EU guidelines excluding settlements from EU-funded projects – impact and scope



On July 19, 2013, the European Union published its ‘Guidelines on the eligibility of Israeli entities and their activities in the territories occupied by Israel since June 1967 for grants, awards and financial instruments funded by the EU from 2014 onwards” in the EU Official Journal.[1]

The new guidelines recall the conclusions of the European Foreign Affairs Council  of December, 2012, specifying that ‘all agreements between the State of Israel and the European Union must unequivocally and explicitly indicate their inapplicability to the territories occupied by Israel in 1967, namely the Golan Heights, the West Bank including East Jerusalem, and the Gaza Strip.’[2] The European Commission has previously affirmed in several Notices that the territory of Israel does not extend beyond the Green Line and that, as a consequence, products made in Israeli settlements are not entitled to benefit from the EU-Israel Association Agreement[3]

EU guidelines constitute a first step towards the implementation of its non-recognition of Israel’s sovereignty over the West Bank, East Jerusalem and the Syrian Golan Heights. The guidelines will prevent Israeli ministries, public bodies and businesses that operate in occupied Palestinian territory from receiving loans worth hundreds of millions of Euros each year from the European Investment Bank. The EU will also stop awarding grant funding to Israeli ministries, public bodies or private businesses for activities that take place in occupied territory, even if they are headquartered inside Israel’s pre-1967 borders. According to paragraph 12 of the Guidelines, any entity pursuing activities in the illegal Israeli settlements is prevented from receiving loans.

In their statement, the Palestinian Boycott National Committe pointed out that ‘among those excluded from receiving loans from the European Investment Bank (EIB) will be major Israeli banks including Bank Hapoalim, Mizrahi Tefahot Bank and Bank Leumi because they all operate illegally in the Occupied Palestinian Territory (OPT), including by having branches in illegal Israeli settlements.’[4] This exclusion applies if the bank is the final recipient of the loan.

The Meaning and Scope of the Guidelines:

— The Guidelines deal only with eligibility regarding territory. Other EU programmes are based on other eligibility criteria, such as the nature of the activity;

— The Guidelines refer only to EU-funded grants, awards and financial instruments such as loans. They do not refer to exports to the European Union. There is no limitation on exports to the European Union of products produced in the settlements. According to the Association Agreements, these products, however, do not benefit from exemptions from customs duties. From 2014 onwards such goods will not be subject to customs exemptions;

— To be eligible, an entity applying for a grant needs to be headquartered within Israel’s pre-1967 lines. In addition, the entity can only apply for EU funding for an activity that takes place inside the 1967 lines or for an activity that is carried out in the territories occupied by Israel since June 1967 but that aims to benefit the protected persons (the Palestinians and residents of the Golan Heights)[5] who live in these territories and/or who aim to promote the Middle East peace process in line with EU policy.[6] If these two conditions are fulfilled, then an organisation such as Kupat Holim, Israel’s third largest health maintenance organization (HMO), would be eligible to receive a grant despite the fact that it has branches in the territories;

— A major Israeli bank with branches in the Territories would be eligible to receive loans from the European Investement Bank if it is not the final recipient but intends to pass them on to Israeli companies. However, the Israeli companies that are the final recipients of the loan will be required to declare that they do not operate in the Occupied Territories either in the framework of the EU-funded activity or in any other way;

— Israeli institutes situated outside the 1967 lines are not eligible for EU grants. A research project carried out jointly by an Israeli university inside the 1967 lines and an Israeli institute situated outside the 1967 lines can not benefit from EU grants;

— The Guidelines do not apply to the EU’s member states, which remain free to make grants to whomever they wish. However, the member states were consulted before the Guidelines were finalized and a majority presumably approved them;

— The Guidelines apply to Israeli local authorities, other public bodies, public or private companies or corporations, and NGOs. However, the Guidelines expressly make an exception for national-level government ministries and other public authorities. The fact that such authorities (e.g. the Israeli Antiquities Department) are located outside the pre-1967 borders does not disqualify them, unless the support relates to specific activities taking place beyond the pre-1967 borders;

— The requirements do not apply to natural persons (a human being, rather than a public or private ‘legal person’ that could be, for example, a corporation.)

 Ahava Dead Sea Laboratories, although having substantial activities outside Israel’s pre-1967 borders, has its place of establishment (legal address) in Holon near Tel Aviv. If it engages in research inside Israel proper it will not be barred from receiving EU funding for that research. The same criteria will apply to all other entities having their legal address in Israel proper while also having activities beyond the pre-1967 borders.

— Only institutions which are established inside a settlement, such as Ariel University, will be denied access to EU resources. Other entities will in many instances be able to continue to benefit from EU financial assistance by ensuring that the activities for which they seek such assistance are carried out inside Israel proper.


European Commission`s FAQ on new guidelines on eligibility of Israeli entities and their activities in the occupied territories

EU Guidelines

Statement by the Delegation of the European Union to the State of Israel on the European Commission Notice

Statement by Catherine Ashton