European Commission Guidelines

In July 2013, the European Commission issued guidelines stipulating that Israeli organisations will no longer be eligible to receive EU-funded grants or loans unless they certify that they originate within Israel's 1967 borders and do not operate in the Golan Heights, the Gaza Strip or the West Bank including East Jerusalem. These rules operated from the start of the EU's 2014 financial year. The Guidelines are intended to force Israel either to accept that it has no sovereign rights in any part of the Occupied Territories, or else to forfeit the prospect of further participation in EU-funded cooperation research, including the Horizon 2020 programme.

Although the Guidelines do not constitute a boycott, they were vigorously opposed by the Israeli government. European sources maintained that the rules were required by the EU’s own law, which incorporates its obligations under international law not to “recognize” illegal actions by other countries. Allowing EU aid to be used to benefit Israel’s settlements could breach that law.
A compromise agreement has been accepted to permit Israeli participation in Horizon 2020. The agreement includes two appendices. One states that Israel does not accept the Guidelines. The other asserts that the Guidelines reflect EU policy. No Horizon 2020 funds will be made available, directly or indirectly, to Israeli institutions in the West Bank.
Israeli bankers are anxious that in future the EU may follow its own rules strictly and refuse to work with Israeli banks because, for example, they all grant mortgages for homes in the occupied Palestinian territories. This could cripple the Israeli banking system.
One Israeli response to European trade restrictions has been to promote trade with Russia, China and India, and more recently with Australia and Indonesia. An eventual aim may be to negotiate free trade agreements with Russia and China.

• See also UK Government guidelines for British companies trading with West Bank settlements.
• Labelling of goods from the settlements.
• EU incentives for peace negotiations.