A recent decision of the Israeli Supreme Court (October 9, 2018) addressed the following scenario:
The Head of the Zikhron Ya’akov Local Council and the Council Treasurer signed an agreement on behalf of the Council, under which the Council undertook to support a development company’s planning proposal for the construction of residential housing units on land owned by the company. The land had originally been designated for hotel use. The Council’s commitment was to support the proposed rezoning throughout the statutory planning process, subject to the approval of the competent planning authorities and in accordance with applicable law.
Following the execution of the agreement, public opposition to the project led to the resignation of the Head of the Local Council. In the subsequent municipal elections, a new Council Head—who had opposed the project—was elected. The matter was later brought before the full Council, which voted by majority to file an appeal with the National Planning and Building Council against the proposed plan and to withdraw the Council’s support for it.
The legal question before the Supreme Court was whether the signed agreement could be specifically enforced, thereby preventing the Local Council from withdrawing its support for the planning proposal.
The District Court held that the agreement was enforceable. However, by majority opinion, the Supreme Court ruled that the agreement was void. Although the agreement had been signed by the Head of the Local Council and the Treasurer in accordance with Section 203 of the Municipalities Ordinance, the Supreme Court held that the subject matter of the agreement was administrative and public in nature, involving the exercise of the Local Council’s statutory powers. Consequently, the authority to approve such an agreement rested with the Council Plenum, rather than with the Council Head and Treasurer acting alone. The Supreme Court also examined the circumstances in which a local authority may be released from its contractual obligations under the Doctrine of Release, a principle derived from the rules governing the prohibition against unlawfully fettering the discretion of public authorities.
In a dissenting opinion, Justice Yosef Elron concluded that an agreement of this nature did not require approval by the Local Council Plenum. In his view, there is no statutory or other normative source requiring council approval whenever a local authority undertakes contractual obligations relating to planning and zoning matters.
