Start-up and VC fund to move funds out of Israel over judicial plan

Israel's hi-tech sector protest judicial reforms of right-wing government
Israelis working in the hi-tech sector hold the national flags of Israel as they demonstrate against proposed judicial reforms by Israel's new right-wing government in Tel Aviv, Israel January 24, 2023. REUTERS/Corinna Kern/File Photo

JERUSALEM, Jan 26 (Reuters) - An Israeli venture capital fund and a local startup are moving their bank accounts out of Israel, they said on Thursday, as opposition mounts against government plans to overhaul the country's judicial system.

Nationwide protests have intensified over the past three weeks, but Prime Minister Benjamin Netanyahu on Wednesday said he would press ahead with the revamp and hit back at critics who said the right-wing government's plan to rein in the Supreme Court would harm the country's economy.

"We are not moving out of Israel. We are moving our bank account," Tal Barnoach, general partner at Disruptive AI, told Reuters without elaborating.

Eynat Guez, chief executive of Papaya Global, a payments platform unicorn, said on Twitter that Netanyahu's proposed changes will harm democracy and that the company has therefore decided "to withdraw all of the company's funds from Israel".

"There is no certainty that we can conduct international economic activity from Israel. This is a painful but necessary business step," said Guez, a vocal critic of the government's judicial plans.

Neither Barnoach or Guez provided any detail on when, where or how much money they were moving.

The proposed reforms, which have yet to be written into law, would tighten political control over judicial appointments and limit the Supreme Court's powers to overturn government decisions or Knesset laws.

Barnoach told the Calcalist financial daily that the reforms are like a "legal coup" that could lead to economic instability. He said his foreign investors are worried and they may not continue to invest in Israel if the reforms pass.

In a Twitter post in response to Guez, opposition leader and former prime minister Yair Lapid said Netanyahu "is leading us to an economic disaster".

Finance Minister Bezalel Smotrich replied that there would be no economic disaster because Israel's economy is "strong and profitable and investors are smart".

The Israeli economy grew by about 6% last year but is expected to slow to a rate below 3% this year.

An S&P Global Ratings analyst this month told Reuters that Israel's judicial reforms plan could pressure the country's sovereign credit rating.

Reporting by Steven Scheer Editing by Tomasz Janowski and David Goodman

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