Ireland's gambit on EU-Israel trade sanctions

Ireland and Spain have revived their campaign to use EU trade in order to bring Israel to heel over its actions in Gaza and Lebanon.

However, the interventions this week both in Luxembourg and Brussels suggest an uphill battle.

The initiative has been hindered by a lack of consensus among EU capitals, and the way the EU-Israel relationship is structured: according to one analysis, Israel should be invited to discuss with member states whether it is in breach of the Association Agreement which binds both sides.

Leo Varadkar and Spanish prime minister Pedro Sanchez first made the call to hold Israel to account through trade sanctions in a letter to European Commission president Ursula von der Leyen back in February.

To date, no reply has been sent (at the time the Commission acknowledged receipt of the letter).

Article 2 of the EU-Israel Association Agreement, which is really all about trade, binds both parties to observe human rights and democratic principles.

Dublin and Madrid believe Israel is in breach and that the Commission should urgently assess whether that is the case, with the option of then suspending trade.

Tánaiste Micheál Martin has also been raising the issue, as has Simon Harris after he succeeded Varadkar as Taoiseach, but to little avail.

One problem is the hybrid nature of how EU foreign and trade policy is constructed.

The European Commission has exclusive competence when it comes to trade with the outside world, while member states are in charge when it comes to foreign policy.

The EU-Israel Association Agreement trickily falls under both.

The choreography of the Irish and Spanish request, therefore, is complex. While the letter was sent to Von der Leyen, the Commission would have to wait for a signal from member states to assess whether Israel was in breach of Article 2.

If that signal were given, the Commission could carry out an assessment, and if it found Israel was in breach, ask member states to take action through the Foreign Affairs Council, ie the monthly meetings of EU foreign ministers.

So far, no signal has been sent to the Commission.

EU foreign ministers first addressed the issue in June.

A background note ahead of the gathering said Josep Borrell, the EU foreign policy chief who speaks on behalf of member states, would "update the ministers on the prospect of convening an EU-Israel Association Council," the bilateral forum for EU-Israeli encounters.

That meant Borrell was taking the Irish and Spanish request seriously, but getting such a meeting off the ground was going to be problematic for starters.

The forum has seldom met. The EU-Israel Association Agreement was signed in 1995 and came into effect in 2000, but the envisaged annual meetings have been plagued with friction.

In 2013, the then prime minister Benjamin Netanyahu cancelled that year’s meeting after the EU said the trade agreement only applied to Israel’s pre-1967 borders, not the occupied territories.

The following year the EU cancelled after member states complained about the civilian death toll in the 2014 Israel-Gaza war.

Convening a meeting at the peak of the current Gaza war, with vitriol flying in all directions, was never going to be easy.

This week, at another meeting of foreign ministers in Luxembourg, Borrell recalled when he broached the subject in June.

"I presented this issue to [EU foreign ministers]," he told reporters. "[They] said, okay, we'll do it. But first, let's talk with our Israeli friends. Let's have an Association Council, and we’ll listen to them, and then we’ll assess the situation."

As expected, no such meeting materialised. Contacts between the EU’s foreign service (the EEAS) and Tel Aviv ground to a halt over the substance of the meeting, the agenda and where it would take place.

On Monday, Borrell was blunt: "If we have to wait for the Association Council to take place, I am afraid it will not [deliver] an answer to the request by Spain, Ireland and others."

For Ireland and Spain, however, the niceties of an Association Council had been overtaken by the advisory decision from the International Court of Justice (ICJ) on 19 July, which stated that Israel’s presence in the occupied Palestinian territories was illegal under international law.

In September, the United Nations said all countries should therefore "review diplomatic, political, and economic interactions with Israel to ensure they do not support or provide aid or assistance to its unlawful presence in the occupied Palestinian territory".

The Irish Government had already sought advice from the Attorney General in August as to whether the ICJ decision bound the EU to ensure its "economic interactions" with Israel did not support its presence in the occupied territories.

