The priority status has been used to award the communities substantial economic benefits since it was first established nearly a decade ago. Such a result, wrote Supreme Court chief Aharon Barak, “is contaminated by one of the most suspect distinctions, which is distinction based on race and nationality. This is a result that Israeli democracy cannot tolerate.”

The court, which took eight years to reach a decision, delivered its judgment on February 28. It said it was giving the government 12 months to discontinue the national priority system and reorganise its ministries’ budgets.

A petition against the National Priority Areas was launched in 1998 by the Adalah legal centre for Arab minority rights. The petition was updated in 2003 to challenge the use of priority areas in awarding educational budgets. Lawyers took the view that the court was more likely to rule if specific forms of discrimination were highlighted. Israel’s Education Ministry oversees separate schools for Jewish and Arab children.

The ruling, however, will have consequences for the awarding of special budgets in many other areas of government expenditure.

In the case of the Education Ministry budget, the 500 Jewish communities were offered numerous benefits unavailable to almost every Arab community, including the costs of employing teachers, running teacher training courses, and subsidising rent on teachers’ housing. The priority areas also received free tuition for kindergartens; contributions towards the costs of pupils’ matriculation exams; classroom computers; and extra study programmes.

The system meant that particularly poor communities inside the priority areas were entitled to grants of more than $20,000 for community centres, scholarships for pupils, and special funds to balance the budgets of penniless local authorities.

This was in addition to other forms of budgetary discrimination between Jewish and Arab pupils. Figures from 2001, published by the Central Bureau of Statistics in 2004, showed that students in Jewish schools received at least four times as much basic funding as students in Arab schools.

The government defended the discrimination embodied in the Priority Areas on “geographic” grounds, saying it wanted to promote certain regions of the country. Most of the extra funding goes to what Israelis refer to as the “peripheries”, the Galilee and Negev, where there are also many Arab communities, and to the settlements in the West Bank (and Gaza before the disengagement).

Adalah argued that the criteria for awarding extra funding ought to be socio-economic and educational, not geographic, which could be used as cover for favouring Jewish communities. It pointed out that the poorest communities in Israel are Arab. Almost all Arab communities are ranked in the bottom half of Israel’s socio-economic league tables, and all the unemployment blackspots are to be found in Arab communities.

On average, Arab schools have far higher drop-out rates than Jewish schools, and Arab pupils far lower educational achievements than Jewish pupils.

The court rejected the government’s argument for the priority system on two grounds. It ruled first that the geographic criteria were clearly discriminatory and favoured Jewish communities, and second that the government did not have the right to make such a sweeping and important decision under its executive powers. Such a national priority system had to be legislated properly by the Knesset.

It is widely assumed that the Knesset will use the court’s year-long reprieve to re-establish a network of priority areas, probably so that extra funds can be directed to Jewish communities.

Several Arab leaders expressed concern that the authorities would simply seek a way round the legal judgment. “We have bitter experience regarding implementation of High Court decisions,” said Dr Hana Swaid, of the Arab Centre for Alternative Planning. “Indeed, the shelves are full of government and judicial decisions that have not been implemented.”

A prominent case of such non-implementation was another watershed ruling, this time over equal opportunities for Arab families to live in hundreds of exclusively Jewish communities. In 2000 the Supreme Court ordered the Jewish community of Katzir, north of Hadera, to consider the application of an Arab family, the Kaadans, who wanted to buy a house there. Katzir refused and the decision has never been enforced.

Azmi Bishara, leader of the National Democratic Assembly party, observed that the government might find a way to circumvent the High Court ruling in an attempt to reach the same goals it had set in the first place.

But there will be barriers to the government simply readopting the existing system, according to Marwan Dalal of Adalah. “The good thing about the ruling is that not only did the court object to the government taking on itself the right make such a decision but it ruled that any similar system, if adopted, would be considered by the courts as racist too. That means that if the Knesset simply rubber-stamps the priority areas it will be challengeable in court.”

Several Jewish leaders condemned the court’s decision, claiming that it was essential that Judaisation - Jewish presence in Israel’s Arab heartlands - be “strengthened”.

Shmuel Rifman, head of the Ramat Negev Regional Council, said: “There are criteria, maybe the court doesn’t like them, but there are. The government wants to encourage Jews to move to the Negev and Galilee and to encourage those already living there to stay there.”

The mayor of Sderot, Eli Moyal, told the Jerusalem Post newspaper it was not shameful for the state to “prefer Jews because this is the state of the Jews. Israel has a complex with which it must come to terms. It wants to be a democratic state and give Arabs [equal rights], but only on paper. It won’t admit it prefers Jews. The government is afraid … and embarrassed to say it discriminates in favor of the Jews.”

Contact: the Arab Centre for Alternative Planning on +972-4-678-3636, Hana Sweid on 054 7633 368, and Adalah on +972-4-950-1610.