A District Court judge ordered yesterday that the city of Jerusalem must pay compensation to a gay group for failing to allocate funds for the group.

Jerusalem Open House (JOH), will receive 350,000 shekels (£40,000), after the court ruled it was unfairly left out of municipal funds over the last three years.

District Court Judge Judith Tzur wrote in her ruling, “Even if municipal officials have a hard time accepting the community, and believe this is an unwanted phenomenon, the municipality cannot veer off from fundamental principles and ignore this community.”

“It must treat this community equally, out of recognition of the supreme value of equality, and out of respect for the values of tolerance and pluralism, which are at the core of democratic values.”

The ruling ended a three-year court battle between JOH and the city of Jerusalem regarding the allocation of public funds. It was yet another legal victory for JOH against Uri Lupolianski, the ultra-Orthodox mayor of Jerusalem. Last year, when Mr Lupolianski attempted to stop their annual Gay Pride march, JOH won an injunction preventing the ban.

“This is the right decision at the right time,” said Hagai El-Ad, executive director of JOH. “We hope this case will set a strong precedent for LGBT people here in Israel and elsewhere. With WorldPride coming up in August, this win generates even more positive energy among JOH activists working toward WorldPride.”

JOH was able to demonstrate to the court that the city had not employed a fair or transparent procedure in allocating its funds. The case was strengthened by a recent Israeli Supreme Court ruling regarding discrimination against Israeli citizens of Palestinian decent.

“The court has previously ruled that when determining whether discrimination had occurred, the merits of the case can be decided based on the discriminatory result alone,” said Noa Sattath, chair of JOH.

“In our ruling this week, we were able to illustrate not only that the city’s process for allocating funds was unfair and discriminatory, but also that no funding has ever been allocated to any gay cause, thus proving that the city acted illegally.”

Mr Lupolianski is reported to be worried that the celebration will cause tension between religious and secular sections of society.

Jerusalem WorldPride runs from August 6-12 2006.

Religious and secular Jews often clash over issues which are seen to conflict between the Torah and the law.