Theodor Herzl is not in the hall when delegates to the 5th Zionist Congress vote for the fifth year in succession to defer the establishment of a Jewish National Fund. Jurist Max Bodenheimer, who opposes the idea of a fund without clearly defined articles, has once again carried the day. In Herzl's absence, he pushes through a vote for a "provisional" fund, to be authorized only after the articles are drawn up. Distraught delegates locate the visionary pioneer of Jewish statehood in the lobby of the Basel Casino where, like the 1st Congress in 1897, the December 1901 session is being held. Herzl strides back into the hall, peremptorily assumes the chairmanship of the meeting, and, summoning up all his considerable eloquence and charisma, reverses the vote and the order of business: The fund will be set up immediately and the articles worked out later. The delegates break out in thunderous applause, assured that in authorizing a fund for the purchase of land for Jewish settlement "in Palestine and Syria," the Zionist movement has taken its first practical step toward the establishment of a national home. Now, 106 years later, the Supreme Court of Israel seems set to rule against the legality of the Jewish National Fund's century-old principle, enshrined in its charter, of leasing land to Jews only. Petitions by the Arab Center for Alternative Planning, the Association for Civil Rights in Israel (ACRI) and Adalah, the Legal Center for the Rights of the Arab Minority in Israel, challenging the practice are scheduled to be heard by the court in mid-September. In their detailed 50-page response, lawyers for the Jewish National Fund (JNF, or Keren Kayemeth LeIsrael in Hebrew) open with a dramatic reference to that stormy meeting in Basel: "The year is 1901... The Zionist movement, led by the visionary Dr. Binyamin Ze'ev (Theodor) Herzl, moves from declarations of intent to practical steps of reclaiming the land of Zion. It founds the JNF, as the land purchasing arm of the World Zionist Organization, land that will be the property of the Jewish people in perpetuity and will never be expropriated from JNF ownership." Their point in going back to the beginnings is that the JNF is part of the very essence of the Zionist endeavor and the idea behind it was for Jews to purchase land to be held by the fund, for the Jewish people, in perpetuity. Now, they say, the petitioners are demanding that JNF land be confiscated from the Jewish people and accorded the same status as all other state land in Israel. "In other words," they write, "the petitions demand that the State of Israel turn its back on Herzl's vision of the decisive function of JNF land in service to the Jewish people." The lawyers' main argument is that JNF land and state-owned land are not the same thing. They maintain that while state-owned land clearly should be made available to all citizens on the basis of full equality, JNF land was purchased by a private organization which should be free to disburse it as it sees fit. "If in the state of the Jews, a Zionist body is barred from owning land and designating it for the use of Jews only, it will be hard to fathom the meaning of a national home for the Jewish people," the response filed by lawyers from S. Horowitz and Co. and Meir Alafia, the JNF's legal adviser, says. But despite the lawyers' claim that there is nothing wrong in reserving land for Jews, for years the JNF took pains to circumvent the problematic "Jews-only" principle through a convoluted system of land swaps. JNF tenders were open to everyone, Jews and non-Jews alike. Ostensibly, there was no palpable discrimination. But whenever a non-Jew won the right to lease JNF land, the JNF was given an equal amount of land somewhere else, enabling it to maintain its pool of "land for the Jewish people" at exactly the same size. This simple mechanism kept everyone happy: Israeli Arabs could lease JNF land, and the JNF could maintain its holding of Israeli land - "reserved for the Jewish people" - at a constant 13 percent. That changed in the course of 2004, when the Israel Lands Administration (ILA), which manages both state and JNF land, abruptly informed the JNF that it had decided to end the land-swap practice. In other words, it was no longer willing to compensate the JNF for land that it leased to non-Jews. That meant that to maintain the size of its holding for the Jewish people in perpetuity, the JNF would have to lease land to Jews only. Therefore, for the first time ever, the ILA invited bids for JNF land - at Givat Hamakosh in the northern city of Karmiel - specifically stating that only Jews could apply. The blunt, unprecedented move was virtually an invitation to civil- and minority-rights groups to petition the Supreme Court. Within weeks, ACRI, Adalah and the Arab Center for Alternative Planning filed demands for a ruling against tenders for Jews only. The petitioners argue that since the ILA is an official arm of government it must conduct all tenders, including those of the JNF, on the basis of full equality, no matter what the JNF's century-old charter says about holding land for the Jewish people in perpetuity. "We argue that, as a public institution, the ILA cannot discriminate against the Arab population, even in the allocation of JNF land," says Suhad Bishara, the lawyer handling the Adalah petition. The JNF's problems don't end there. About half the land it holds was once owned by Arab refugees. The JNF acquired around 1.3 million of its 2.6 million dunams (650,000 acres - 1 acre = 4 dunams) in purchases of absentee Arab property from the state in 1949 and 1953. How, the petitioners ask, can Israeli Arabs be denied in principle the right to lease land once owned by Arabs and only