Israeli Prime Minister Benjamin Netanyahu leaves his Likud party faction meeting at the Knesset, Israel's parliament, in Jerusalem
Israeli Prime Minister Benjamin Netanyahu leaves his Likud party faction meeting at the Knesset, Israel's parliament, in Jerusalem, June 14, 2023. Reuters

Parliament delivered a surprise blow to Prime Minister Benjamin Netanyahu's coalition on Wednesday by electing an opposition member to sit on a committee that appoints judges, a panel at the heart of a political battle over Israel's justice system.

Karine Elharrar of the centrist Yesh Atid party secured one of the two committee seats but Tally Gotliv of Netanyahu's Likud party lost, paving the way for another vote on the second seat within 30 days, Knesset speaker Amir Ohana announced.

The vote was viewed as a bellwether in talks between Netanyahu and the opposition over legal reforms and a test for his command over a hard-right coalition that controls 64 of the Knesset's 120 seats.

Compromise talks were launched soon after Netanyahu suspended in March his government's contentious drive to overhaul the judiciary, which had sparked unprecedented protests as critics dubbed it a threat to Israel's democracy.

But after the results were in, opposition leaders said talks were off as long as the nine-member panel, which also includes two ministers, three judges and two lawyers, was not complete.

"The committee has not been established and the threat to our democracy has not been removed," Yesh Atid leader Yair Lapid said in a televised statement. "No committee, no talks."

Uproar over the overhaul somewhat subsided in recent weeks as talks progressed and Netanyahu's coalition was widely expected to adhere to Knesset tradition and support one opposition member alongside a coalition lawmaker for the panel.

But after last-minute deliberations, the coalition said it would not support any candidate, aiming for a delay. Netanyahu called on the opposition to stick with the talks.

Western allies, including Washington, have urged Netanyahu to pursue broad consensus over reforms to a justice system they say should remain independent. The stakes are rising with two Supreme Court judges retiring in coming months.

Advocates of the suspended overhaul, which grants almost complete coalition control of bench appointments, say the Supreme Court is elitist, left-leaning and overreaching, and that elected officials should have more power in picking judges.

Opponents say this would politicise and weaken a strong Supreme Court that plays a major role in Israel's democratic checks and balances.

The overhaul drive spooked investors and weakened the shekel currency before Netanyahu suspended it in late March. But economists and international credit agencies say further uncertainty poses a downside risk for Israel.

Fluctuating on the twists and turns, the shekel recovered a more than 2% loss throughout Wednesday.