Surely the EU-Israel Association Agreement was now central to that question?

Arriving at the EU-Gulf Cooperation Council summit in Brussels on Wednesday, Simon Harris believed it was.

"The context has very much changed since the ICJ advisory opinion was given in July," he told reporters. "In fact, I would go so far as to say it is now no longer a discretion on countries that support the ICJ. It is an obligation to take action to help give effect to that opinion."

Harris had been given cover by Pedro Sanchez. At a forum in Barcelona on Monday, the Spanish prime minister said: "The European Commission must respond once and for all to the formal request made by two European countries to suspend the Association Agreement with Israel if it is found, as everything suggests, that human rights are being violated."

Sanchez and Harris then held talks on the margins of the regular EU summit on Thursday.

"They exchanged views on the need for the EU to reflect on its policy and relationships in the [Middle East] region in light of the ICJ advisory opinion in July," said a government spokesperson. "They agreed to maintain their call for a review of the EU-Israel Association Agreement."

However, the agenda of the summit on Thursday was not entirely conducive to such a call.

The morning was dominated by the visit of Ukrainian president Volodymyr Zelensky, while leaders spent a long time discussing migration in the afternoon and early evening, leaving just two hours for a discussion on the Middle East over lunch.

Furthermore, the sheer scale of the conflagration, now engulfing Lebanon, with fears of all-out war between Israel and Iran, meant that EU-Israel trade was somewhat drowned out.

On top of all that, reports started filtering in that the Hamas leader, and 7 October mastermind, Yahya Sinwar had been killed in Rafah - precisely the part of Gaza that the EU had begged Israel not to invade.

The outgoing president of the European Council Charles Michel decided that leaders should focus more on the text of the summit’s final communiqué - so as to leave more time to discuss migration - rather than get into long discussions about the Middle East.

In the event, leaders agreed an 11-paragraph text on the Middle East crisis - calls for ceasefires, a focus on the two-state solution, protecting UNIFIL and UNRWA (the UN agency for Palestinian affairs) from Israeli attacks, condemnations of the civilian casualties in Gaza and Lebanon, condemnations of Iran’s ballistic missile attack on Israel - but no mention of the EU-Israel Association Agreement.

Harris and Sanchez both raised it during the meeting, however.

The Taoiseach said Israel was not listening to its allies despite repeated entreaties for a ceasefire.

He asked what the tipping point would be for Israel to finally listen.

While Israel had a right to defend itself, it had to do so within International Law, and the ICJ opinion suggested that this was not the case, he said.

"We therefore need to ask ourselves what we can do to achieve this," said Harris, linking that question to the EU-Israel Association Agreement.

Harris and Sanchez were supported by the Belgian prime minister Alexander de Croo (Belgium’s foreign minister had also pushed the Association Agreement angle at foreign ministers meeting in Luxembourg on Monday).

After the summit, De Croo told reporters: "I probably agree with what Simon said. I think the Association Agreement has clear provisions on respect for human rights, and there are strong indications that, if you do the evaluation, there are a lot of red flags."

On Monday, Josep Borrell made it clear that foreign ministers did not have to wait for the convening of an Association Council - they could, in mid-November, decide themselves to ask the Commission to start assessing Israel’s compliance with the human rights clause.

However, that seems unlikely, given the lack of consensus to date.

The Government acknowledges the complex overlapping of competences between member states and the European Commission, and the opposition of countries like Austria, Hungary and the Czech Republic to threatening trade sanctions (Simon Harris told reporters it was "crystal clear" there was no consensus.)

Dublin also believes that the Israelis do not have to be "on board" with any assessment of Article 2.

On Wednesday, the Taoiseach said Ireland would "not wait for everybody in Europe" to move on the issue.

"I'd like to do that at an EU level, but regardless of the EU position, I'm not going to ignore the obligation that I believe now exists on Ireland to act," he told reporters.

