The court's decision was part of a tort suit filed by the victims' orphan daughters and other family members.
This is the first time that an Israeli court rules that the Palestinian Authority is directly responsible for a terrorist attack.
"From the point of view of the family, we have come full circle, since that terrible day in which we lost our loved ones. We wanted to bring to justice not only the perpetrators of the attack, but also those who encouraged uninhibited and bloodthirsty incitement, and openly called for the murder of Israelis," Yigal Shemesh, Gadi's brother said.
"To our delight, the court showed courage, placed the blame on the Palestinian Authority, and ruled that it is directly responsible for this despicable act of murder," Shemesh added.
The couple, Sergeant Major Gadi Shemesh, and his wife, Tzipi, were on their way home from an ultrasound test for Tzipi, who was five months pregnant with twins, when a suicide bomber blew himself up in Jerusalem. Tzipi was killed on the spot, and Gadi was critically wounded and passed away a few hours later. Yitzhak Cohen, a father of six from Modi'in, was also killed in the attack, and about 80 people were wounded.
The couple left behind two daughters, who were raised by Gadi's sister.
16 years ago, the family filed a lawsuit against the Palestinian Authority and the Palestine Liberation Organization (PLO). The family claimed that the perpetrators were Palestinian terrorist operatives who acted according to the PA's policy of using violence against innocent Israelis.
According to the family, the PA's institutions have, to this date, been providing compensation and various benefits to the families of the suicide bomber and the families of the accomplices, which points to their involvement and encouragement of the perpetrators.
The Palestinian Authority claimed, through attorneys Yosef and Yonatan Arnon, that the family's claims were too broad and not fit to try. According to the PA, the issues raised by the family in the trial are historical and complex, and it is not appropriate to bring them before the court, rather it should be left to historians.
Regarding the payments to the families of the terrorists, the PA claimed that in a state of conflict, it is accepted that each side bears its damage and takes care of its victims, and that the payment to the families of terrorists is part of the PA's concern for its victims and should not be considered as a confirmation of their actions.
The ruling was based on the opinion of Lt. Col. (res.) Alon Eviatar, a former adviser on Arab affairs to the Coordinator of Government Activities in the Territories, who analyzed the involvement of members of the Palestinian Authority in the attack.
It was revealed that Muhammad Khashika, the suicide bomber, was detained by the PA and released upon a request by Abd al-Karim Awis, an officer in the General Intelligence Services of the PA, in order to carry out the attack.
The explosives used to prepare the explosive belt were taken from the office of the chief of the General Intelligence Service, Tawfiq Tirawi, who himself paid NIS 1,200 to Nasser Shawish, who was involved in the attack and drove the terrorist.
Tirawi, who was subordinate to Yasser Arafat, was the number one wanted man at the height of the second intifada, because of his active involvement in carrying out terror attacks.
Another Palestinian who was involved in the attack was senior Fatah official Hussein al-Sheikh, who met the suicide bomber and two other operatives and gave them money and two hand grenades to carry out the bombing.
Al-Sheikh currently serves as Minister of Civil Affairs in the Palestinian Authority, responsible for relations with Israel. In addition, PA officials transferred money to carry out the attack and to the families of the terrorists.
In recent years, a number of claims have been filed against the Palestinian Authority by families whose loved ones were either killed or wounded during the second intifada.
Last year, the district court ruled that the Palestinian Authority would compensate the Ben Shalom family, who lost their parents Sharon and Yaniv Ben Shalom in a shooting attack on Road 443, due to the PA's negligence, which did not prevent the attack.
In another case, the Supreme Court ruled that the Palestinian Authority would compensate the family of Amit Amos Mantin, who was murdered in the attack in Baka al-Garbiyeh in 2003. Mantin worked as a Bezeq technician and was sent to repair an electrical malfunction in the city where he was shot dead by a 15 year old Palestinian with a pistol.
The terrorist was caught and sentenced to life imprisonment. During his trial it emerged that ten days before the attack he had completed a period of "physical and weapons training" at a Palestinian Authority camp in Jericho.
In the suicide bombing that killed the Shemesh couple, it was proven that the PA security forces were directly involved and therefore the judge, Irit Cohen, placed responsibility for the attack on the Palestinian Authority.