forfeited to the state when they fled their homes as victims of war? In its legal comeback, the JNF argues that although it is true that its lands are administered by the ILA, a "covenant" it concluded with the state of Israel in 1961 specifically states that JNF land must be managed in accordance with its century-old charter. The state, the JNF says, is legally bound to honor that commitment. As to the absentee property, the JNF maintains that it paid the state a fair price for the land, 18.25 lirot per dunam and, if the former owners have a complaint, it should be addressed to the state that impounded the absentee property, not the JNF that bought it. Bishara turns these arguments on their heads. She maintains that precisely because the JNF took over absentee property and because it concluded a special covenant with the state, it cannot be regarded as simply "another private company," free to do as it pleases with its holdings. "The 1961 covenant grants the JNF privileges of a public authority. Moreover, they have a 50 percent presence on the ILA board, which means they help set policy for all public land in Israel," she declares. In mid-July, the already dense plot thickened. With the date for the Supreme Court hearing on this tangled back and forth rapidly approaching, right-wing Knesset members made an apparent attempt to influence the outcome. Knesset members Uri Ariel of the far right National Union, the Likud's Moshe Kahlon and Ze'ev Elkin of the ruling Kadima party tabled an amendment to the 1960 ILA Law, stipulating that JNF land must be administered according to the JNF charter, that is used for settling Jews, and that doing so will not be considered "unlawful discrimination." On July 18, the bill passed a preliminary reading by 64 votes to 16. "When we saw the courts were about to change the rules because there was no specific legislation, we decided to legislate," says Elkin. "The legislation is by no means racist. The JNF gave its land to the state to administer in trust. The idea was that the state would use the land according to JNF principles. The state would never dream of taking Muslim waqf land (belonging to the trust that manages Muslim holy places) and using it for purposes other than those designated by the waqf." The state, Elkin insists, must respect both the JNF's charter and its covenant with the JNF; the proposed legislation simply gives it the legal wherewithal to do so. The bill, however, stirred an international storm the JNF could well have done without. Critics and friends of Israel alike branded it discriminatory and racist, the kind of law no democratic country should have on its books. Ameinu, the U.S. affiliate of the World Labor Zionist Movement, sent Elkin a sharply worded letter: "At a time when Israel is trying to show the world that there is no contradiction between a Jewish state and a democratic one, every effort must be made to enforce the principle of equality and equal opportunity for all Israeli citizens... This bill is not only unfair to one fifth of Israel's population; it also reinforces the growing perception around the world that Israel is an 'apartheid' state." Worse: JNF offices far and wide, especially in the U.S., Canada and Australia, reported attempts by human rights groups to get donations to local branches denied tax-deductible status on the grounds that they were affiliated to a racist organization, JNF-Israel. JNF-Israel was therefore careful not to say anything about the law, for fear that endorsing it would lay it open to further allegations of racism. Indeed, JNF officials see little point in the legislative exercise: They say there is little chance that the law will be passed in time for it to impact on the Supreme Court hearing, and that, even if it does, it is certain to be challenged in the Supreme Court, possibly sparking a major constitutional crisis touching on the legal basis of Zionism itself. With or without the new law, JNF directors are looking for ways of avoiding a Supreme Court showdown they do not believe they can win. Despite their belief in the justice of their cause, the directors, in private conversations, say they feel the state has abandoned them. Their pessimism stems mainly from the fact that in May the attorney general reaffirmed his unwillingness to defend their position in court. So, to avoid a ruling which could have far-reaching implications for other Israeli laws which accord Jews priority status, the JNF directors are considering accepting a compromise they have long opposed: handing over all their urban land holdings to the state, and getting far-flung rural land, mainly in the Negev, and a lump sum in compensation. In other words, a huge one-off land swap that would take the JNF out of the land-leasing business (since the outlying lands would not be earmarked for settlement any time soon), and leaving the ILA free to publish all its tenders on a basis of full equality. If reached, such an agreement would render the petitions against tenders for Jews only moot (there would be no longer be any), and the court would be asked to close the case. If this is the route the JNF chooses, it may be about to formalize a historic transformation many critics think should have occurred with the founding of the state in 1948: shifting its focus entirely from land buying and leasing to the major cutting-edge environmental and development projects it has been carrying out all over the country for years. The idea of a Jewish National Fund leasing land for Jewish settlements and then helping to develop them predates Herzl. It was first voiced in the 1880s by Zvi Hermann Schapira, an untenured mathematics professor at Heidelberg University, and a leader of Hovavei Zion (The Lovers of