The European Union has issued a directive forbidding its 28 member countries from funding or participating in projects that are located within illegal Israeli settlements. The new directive, however, does not apply to trade between the EU and Israel, so businesses operating in the illegal settlements would not be affected. The legally binding directive will come into effect in 2014, and it forbids EU member states from issuing grants, scholarships, funding, and prizes to Israeli non-governmental and governmental organizations operating in settlements built illegally by Israel in East Jerusalem, the West Bank, Gaza, and the Golan. The directive requires that any agreements or contracts between an EU country and an Israeli organization include a clause stating that the project or institution receiving funding or assistance is not located in an illegal settlement. The European Union recognizes that Israeli settlements on occupied land are illegal according to international law.

A statement issued by the EU explained that, “the purpose of these guidelines is to make a distinction between the state of Israel and the occupied territories when it comes to EU support.’ The Israeli government will have to stipulate in future agreements with the EU that the settlements in East Jerusalem, the West Bank, and the Golan are not a part of the State of Israel. Haaretz quoted an Israeli official as saying that the new EU guidelines are an “earthquake”, and Ze’ev Elkin, Israel’s deputy foreign minister, described the EU directive as a ‘big mistake.” Palestinian official Hanan Ashrawi embraced the EU’s decision, saying that “[this] is the beginning of new era. Israel should listen carefully and should understand that this occupation cannot continue without any kind of accountability.’