The Jerusalem district court said it decided not to jail Nachum Korman for the killing of 11-year-old Hilmi Shusha four years ago because he had only been convicted of manslaughter by negligence, and had served eight months in prison. It fined him 70,000 shekels (about £11,600).

The sentence handed down by the Jerusalem district court yesterday is especially suspect because it was determined by the same judge, Ruth Or, who acquitted Korman at his original trial after rejecting evidence from witnesses and the state pathologist.

That verdict was overturned by the supreme court, which convicted him of manslaughter and sent him back to the district court for sentencing.

Korman, the chief of security at the Hadar Beitar settlement, descended on the Shushas' West Bank village in October 1996 to hunt down a group of children who had been pelting Jewish cars with stones.

Cousins of the dead boy, who saw the assault, said he pinned Hilmi down with his foot before delivering the fatal blow. Korman claimed he never intended to kill the child, and said he tried to revive him.

The boy's father, Said Shusha, told Israel radio the sentence amounted to "giving people a licence to kill".

The B'Tselem human rights organisation said the sentence was part of a pattern of institutions turning a blind eye to abuses of Palestinians by Israelis while showing no mercy to Arabs accused of causing injury to Jews. It said such leniency prevailed long before the intifada, and mobs of Jewish settlers have often been accused of attacking Palestinian villagers in the West Bank.

"At a time when violence by Israeli civilians against Palestinians is increasing, the court's decision sends the message that Palestinian life is cheap, and that Israeli civilians in the occupied territories can continue to abuse Palestinians with impunity," B'Tselem said in a statement.

The decision is bound to deepen criticism of systematic racial prejudice in Israel's law enforcement system.

Also yesterday, the governing body of Israel's 1m Palestinian citizens submitted an investigative report to the supreme court, accusing the government of sanctioning a shoot-to-kill policy against Arab protesters inside Israel in October, when 13 demonstrators were shot dead.

Meanwhile, the supreme court is considering the release of another Jewish settler, Yoram Skolnik, who was convicted in 1993 of shooting dead a Palestinian who lay on the ground with his hands and legs bound.

Israel's former president, Ezer Weizman, granted Skolnik two reductions on his life term, and the parole board has recommended his early release for good behaviour.

Meanwhile, Israeli troops shot dead a 15-year-old Palestinian stonethrower in the Gaza Strip yesterday, hours before the start of talks in the Egyptian resort of Taba. The talks, expected to last at least a week, are seen as a last-ditch effort by Mr Barak and the Palestinian leader, Yasser Arafat, to map out a course for future negotiations before Israel goes to the polls on February 6.

But even Mr Barak, who opinion polls predict will suffer a resounding defeat unless he can convince Israelis he is the only man who can negotiate with the Palestinians, was not holding out much hope.

"In the short time left, with the gaps that exist, the chances of bridging them is not great," he told Israel army radio.