Although settlers in the Occupied Territories live in an area subject to military rule and the settlements have not been formally annexed, Israel has applied a substantial part of Israeli law to the settlers. As a result, Israeli civilians living in the Occupied Territories are not subject to military or local law, like the Palestinians, but are prosecuted according to the Israeli penal law.

The Emergency Regulations (Offenses in the Occupied Territories - Jurisdiction and Legal Assistance), 5727-1967, enacted by the Minister of Defense in July 1967, provided that Israeli civilians who committed offenses in the Occupied Territories were to be tried in Israeli civil courts. Although not binding, the regulations limited the powers of military commanders and local courts in the Occupied Territories, and for the first time created extra-territorial personal status for Israeli civilians in the Occupied Territories. Since then, the Knesset has regularly extended these regulations.

By being subject to the Israeli judicial system, settlers enjoy liberties and legal guarantees that are denied Palestinian defendants in the Occupied Territories charged with a similar offense. The authority to arrest an individual, the maximum detention before being brought before a judge, the right to meet with an attorney, the protections available to defendants at the trial, the maximum punishment allowed by law, and the release of prisoners before completion of sentence - all of these differ greatly in the two systems of law, with the Israeli system providing the suspect and defendant with more protections.

Thus different legal systems are applied to two populations residing in the same area, and the nationality of the individual determines the applicable system and court. This situation violates the principle of equality before the law. This violation is particularly apparent in the disparity between the two systems. This also violates the principle of territoriality, commonly accepted in modern legal theory, according to which persons living in the same territory must be subject to the same system of laws.

This situation is extremely grave: in a single occupied territory, Israel is operating a system of separation with discrimination by law. It is doubtful that any comparable system has existed since the end of apartheid in South Africa.

Everyone suspected of committing an offense in the Occupied Territories must stand trial according to the same judicial system and the same laws, irrespective of his or her ethnic identity. The application of Israeli criminal law solely to Israeli civilians and non-Israeli Jews must be abolished. In accordance with international law, as long as Israel continues to control these territories, military justice and local law must apply to everyone who breaks the law in the Occupied Territories, while ensuring human rights.