Zion), which already had a smattering of settlements in Palestine. Schapira brought the idea, expressed in 12 numbered paragraphs, to the 1st Zionist Congress in Basel in 1897. Herzl, keener on establishing a Jewish bank, kept him at bay, giving Schapira the floor only briefly toward the end of the conference. Three of the principles the Heidelberg professor adumbrated formed the basis of the JNF charter: money would be collected from Jews all over the world, rich and poor; two thirds would be for land purchases, one third for development; the land would be leased, not sold. By 1901, Herzl, realizing that big bankers weren't about to put the kind of money he needed on the table, was won over to the idea of pennies from the masses and at the 5th Zionist Congress shepherded through the fund's establishment. In 1904, the first blue collection boxes - one of the most potent symbols of Zionism as a mass movement - were produced, and in 1907, the JNF was registered as a company in England. By then it had already acquired its first parcels of land, near Hadera, Tiberias and Ben Shemen, and was about to become deeply involved in the founding of Tel Aviv, the first modern Jewish city. By 1920 it had acquired 22,363 dunams, which swelled to 936,000 dunams by May 1948, when the State of Israel was declared. As a facilitator of Jewish settlement in Israel, the JNF enjoyed great success. About 500 kibbutzim and moshavim are situated on JNF land. The JNF has also played a major environmental and development role, particularly in afforestation, combating desertification and enhancing water resources. It has planted around 223 million trees, making Israel the only country in the world with more trees in the 21st century than at the start of the 20th; built 180 dams and water reservoirs and developed cutting-edge water technology; and, as a founding member of the International Arid Lands Consortium, shared expertise on a wide scale with other dry countries. Today most of the JNF's focus is on developing the Negev, as it seeks what it calls "community-transforming" projects. For example, in the Negev town of Yeruham, it is purifying an artificial lake of polluted water in an ambitious project designed to transform the sleepy hamlet into a major tourist attraction. According to JNF officials the corporate culture is anything but racist. They point out that about a quarter of the 700-strong workforce are Arabs, that one of the directors, Ra'ad Sfori, is a Christian Arab, and that the JNF is active in development work for Arab villages. Still, some of the JNF's post-1948 activities have raised profound moral questions. With the founding of the state, Israel's first prime minister David Ben-Gurion initially thought that the fund had completed its historic mission of reclaiming the land and should be dismantled. But one of the first big decisions he faced after the 1948 War of Independence was deciding what to do with over 4 million dunams of absentee Arab property. In January 1949, in what was dubbed the "million-dunam deal," he decided to sell one million dunams to the JNF. This had a two-fold advantage: It raised much needed capital for the cash-strapped post-war state, and it distanced the property further from its absentee owners. In 1953 another million-dunam deal was planned, but in the end the JNF bought only 250,000 dunams. Up till then, transactions involving absentee land had been carried out on the basis of ad hoc emergency regulations. To create a more solid legal framework, the government passed the 1953 Lands Acquisition Act, stipulating that land not in its owner's possession in April 1952 could be expropriated for security or development needs. Expropriated land would go to a Development Authority, specially set up for the purpose, which could transfer it to the JNF or the state. In 1960, the government established the Israel Lands Administration, to manage state-owned land. And in 1961, the JNF and the State concluded a "covenant," by which the ILA would manage all JNF land, according to the principles laid down in the JNF charter. The legal maneuvering left the state in control of about 89.5 percent of the country's land resources, including the JNF's 13 percent, with 2.5 percent in the hands of the Muslim waqf and 8 percent privately owned. Since the ILA would only lease, never sell, land to private individuals or companies, this created a virtually closed system of land ownership in Israel, with the ILA or the Development Authority only actually selling land to the JNF or each other. It also provided the legal structure for the JNF's land swaps with the ILA, if and when JNF tenders were won by non-Jews. After the 1967 Six-Day War another controversial chapter in the JNF story began. A subsidiary called Hemanuta started operating in the occupied territories. Had the JNF done so in its own name, it might have jeopardized donations abroad. Founded in 1938 and registered first in Jordan and then in Ramallah, Hemanuta had other advantages: It was not bound by JNF rules to lease out land only. It could buy and sell freely to anyone. This enabled it to obtain West Bank property through land swaps with Palestinian owners. Since 1967, Hemanuta has reportedly acquired land across the Green Line, mostly in the vicinity of Jerusalem, in Beit Jala, Beit Safafa, the Etzion Bloc, Silwan, Givon, Wadi Kelt, Beit Sahur, Ma'ale Adumim, Givat Ze'ev and Nebi Samuel. It was also reportedly involved in the Housing Ministry's attempt in 1990 to buy the St. John's Hospice building in East Jerusalem. Lawyer Dani Seidemann, who often represents Palestinian clients in land cases, calls Hemanuta "the dirty tricks operation" of the state and the JNF. "Whenever Israel wants to distance itself