Home-sharing platform Airbnb has announced it will back off a plan to remove Jewish settler homes in the occupied West Bank from its rental listings to end lawsuits brought by the hosts.

Israeli lawyers filed a class action suit against Airbnb in November immediately after it said it planned to remove from its rental listings Jewish settler homes in the West Bank “that are at the core of the dispute between Israelis and Palestinians”.

On Tuesday, the company said the agreement settled all legal actions brought by hosts and potential hosts who went to court.

“Airbnb will not move forward with implementing the removal of listings in the West Bank from the platform,” the San Francisco-based company said in a news release.

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“We will continue to allow listings throughout all of the West Bank, but Airbnb will take no profits from this activity in the region.”

Profit generated from Airbnb listings in the West Bank will be donated to non-profit groups dedicated to humanitarian aid in various parts of the world, according to the startup.

The decision would have affected around 200 homes in Israeli settlements that had been listed on the platform.

Arvind Ganesan, of New York-based Human Rights Watch, called Airbnb’s retreat from the decision disappointing.

“Donating profits from unlawful settlement listings, as they’ve promised to do, does nothing to remedy the ‘human suffering’ they have acknowledged that their activities cause,” said Ganesan.

“By continuing to do business in settlements, they remain complicit in the abuses settlements trigger.”

An Amnesty International report published earlier this year argued that digital tourism giants Airbnb, Booking.com, Expedia and TripAdvisor are profiting from “war crimes” by offering services in Israeli settlements.

The London-based rights group’s Destination: Occupation report called on the companies to stop listing tourist accommodation, activities and attractions in settlements in occupied territories, including occupied East Jerusalem.

“In doing business with settlements, all four companies are contributing to, and profiting from, the maintenance, development and expansion of illegal settlements, which amount to war crimes under international criminal law,” the report said.

Around 400,000 Israelis live in settlements that dot the occupied West Bank and range in size from tiny hamlets to large towns, in addition to 200,000 living in settlements in East Jerusalem.