An Israeli court has ordered the Palestinian Authority to pay more than $10m in damages to Israel's main bus company for attacks against it by Palestinian militants.

The court in Tel Aviv issued its decision after Yasser Arafat's administration did not defend the action brought by the Egged bus company.

The Israeli Government wants to waste Palestinian money they are holding Saeb Erekat, Palestinian minister

Egged has been hit by more than 50 attacks, including at least 20 suicide bombings, since the Palestinian intifada or uprising erupted in September 2000.

Palestinian officials condemned the ruling as "purely political".

The court ordered that the money be paid out of Palestinian funds frozen by Israel, according to the French AFP news agency.

Arafat accused

In its suit, Egged held Palestinian leader Yasser Arafat responsible for "grave, continuous, unavoidable and... irreversible" losses for failing to rein in Palestinian militants.

Armed groups and suicide bombers have repeatedly targeted civilian buses, killing more than 100 people and wounding hundreds more.

The indiscriminate attacks have scared many Israelis away from using public transport. The bus company says passenger numbers have fallen by between 15% and 20%.

Some of the attacks have been carried out by groups not officially linked to the PA, but Israel has accused Mr Arafat of overall responsibility for failing to act against radical Palestinians.

'Dangerous' ruling

Palestinian minister Saeb Erekat called the ruling "very dangerous" and said the authority's legal department would respond, AFP reported.

"This is a purely political decision, the Israeli Government wants to waste Palestinian money they are holding," he said.

Israel controls duties on products brought into Palestinian-run territories from Israel and has refused to release funds, claiming Palestinian officials have used the money to finance terrorism.

The Palestinian Authority has denied the charge, and has said it is owed $1.5bn in revenue.