, happens to be a resident of Florida, specifically West Palm Beach. Secretary of State Anthony Blinken called to console John in the wake of Jacob’s death in early April.
With respect to Israel bonds, while Israel is protected from legal action in US courts due to its rights under the Foreign Sovereign Immunities Act (FSIA), if I’m reading it right, it’s not legally impossible to bring a case against it that comes to bear on Israel bonds.
According to this Israeli document outlining details of Israel bonds,
Israel is a foreign sovereign state and accordingly it may be difficult to obtain or enforce judgments against it. Israel is a sovereign state. Although Israel has waived its sovereign immunity in respect of the bonds, except for its sovereign immunity in connection with any actions arising out of or based on United States federal or state securities laws, enforcement in the event of a default may nevertheless be impracticable by virtue of legal, commercial, political or other considerations. Because Israel has not waived its sovereign immunity in connection with any action arising out of or based on United States federal or state securities laws, it will not be possible to obtain a United States judgment against Israel based on such laws unless a court were to determine that Israel is not entitled under the United States Foreign Sovereign Immunities Act of 1976, as amended, to sovereign immunity with respect to such actions.”
Okay, so if a court found that Israel isn’t entitled to sovereign immunity under the FSIA, then one could take legal action against them and call the bonds.
I asked around and couldn’t find anyone who knew about this law. So I looked into it and found some interesting stuff. Indeed, it’s nearly impossible to bring a successful case against Israel for actions related to its bonds. The law, so far as I can tell, makes this path extremely difficult but it’s not impossible. I found a case where people gave it a try, but also language in the law that, given the list of Americans killed by Israel, opens a possible path.
Waivers and terror
There are five exceptions to FSIA immunity, two of which are relevant to bonds: the waiver exception and the terrorism exception.
The waiver exception is just what it says: a country can waive its immunity for specific reasons, like selling bonds. However, the waiver exception comes with very specific limitations that make suing very difficult:
Even if a foreign state has explicitly or implicitly waived its immunity from the jurisdiction of a US court to adjudicate a dispute, that waiver does not automatically also extend to the state's immunity from enforcement of any subsequent judgment against the state...
So even if you get an adjudication, it’s near impossible to get the court to enforce any judgement against the state. For instance, this might have happened in the case of Jacubvitch v. the State of Israel, where a court found that a certain recipient of Israel bond revenue wasn’t a proper agent of Israel.
But there’s another exception to FSIA called the terrorism exception:
States lose their immunity under Section 1605A in cases where plaintiffs seek damages "for personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources for such an act."
Section 1605A's terrorism exception is unusual in that it limits the pool of both potential plaintiffs and potential defendants. On the plaintiff's side, Section 1605A requires that either the claimant or the victim be a national of the United States, a member of the US armed forces, or an employee of the Government of the United States or a US government contractor.
On the defendant's side, Section 1605A applies only if the state was designated as a state sponsor of terrorism at the time of the alleged act of terrorism or if it was designated as a result of that act.
So you can get around FSIA’s immunity protections if a country designated as a state sponsor of terror kills a US national.
I think the cases of Eygi, Akleh, Flickinger, and Corrie meet that second criterion. But the first criterion not so much: Israel is certainly not designated as a state sponsor of terror. However, it might be interesting for organizers, backed by a champion in Congress, to craft a lawsuit by family members related to those slain US citizens and see about demanding that Israel be considered a state sponsor of terrorism, which seems unlikely, but, again, might be worth a try.
The State Department makes this kinds of determination under the Secretary of State. The Biden administration is a lame duck administration and could consider such a move. It doesn’t appear to require an act of Congress. There’s actually a long history of accusing Israel of state-sponsored terrorism.
In any case, as someone who studies school infrastructure (and happens to be Jewish), I believe something must be done about this situation and quickly. I’ll just mention one aspect of the genocide relevant to my work: a recent Aljazeera article has reported that 85% of school buildings in Gaza have been impacted by the Israeli assaults, including 140 out of 208 school buildings in Gaza City being directly hit with missiles.
This needs to stop, and focusing on divestment campaigns to call Israel bonds—which are wrapped up in K-12 and higher education finance throughout the US—can help create that pressure.