Israel's Supreme Court hears arguments in showdown over judicial curbs

By Maayan Lubell

JERUSALEM (Reuters) -Israel's Supreme Court heard petitions for over 13 hours on Tuesday challenging measures by Prime Minister Benjamin Netanyahu's government to curb the power of judges, a historic hearing in a crisis that has tormented the country for months.

In a packed courtroom which saw all 15 judges sitting together for the first time in Israeli history, watchdog groups appealed against an amendment passed in July ending the Supreme Court's ability to overturn some government decisions when it deems them "unreasonable".

Although other tools for voiding executive decisions remain in place, opponents say the amendment removes a vital democratic oversight mechanism in Israel's political system. The government says its aim is to stop political overreach by unelected judges.

"The cardinal question here is who has the last word," Ilan Bombach, the government's representative, told the court.

The crisis has split Israeli society, prompting months of mass demonstrations by protestors who see the right-wing coalition's overhaul as a threat to democracy. Supporters say the protests aim to subvert parliament and undermine the elected government.

The United States and other Western allies have also voiced concern about the impact of the judicial changes on Israel's democracy.

A ruling is not expected for weeks or months.

"Can you really hold a discussion of this question, without bias or predisposition, given that it is a matter of your status, your honour?" Simcha Rothman, a lawmaker in Netanyahu's religious-nationalist coalition and architect of the judicial overhaul, asked the court.

Chief Justice Esther Hayut dismissed suggestions the judges were only concerned with their own position, saying, "We are addressing the public's vital interests."

She said the bar for striking down a Basic Law was high and the court would not be voiding laws "every other day" but only when it saw "a fatal blow to the most basic foundations of democracy".

The showdown pitting the judiciary against the executive and legislature has gripped the nation.

Israeli business and civil society groups say the overhaul risks undermining the economy and driving away investment, and the shekel slid 0.5% during the day.

Significant numbers of military reservists - in the thousands according to protest leaders - have stopped reporting for duty. Netanyahu and some in the military say their action threatens national security.

The government says the Supreme Court has no authority to review amendments to Basic Law, which has a quasi-constitutional status in a country without a formal constitution.

"If the court can cancel Basic Laws, it turns itself into the sovereign instead of the people. This extreme step will undermine democracy's foundations. This is a red line that must not be crossed," Netanyahu's Likud party said in a statement.

Yair Lapid, centrist head of the parliamentary opposition, said the amendment was "warped and thuggish".

Netanyahu, who is on trial for corruption charges he denies, says the judicial changes are meant to balance out branches of government. He has been hazy when asked whether he would abide by a ruling that would quash the new law.

Since the coalition started its judicial campaign in January, many Israelis have been rattled by the public protests amid worries about potential flare-ups with the Palestinians, Iran and the Iranian-backed group Hezbollah in neighbouring Lebanon.

Netanyahu has said some of the original proposals have been scrapped. But his efforts to reach compromise agreements with opponents on the overhaul have so far been fruitless, adding to fears that Israel's worst domestic crisis in years will deepen.

With two more appeals scheduled this month and with the court possibly ruling as late as January, analysts said there was still time for both sides to reach agreement on changes.

(Writing by Maayan Lubell and Dan Williams; additional reporting by Henriette Chacar; editing by Raju Gopalakrishnan, Edmund Blair and Mark Heinrich)