That sets up a potential conflict with the European Commission if the Attorney General’s advice - which he will bring to Cabinet next week - recommends that Ireland take unilateral trade measures against Israel.

The advice is linked to the revival of the Occupied Territories Bill, first tabled by Senator Frances Black in 2018, which would make it an offence to import goods made in Israeli settlements in Palestinian Territories.

What difference would the Bill make if it became law?

It’s estimated that imports into Ireland from Israeli settlements amount to between €500,000 and €1 million annually. It would be a criminal offence to import such goods under the Bill.

The EU regards the Israeli settlements as illegal, and as such its trade with Israel (under the Association Agreement) does not cover any goods produced by settlers.

The net effect is, not that the goods are prohibited, rather they do not avail of the same preferential tariffs applied to goods produced in Israel itself.

Settler goods cannot be declared "Product of Israel", and in 2015 the EU issued guidelines about how goods produced in settlements - such as fruit and vegetables - should be labelled, in the teeth of fierce opposition from Israel.

Since 2004, Israel has had to provide proof of origin when shipping goods to Europe, showing where they were precisely produced (down to the postcode), so that consumers can be sure of whether they are coming from settlements or not, and so that EU customs officials know whether or not they qualify for preferential tariffs.

The European Commission publishes a list of such postcodes, given that settlements have been expanding. The most recent list was in June 2023.

The net difference, therefore, between the Occupied Territories Bill and the EU’s own restrictions is that settler produced goods would be prohibited from entering Ireland, whereas under EU rules they are simply more expensive, and are clearly labelled as coming from the Occupied Territories.

The big problem, however, is the Bill would be regarded as illegal.

Trade between member states and the outside world is an EU competence (indeed, when the Bill was first tabled, the government at the time blocked it on the basis that it would be incompatible with EU law).

An EU official said that under the Common Commercial Policy, any unilateral move by Ireland on foot of the Attorney General’s advice next week would be a breach of EU rules.

In April this year, former Sinn Féin MEP Chris McManus, in a written question, asked the Commission if there were exemptions to EU trade law on the grounds of "public morality, public policy or public security" - as laid down in Article 36 of the EU treaties - in the context of the Occupied Territories Bill.

The response was framed in terms of the free movement of goods between EU member states since Israeli settlement goods would not make their way directly to Ireland but rather through other EU ports (in other words, if the goods came via Rotterdam, would Irish customs officials be able to block them?).

The Commission made it clear that a fundamental principle of the free movement of goods meant that exemptions were "interpreted narrowly".

The burden of proof would be on Dublin to demonstrate that the Occupied Territories Bill was necessary to protect public morality etc, and that it complied with the principle of proportionality.

The other legal question is whether the ICJ decision - which is non-binding - trumps EU law, which is binding on member states.

A spokesperson for the Department of Foreign Affairs said: "The government has been examining the implications of the International Court of Justice Advisory Opinion at national level.

"The Government has received the advice of the Attorney General on whether the Occupied Territories Bill can be enacted. This is now receiving careful consideration and the Tánaiste will bring a Memorandum to Government at its meeting next week."

What will the Commission do if Dublin adopts unilateral trade sanctions?

Probably not much initially.

One useful parallel is Poland’s unilateral blockade against Ukrainian grain imports last year.

On paper, it looked like Poland was in clear breach of EU trade law. However, because of the political sensitivity around the issue, the European Commission did not take immediate legal action.

Without further pressure from member states, the issue remained in limbo until the dispute resolved itself in the wider geopolitical context.

One EU source suggested something similar might happen if Ireland goes it alone.

Either way, the affair is indicative of how divisions at EU level, and the sense of helplessness in the face of Israel’s actions, have necessarily characterised Europe’s response.

So long as Israel’s supporters - Austria, Germany, Hungary and the Czech Republic - are determined to limit any damage to relations with Israel, the EU will collectively have few levers to force a rethink.