After the adoption of the UN Partition Plan and the end of the British Mandate, the Yishuv (Zionist settlement in Palestine) proclaimed the State of Israel.
Amongst the issues discussed were territorial questions and the establishment of recognized borders, the question of Jerusalem, the repatriation of refugees (and whether the issue could be discussed separately from the overall Arab–Israeli conflict), Israeli counter-claims for war damages, the fate of orange groves belonging to Arab refugees and of their bank accounts blocked in Israel.
Israel was willing to make a modest financial contribution toward the resolution of this problem but only as part of an overall settlement of the conflict and only if the refugees were to be resettled in Arab countries.
[11] In a memo of 27 May 1949 to U.S. president Harry S. Truman, the Department of State reported Israel's territorial demands and its refusal to compromise on the refugee problem.
[16] The territorial demands included a piece of southeastern Lebanon, the Gaza Strip, and parts of Transjordan as well as those portions of "Arab Palestine" defined by the UN that Israel had occupied.
[16] According to the memo, the Lausanne Conference was likely to break up when the Arabs learned of the refusal of Israel to make any concessions on territory or refugees.
[17] When the U.S. ambassador the next day handed over the telegram to Ben-Gurion, the latter reacted by saying that the United States and UN had been unable to enforce 29 November resolution and to prevent the Arab aggression.
It stated that the willingness of Israel to negotiate and its full cooperation with the Conciliation Commission proved that it did not reject the basic principles of Resolution 194.
The refugees were (thus) members of an aggressor group defeated in a war of its own making: "The exodus is a direct consequence of [the Arab state's] criminal invasion."
[21] Israel made clear to the Conciliation Commission, that she also wanted a slice of Southeastern Lebanon, necessary to her development scheme, but not yet demanded in favor of a quick peace.
[25] The Arabs on the other hand, insisted that any deal had to be resolved on the basis of the Partition Plan, with territorial adjustments necessary pursuant to the Lausanne Protocol.
While they had previously rejected the UN's internationalisation plan,[27] most of the Arab delegations accepted a permanent international regime (called corpus separatum) under United Nations supervision as proposed in the Resolutions 181 and 194.
[28] Israel rejected this and instead preferred a division of Jerusalem into a Jewish and an Arab zone, and international control and protection only for Holy Places and sites.
[29][30] During the conference, the Israeli government began moving its offices into West Jerusalem which angered the Arab states, who submitted a formal complaint to the commission with respect to the "administration and services which have been installed in this city in contempt of the resolution of 11th December 1948.
[25] On 1 August, Israeli Minister of Foreign Affairs Moshe Sharett declared in the Knesset, that Israel considered itself not responsible in any way for the problem of the refugees.
[36] Israel had, however, failed to stipulate under what conditions refugees could return and Egypt was afraid they would be dropped in the desert area of the Negev.
[10] Israel was prepared to accept 100,000 refugees, contingent upon Arab agreement to a comprehensive peace and if its present (extended) territory remained the same.
Israel was afraid that the discussions on borders and refugees would delay its admission and tried to persuade the Palestine Conciliation Commission to prevent debate on the issues in the UN pending the application procedure.
[citation needed] The UN hoped that Israel as member would abide the Charter and the Resolutions 181 and 194, thus helping foster peace in the Middle East.
The Security Council was divided about whether or not admission would benefit the negotiations on Palestine and also about the borders, defined in the Partition Plan, but not accepted by Israel.
For the Arabs, movement on the refugee issue remained the sine qua non of any wider discussion with the Israelis and so they too came away disappointed from Lausanne.
– According to Benny Morris, the "Arab delegations arrived united in the demand that Israel declare acceptance of the principle of repatriation before they would agree to negotiate peace".
"[50] – Ilan Pappe writes: On 12 May 1949, the conference achieved its only success when the parties signed the Lausanne Protocol on the framework for a comprehensive peace, which included territories, refugees, and Jerusalem.
Once Israel was admitted to the UN, it retreated from the protocol it had signed, because it was completely satisfied with the status quo, and saw no need to make any concessions with regard to the refugees or on boundary questions.
Israeli Foreign Minister Moshe Sharett had hoped for a comprehensive peace settlement at Lausanne, but he was no match for Prime Minister David Ben-Gurion, who saw the armistice agreements that stopped the fighting with the Arab states as sufficient, and put a low priority on a permanent peace treaty.
[51] Among the Arabs, only King Abdullah of Transjordan (today's Jordan) worked for a permanent peace treaty with Israel, in part because he had annexed the West Bank and wanted the Israelis to recognize this.
Nevertheless, Israel, inspired by its newly defined security interests, signed the document but successfully impeded its translation into a political agreement (Levy, 1997, p. 60).
The commission found that and that no constructive progress towards a solution of existing problems would be possible unless all the parties to the dispute, at the outset of the discussions, expressed their determination to respect each other's right to security and freedom from attack, to refrain from warlike or hostile acts against one another, and to promote the return of permanent peace in Palestine.
The Arab States insisted upon a prior solution of the refugee question, at least in principle, before agreeing to discuss other outstanding issues.