Based on a recent statement from the UN, I don't believe Israel has this right (https://news.un.org/en/story/2021/05/1091492). My inclination to evaluate the situation purely on the facts of the dispute implies that Israel does. Regardless of how long ago this all came to be, Israel remains an occupying power in the eyes of International Law. The laws and courts of Israel should not apply here.
[Edit: I did not downvote you.]
My understanding from the UN link that I shared is that international law applies here as Israel is an occupying power. I am not sure whether there is an international court to hear this dispute and rule according to the applicable international law. If there isn’t, though, I can’t bring myself to justify that Israel has the right to apply its laws and courts in order for there to be some system of law and order. Even if the PA is in effect ceding this responsibility to Israel through incompetence, applying Israeli law and adjudicating in Israeli courts sets a precedent that any occupying nation can do this in land that is not internationally recognized as their own so long as there is no functioning law and court system in that land. To me accepting this as precedent feels like a slippery slope toward an invitation for nations to engage in annexation and colonialism.
Let us also remember that the ruling regime is accused of committing the crime of Apartheid. [1]
More important than the actual facts of the case is this: HOW is a legal dispute, which is working its way through a civil court system -- the same court system that ruled in favor of these Palestinian families in the 1980s -- an "incitement to violence?" I am genuinely curious to know what the argument is here.