from a transaction Hemanuta is used," he says. According to JNF officials, there is nothing sinister in any of Hemanuta's West Bank dealings. They claim Hemanuta has acquired no more than 10,000 dunams across the Green Line, and that 70 percent of this was in regaining title to land Hemanuta had purchased for the JNF before the establishment of the state in 1948. Indeed, Seidemann lost a case over land in Silwan precisely because Hemanuta was able to show previous ownership. To this day, though, Seidemann sees this as unjust. "In 1991, there was a transaction between the JNF and the State of Israel by which all the absentee property in Silwan which belonged to Palestinians was turned over to the JNF or Hemanuta , establishing a principle completely incompatible with equality before the law: That any land once owned by a Jew could be turned over to the JNF and the JNF would then turn it over to the settlers." Hemanuta's activities and the fact that Haim Cohen, a former CEO, was implicated in shady West Bank deals involving falsified documents in 2005, hurt the JNF's image. But that was small potatoes compared to the organization-threatening developments the year before. The man who started the trouble was none other than Prime Minister Ehud Olmert, then minister of Trade and Industry, in charge of the ILA. In May 2004, Olmert set up a commission under the late Yaakov Gadish to look into the workings of the ILA and its relations with the JNF. Possibly influenced by a landmark Supreme Court ruling in 2000 forcing the Jewish village of Katzir to allow Adel Ka'adan to build a home there, Gadish recommended that the JNF hand over all its urban land holdings to the ILA and get rural land, 90 percent in the Negev and 10 percent in the Galilee, as well as an additional $1.3 billion in compensation. Besides filling state coffers, the plan was designed to simplify red tape, free up land in the center of the country, reduce housing costs and obviate the need for any discriminatory practices. The JNF balked on the grounds that more than half of its $150 million annual budget comes from income generated by its urban land holdings. At this point the ILA started turning the screws. In line with Gadish's approach, it informed the JNF that it was terminating the practice of ad hoc individual land swaps when non-Jews won JNF tenders. This put the JNF in an invidious position: Accept the compromise or face the prospect of racist tenders put out in its name. The tenders for Givat Hamakosh in July provided the first test case. The key player now was Attorney General Menachem Mazuz. In January 2005, after a long meeting with JNF directors, he seemed to favor continuation of the ad hoc individual land swaps as a means of circumventing discriminatory land policies. But as time went by he changed his mind. The final blow to JNF hopes for legal backing from the state was delivered in May this year, when lawyer Osnat Mandel of the Attorney General's Office wrote the Supreme Court that "the attorney general believes that the ILA must uphold the principle of equality and that it cannot discriminate according to nationality when acting as administrator of JNF lands." Then she added the clincher: The attorney general, she said, regarded the practice of giving the JNF alternative land for land leased by non-Jews as "clumsy." So where does the JNF go from here? Elkin suggests modifying the JNF charter at the next Zionist Congress to allow more open tenders. For example, he would open the tenders to IDF veterans, irrespective of nationality, race or creed. "I think Druze who serve in the army should be entitled to JNF land," he says. "The JNF charter does not take their army service, which reflects a Zionist attitude, into account. That should be changed." But left-wing Diaspora Zionists reject this approach out of hand. Gidon D. Remba, the executive director of Ameinu, says everyone knows most Israeli Arabs don't serve in the IDF and opening the tenders to army veterans would simply be "discrimination by another means." Remba also does not see the need for the World Zionist Organization to bother with the JNF's anachronistic charter. "The state does not need to change the charter of a private organization it has contracted with to publicly administer the land that it owns. Rather the private organization has to conform to the laws of the state," he declares. Leading Labor Party legislator Ami Ayalon proposes that the JNF first return the absentee property to the state, and use the rest of its land for "state needs" - for example, leasing to demobilized soldiers or for Jewish-Muslim institutions. Some JNF directors suggest abrogating the 1961 covenant with the state, to make clear the JNF's private status, and so underline its right to disburse its property as it sees fit. The full JNF board, however, is unlikely to accept any of these ideas - giving back absentee property or abrogating the covenant would cost it its prized forest lands. That leaves the Gadish compromise. In the run-up to the September Supreme Court hearing, the JNF board thrashed out the options in a series of lengthy meetings. Insiders say the wind seems to be blowing in the direction of finally accepting the huge one-time land swap of the JNF's urban holdings for out of the way rural land in the Negev and Galilee. The directors are already looking for ways to make up the huge shortfall in annual revenues this would entail. They are also looking for creative ideas on what to do with the rural land. One idea is to set aside some of the Negev land for the production of solar energy - enough to provide around ten percent of the nation's consumption a decade from now. Herzl, the liberal visionary, would probably have approved.