On 15 May 1988, a five member panel of international arbitrators, which included also an Israeli and an Egyptian representative, started its discussions on the Taba issue. It was clear that its ruling would be binding. In Israel there were two views. One, that of the Prime Minister said that Israel must retain sovereignty over Taba. The other, that of the foreign ministry, said that sovereignty over Taba is Egyptian while Israel must maintain concessions over the tourist facilities in the tiny 700 square meters area. On 29 September the arbitrators ruled in favour of Egypt. Israel accepted the ruling with a heavy heart and agreed to hand over in late December. The following is the initial reaction of the prime minister to the ruling.
"I would advise against reaching an incisive conclusion. What we have heard from Geneva is that the arbitrators' decision is not in Israel's favor; and under the arbitrators' mandate, [the arbitrators] were requested not to determine the border, but to rule on where the milestones should be. In this matter the arbitrators accepted in principle the Egyptian position. Now, however, decisions must be taken on determining the border and arrangements must be made for day-to-day life; on these matters we shall have to speak with the Egyptians and to conduct negotiations. I am waiting until we receive the arbitrators' document, we will study it, will hold an Inner Cabinet discussion on the matter and will decide what to do. We must receive their decision, including the reasons, which are extremely important. The Taba issue need not disrupt relations or damage the peace with Egypt. The discussion with the Egyptians must be matter of fact, and we must take care of our interests, just as the Egyptians look after their own interests. Throughout the years we have been dealing with the Taba issue, Israel searched for an acceptable compromise regarding a division of the territory and joint administration. The Egyptians rejected the compromise proposals. The Likud advocated conciliation, the Alignment arbitration; the U.S. and Egypt supported arbitration -and the three sides overcame one."
[ ... ) In my opinion, conciliation is the correct and the just stance, also in regard to problems which are liable to arise in the future, The Left, along with the Egyptians, pressed for arbitration only. This must be a lesson for Israel, i.e. Israel should not be interested in arbitration, but in conciliation and direct negotiations. By opting for arbitration you relinquish authority and allow others to decide in your place. "