The bill was not renewed, highlighting the different legal systems in the West Bank. Nearly 500,000 Jewish settlers have the benefit of Israeli citizenship. Meanwhile, 3 million Palestinians are living under military rule well into its sixth decade. Three major human rights organizations have called the situation apartheid. Israel denies this claim as an attack on its legitimacy.
The coalition headed by Prime Minister Naftali Bennett is still in power. However, Monday's vote highlighted the weaknesses and divisions within the alliance and raised doubts about its viability.
For decades, emergency regulations have been in place in the West Bank. This separate legal system applies parts of Israeli law to Jewish settlers.
These regulations will expire at the end the month. If they aren't renewed, the legal system Israel has created for its settlers in West Bank since 1967 will be in jeopardy. It could also affect the legal status for the 500,000 settlers who live there.
The law extension supporters claim they want to preserve the status quo and extend the government's shelf-life. Opponents argue that extending regulations would make the system more unfair.
Monday's vote, which was defeated by a margin of 58 to 52 votes, went beyond what was expected in legal debate. It served instead as a crucial test for the government's survival prospects, creating paradoxical circumstances where many of the largest settlement opponents voted for it, while hard-line party members that support settlements voted against it to weaken government.
The coalition is made up eight ideologically distinct parties, which include supporters and opponents of settlements. It was formed last year and pledged not to be divided by issues that could threaten its survival. Monday's vote demonstrated just how difficult this mission was.
Although the vote didn't immediately overthrow the government, it was still possible for the coalition present a modified version.
"As always, after we lose," declared Foreign Minister Yair Lepid, who is the chief architect for the governing alliance in a tweet.
However, the setback showed that the government's days may be over. The nationalist New Hope, one of the coalition members, has threatened to leave if the measure is not passed by the coalition. New Hope could leave the coalition to give the opposition the votes they need to form new governments or trigger new elections.
"Any coalition member that doesn't vote in favor of this law is an active participant to its demise," Justice Minister Gideon Saar from New Hope said before the vote. He also warned that the bill could create legal chaos in the West Bank and cause harm to Israeli settlers.
Closely monitored were the votes of some lawmakers, including rebellious hard-liners in coalition and Ra'am, an Arab Islamist organization that was the first Arab party ever to join an Israeli alliance. These lawmakers were not present in many cases.
The opposition, a coalition of mostly nationalist parties headed by Benjamin Netanyahu was able to show its willingness to abandon its pro-settlement ideology to bring down the coalition.
Bennett's Yamina party released a statement in which it accused Netanyahu and his Likud party, accusing them of joining forces with leftist settlement opponents in order to further the former prime minister's interests. It stated that the Likud would "burn the state to Netanyahu's benefit" and promised to find a way of passing the necessary legislation.
Bennett has been through many hurdles. Bennett has faced many obstacles in the past. Idit Silman (the coalition whip from Bennett’s small, nationalist political party) quit earlier this year. This left the government with 60 seats at the 120-seat Knesset. The coalition survived immediate defeat, but was unable to govern. Ghaida Rinawie Zabi, another Meretz legislator, also quit but was later reinstated after receiving a series of benefits for her constituents, Palestinian citizens in Israel.
Silman opted to skip Monday's vote. Zoabi, however, voted against the bill and gave a thumbs down as she cast her vote.
After two years of political chaos, Bennett's government was formed last year. There were four elections that did not produce a clear winner. The goal to remove Netanyahu, the long-serving prime minister, was the common thread that unified the eight members of the coalition. He is currently facing corruption charges and they have tried to find a way to deal with their problems to keep him from power.
In 1967, Israel captured the West Bank and Gaza Strip as well as east Jerusalem. In 2005, Israel annexed east Jerusalem. This move is not recognized internationally. Hundreds of thousands of Israelis live in 120 settlements scattered across the West Bank. This is in addition to more than 2.5 million Palestinians.
The territory is technically still under Israeli military control, even though Israel never annexed it. This creates a confusing legal reality. Most of Israel's civil and criminal laws are applicable to Jewish settlers in West Bank. They vote in Israeli elections and enlist for mandatory military service.