Israel has been accused of withholding information in a key case against the Bank of China by a group of bereaved families who say the bank abetted Palestinian militants.

According to Nitsana Darshan-Leitner, director of Shurat HaDin, an Israeli legal group representing the families, the justice ministry was asked by a New York court to supply certain documentation, but ignored the request.

"The federal court in New York made the request for the documents half a year ago. The request went unanswered... so we sent a letter weeks ago asking what's going on, which also went unanswered," Darshan-Leitner told AFP.

But on Wednesday, following a petition by Shurat HaDin, Israel's Supreme Court gave Justice Minister Tzipi Livni a week to justify why the documents had been withheld.

The ministry was not immediately available for comment.

This is the latest twist in a complex billion-dollar civil lawsuit launched in a New York court in October 2012 by the Israeli families of eight teenagers shot dead by a Hamas gunman at a Jerusalem seminary in 2008.

The families claim the Bank of China "facilitated" the attack and dozens of others by allowing wire transfers to the tune of millions of dollars to the Palestinian Islamist movement Hamas, via its New York City branch in violation of US law.

The Bank of China denies the allegations.

Darshan-Leitner said the documents would "enlighten the case and support allegations" against the bank.

They include information on "the bank accounts used to transfer money to the organisations in Gaza, the source of the money and people who were arrested in connection with the attacks."

The latest allegations come after Israel refused to let a former intelligence agent testify in the case, with families accusing the government of Prime Minister Benjamin Netanyahu of caving into Chinese pressure in order to protect lucrative trade ties.