Israel and the Palestinians have resumed peace talks following a 17-month break in negotiations. Possibly the most difficult issue on the table in the conflict is the future of Jerusalem's Old City - an area sacred to Muslims, Christians and Jews. A group of Israelis, Palestinians, Canadians and Americans has released a new initiative designed to help the parties resolve this thorny problem.

The Jerusalem Old City Initiative began about seven years ago when former Canadian diplomats recruited Palestinian and Israeli negotiators as well as U.S. Middle East experts to find at least a temporary solution to what has been a turbulent issue.

The release of the initiative coincides with the start of so-called proximity talks between Israel and the Palestinians.

U.S. special envoy George Mitchell is expected to engage in shuttle diplomacy between the parties during the next four months.

Wendy Chamberlain is president of the Middle East Institute, the oldest Washington-based organization dedicated solely to the study of the region.

"Now these proximity talks are not the direct talks that we all hoped for," Chamberlain said. "But they certainly do represent a step forward after a long drought. Special envoy Mitchell will be dealing with parties who are still very far apart."

The Old City Initiative proposes creating what it calls a special regime of Israelis and Palestinians, but run by an outside administrator with international standing.

One of the authors of the initiative, Arthur Hughes of the Middle East Institute, is a retired U.S. Foreign Service officer who served as the director-general of the peacekeeping operation between Egypt and Israel.

"We were always working on the basis that any recommendations that we made had to be workable and had to be sustainable," Hughes said. "Because it was obvious that if any agreement on Jerusalem and the Old City would break down, then the entire peace agreement would probably breakdown."

The initiative proposes a government that would oversee security, access to holy sites, zoning, archeological issues and planning.

A report outlining the idea says the creators of the initiative do not believe the Israelis and Palestinians will agree on sovereignty issues, such as how to divide the Old City, anytime soon.

One of the directors of the project, Michael Bell of the University of Windsor, is a former Canadian ambassador to Israel, Egypt and Jordan.

"We tried to be realistic," Bell said. "We wanted a system that would not fail with the first shock that it got -- the first murder in the Old City, the first contretemps [i.e, inopportune or embarrassing occurrence, situation or dispute], the first riot, the first attempt to sabotage what had been achieved and that led us to develop this special regime concept."

Another director of the project is Michael Molloy, a former Canadian ambassador to Jordan and Canada's coordinator for the Middle East peace process.

"Our special regime is embedded in and grows out of an Israeli-Palestinian peace treaty that establishes a Palestinian state," Molloy said. "It cannot be imposed. It must be the creation of the two sides with a little help from their friends."

Gilead Sher was Israel's co-chief negotiator at Camp David in 2000 when the Israelis and Palestinians failed to reach a comprehensive peace agreement. That meeting is often cited as a reason for the breakout of the second intifada, the violent Palestinian uprising against Israeli occupation.

Sher says both parties need proposals like the Old City Initiative.

"We need this kind of unofficial work because within governments and within the official entities, some of the issues are too sensitive and too explosive to handle," Sher said. "This is one of them, of course."

Ghaith Al-Omari is the advocacy director at the American Task Force on Palestine and was a Palestinian negotiator at Camp David in 2000. He says the proposal can be used by negotiators after the broad parameters of a peace deal are reached.

"The way the Palestinian-Israeli negotiations work, this issue will not be touched until the leaders come in and decide on sovereignty and then we are going to have, you know, a week for the negotiators to come in and actually put the practical issues on the table," Al-Omari said. "And that is when this kind of initiative becomes extremely valuable."

Those involved in the Jerusalem Old City Initiative estimate it will take a generation after a peace deal is reached until both sides will be able to agree on sovereignty for Jerusalem and the holy sites that make it unique.