A legal tug of war at the heart of the EU is shaping the debate on whether the bloc should restrict or ban trade with illegal Israeli settlements as a procedural battle rages in Brussels.
Buried deep in Brussels jargon are the outlines of the arguments that will define the outcome of Europe's response to the conflict.
The central question is deceptively simple: should any trade restrictions on settlements be adopted as a sanction or as a trade measure? The answer determines whether unanimity is required or a qualified majority will work – and therefore whether it can actually pass.
In an options paper put forward this week to EU states, the European Commission, backed by Germany, suggested that restricting trade with settlements should be considered a sanction. This was part of a broader package of options that ranged from amending existing measures to an outright ban.
The sanction classification requires unanimous agreement from all 27 member states, effectively handing any single country a veto. Given German opposition, adoption becomes highly unlikely.
But other big states such as France, the Netherlands, Sweden and Spain disagree. They argue trade restrictions on settlements should be adopted as a trade measure, in the same way the EU voted last year to phase out Russian gas imports – a decision that required only a qualified majority (QMV) of 55 per cent of member states representing 65 per cent of the EU's population.
Obligation
The European Council – the body representing member states – backs the trade measure argument. So does Human Rights Watch. “A ban is an obligation,” said Claudio Francavilla, the organisation's associate director of EU advocacy. “Anything short of that would fail to comply with international law and continue to bankroll Israel's occupation and apartheid.”
The EU's top diplomat Kaja Kallas appeared to back the Council's position as she arrived Monday at a meeting of EU foreign ministers during which the Commission's proposals will be discussed. Answering a question from The National, she said: "We are here in the council building and the council legal service says that for this we need QMV because it’s a trade issue."
The subject is politically explosive in Brussels. The mere existence of the options paper has forced member states into the uncomfortable position of justifying decades of trade with territories universally considered illegal under international law.
“The what paper?” a senior EU official said when asked about the paper by journalists. Pretending not to have heard of it defied the chatter it has sparked in Brussels.
It was leaked to the press on Thursday immediately after it was circulated to EU states, prompting visible frustration among officials. By Friday evening, ambassadors were meeting in a restricted room with no devices, in an apparent effort to prevent further leaks, The National understands.
The legal battle is expected to run well into the autumn.
Compare Ukraine
The options paper has also exposed a glaring double standard. Germany has long pushed to abolish the unanimity requirement for foreign policy decisions – after Hungary repeatedly used its veto to block measures against Russia and support for Ukraine. Yet Germany now champions unanimity when the subject is Israel.
During a visit this week to Israel, Foreign Minister Johann Wadephul expressed concern about the situation in the West Bank and called on Israel to stop weakening the Palestinian Authority. But taking what Israel would see as punitive measures against settlements is a red line for Germany, which says it has a special relationship with Israel because of its responsibility for the Holocaust.
Also, the Russian precedent – repeatedly cited by advocates of a trade ban – cuts both ways. French Foreign Minister Jean-Noël Barrot publicly compared the proposed settlement trade restrictions to the EU's 2014 ban on goods from Crimea.
But that ban was adopted unanimously as a sanction, undermining his argument that the Israeli case should go through a simpler trade measure route. Asked to explain the contradiction, French diplomatic sources told The National: “It's a question of political will, as the European Union has demonstrated, for example, with regard to Crimea.”
There has always been lingering unease about trade with Israeli settlements, but an outright ban would probably deepen tensions with Israel, which uses the term “Judea and Samaria” for the West Bank and believes its settlements are legitimate.
Israel's Foreign Minister Gidon Saar recently said he would stop talking to Ms Kallas after she was reported to have used the word “apartheid” in a private conversation to describe Israel's treatment of Palestinians.
Trading partners
Currently, EU trade with settlements is governed by 2015 European Commission rules requiring settler businesses to label their goods as different from those produced in Israel.
But the explosion of violence in the occupied West Bank since October 2023 – coupled with a 2024 International Court of Justice opinion stating that countries have an obligation to stop fuelling the occupation through trade – has reignited the debate with new urgency.
The numbers make the stakes clear. The EU is Israel's largest trading partner, with roughly €70 billion in two-way trade in goods and services in 2024. Trade with settlements is far smaller but not negligible: the World Bank put it at €300 million in 2012, widely considered an underestimate.
A report published last month by legal non-profit Global Echo found that more than 17 per cent of products exported from Israel to Europe actually originated in the settlements. The Commission has never published its own figures and is understood not to collect data on settlement imports.
European Commission spokesman Olof Gill confirmed the paper's existence on Thursday. “This non-paper lays out options to improve the current system of differentiated treatment as regards trade with Israeli settlements,” he said. “It also presents options to restrict or ban the import of goods from these illegal settlements with a view to responding to the deteriorating situation.”
Asked directly by The National whether the Commission believed such measures required unanimous backing, Mr Gill declined to answer. “I'm not going to say more,” he said.
