Can Israel sue the European Union before the WTO over the labeling crisis?

Whereas the European Union sees the labeling as a way to press Israel to make concessions to the Palestinians regarding the settlements, Israel views the move as unfairly taking sides.

A girl holds an Israeli flag on a hilltop near the Maaleh Adumim settlement (photo credit: REUTERS)
A girl holds an Israeli flag on a hilltop near the Maaleh Adumim settlement
(photo credit: REUTERS)
The Kohelet Policy Forum last week pushed for Israel to sue the EU before the World Trade Organization for discrimination in the settlements labeling crisis.
Earlier last week, on Wednesday, the EU finally published its long-expected guidelines for the labeling of imports from the West Bank, Golan Heights and east Jerusalem as from the Israeli settlements instead of as made in Israel, causing one of the biggest diplomatic fall-outs in years between the EU and Israel.
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Whereas the EU sees the labeling as a way to press Israel to make concessions to the Palestinians regarding the settlements, Israel views the move as unfairly taking sides and Kohelet put forth the idea of suing the EU before the WTO as a concrete legal tactic to block the new policy.
So is suing the EU before the WTO a realistic option? What would be the basis under relevant WTO law? Even if it is legally possible, doesn’t it seem a long-shot that a small country like Israel could beat the powerhouse EU in an international forum – the kind normally dominated by the EU? The WTO is the umbrella organization that sets the legal framework for international trade, and it can also provide binding arbitration proceedings to resolve international trade disputes.
According to one of the authors of the Kohelet position paper, Prof. Eugene Kontorovich, the new EU policy carves out a special legal rule for Israel that contradicts the EU’s official positions, goes against rulings of European national courts, and violates the WTO’s basic tenets opposing discriminatory trade rules.
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He notes that the WTO has a nondiscrimination requirement making it impermissible to apply trade rules and restrictions to some member countries and not to others.
Further, Kontorovich contends that the WTO’s nondiscrimination restrictions apply not just to a state’s sovereign territory, but also to areas of its “international responsibility,” such as occupied territories.
For example, Kontorovich explains that the US, with international approval, received the benefit of its international trade treaties even in territories it occupied in World War II, as well as in the Panama Canal Zone, despite making no claim of sovereignty.
Accordingly, argues Kontorovich, it would not be new for Israel to receive full trade rights for non-sovereign areas that it is administering.
Confronting head-on some of the practical concerns with their idea, Kontorovich and co-author Prof. Avi Bell write that the WTO is “a relatively attractive forum to challenge the European restrictions.”
This is because it does not require intervention from “a permanent international court likely to be influenced by hostile attitudes toward Israel.”
Next, Kontovorich addressed whether a smaller country such as Israel could beat a powerhouse like the EU on the high-profile stage of the WTO.
He cited as proof the Caribbean nation of Antigua and Barbuda’s successful slam-dunk win over the US, winning a $150 million judgment in WTO arbitration for discrimination regarding online gambling.
In 2003, Antigua and Barbuda sued the US at the WTO, protesting new US restrictions on online gambling trade that contradicted agreements the US committed to in the mid and late 1990s.
The US subsequently claimed that it “made a mistake” in including online gambling in the GATS trade agreement schedule of approved trade categories, and tried to back out of the WTO case at one point by claiming the agreement was invalid on moral grounds.
This is significant because it raises a case where the US lost to a small nation even though it was claiming that the case raised deeper moral issues and was more than just an economic dispute – a defense the EU would likely raise in any Israel suit over the labeling dispute.
But the WTO scoffed at the US’s morality claims, noting the widespread gambling opportunities available throughout the US.
Kontorovich says that Israel could note the EU does not have restrictions on trade or special labeling for Morocco, Turkey and other countries that for decades have occupied territories of other states that do not belong to them under international law.
This would make the labeling restrictions discriminatory and inconsistent just as the US’s restrictions on Antigua were discriminatory and inconsistent.
In another dispute, several small and less powerful Latin American countries, such as Guatemala, beat the EU at the WTO in a trade dispute over quotas and the amount of tariff the EU imposed on bananas in the 1990s, eventually leading to the EU revising its policies in 2009 and 2012.
There are more instances where the WTO ruled against a country that claimed as a defense that the issue was not commercial, but a moral issue related to the environment, public health or protecting human rights.
Further, Kontorovich suggests that filing a WTO suit is often a way to create more favorable conditions for settling a dispute without ever getting to the judgment stage.
But even if this is possible, will Israel decide to do it? Kohelet’s initiative got quick support from Public Security Minister Gilad Erdan, although his public statements in favor stopped just short of formally committing to sue the EU.
Foreign Ministry spokesman Emmanuel Nachshon was more noncommittal regarding the idea, stating, “Our jurists are aware of and are studying these options and will formulate an agreed upon opinion.”
Further, despite all of the above, The Jerusalem Post has learned that there are likely strong voices within the government that view the WTO idea as counterproductive, with a softer power behind-the scenes approach being more effective for resolving the issue.
In other words, Israel has been willing to push back at the EU with softer measures such as temporarily suspending diplomatic dialogue and summoning the EU ambassador, but some would view suing before the WTO as too blunt an instrument and one that would not produce results anyway.
Further, the issue has only arisen publicly as an option very recently, so there has not been much time for contrary academic opinions to form.
For now, though, suing before the WTO is another idea on the public agenda that is likely to be debated in terms of how to address the EU settlement labeling dispute.