The Legal Basis for EU Measures Restricting Trade with Israeli Settlements: A Constitutional Analysis

The International Court of Justice’s (ICJ) 2024 Advisory Opinion on the legal consequences of Israel’s occupation of Palestinian territories has brought into sharp focus the European Union’s obligations under international law. Among these is the duty of non-recognition, which requires the EU to ensure that its trade and economic relations do not contribute to the maintenance of an unlawful situation. This raises a constitutional question for the EU: On what legal basis should it adopt measures restricting trade with Israeli settlements in the occupied territories?

Two primary options present themselves: Article 207 TFEU, which governs the Common Commercial Policy (CCP), or Articles 29 TEU and 215 TFEU, which provide for restrictive measures under the Common Foreign and Security Policy (CFSP). The choice between these legal bases is not merely technical. It determines the procedural framework—qualified majority voting in the Council with European Parliament involvement under Article 207 TFEU, or unanimity in the Council without Parliament under the CFSP—and carries significant implications for the EU’s institutional balance and democratic legitimacy.

The Post-Lisbon Framework: Blurred Boundaries

The Lisbon Treaty significantly reshaped the EU’s external relations architecture, blurring the boundaries between trade and foreign policy. The CCP, as set out in Article 207 TFEU, now explicitly operates "in the context of the principles and objectives of the Union’s external action," which include respect for international law, human rights, and sustainable development. This expansion has enabled the Court of Justice to accept that the CCP can accommodate values-based trade regulation, provided the measure directly and immediately affects trade flows.

In Opinion 2/15 on the EU-Singapore Free Trade Agreement, the Court confirmed that the CCP may include provisions pursuing non-commercial objectives, such as labor and environmental standards, so long as they regulate the conditions under which trade takes place. This reasoning has since underpinned a series of unilateral EU instruments, including the Forced Labour Regulation, the Conflict Minerals Regulation, and the ban on Russian gas imports. These measures demonstrate that the CCP can serve as a vehicle for addressing geopolitical and normative concerns through trade governance.

At the same time, the CFSP remains a distinct competence, governed by its own procedural rules. Articles 29 TEU and 215 TFEU allow the Council to adopt restrictive measures interrupting or reducing economic and financial relations with third countries. The Court has upheld the use of these provisions in cases where measures are embedded in broader security strategies, such as UN-mandated sanctions or CSDP operations. However, the CFSP’s doctrinal foundations are less stable in cases lacking such a security-oriented framing.

Applying the Centre-of-Gravity Test

The Court of Justice’s centre-of-gravity test requires that the choice of legal basis rest on objective factors, primarily the aim and content of the measure. For measures with multiple objectives or components, the Court distinguishes between those that are essential and those that are incidental. Only in exceptional cases, where the components are inseparably linked and the relevant procedures are compatible, may multiple legal bases be combined.

Option 1: Article 207 TFEU (with or without Article 114 TFEU)

A measure restricting trade with Israeli settlements would directly and immediately affect trade flows by prohibiting the import and export of goods and services. The Court has consistently held that such measures fall within the scope of Article 207 TFEU if they are "essentially intended to promote, facilitate or govern trade." The proposed measure meets this criterion: its operative provisions regulate trade, and its objective—to ensure compliance with the duty of non-recognition—is embedded within the normative framework of Article 207(1) TFEU.

Moreover, the post-Lisbon trajectory of the CCP supports this interpretation. The Court’s acceptance of values-based trade instruments in Opinion 2/15 and subsequent case law suggests that the CCP can accommodate measures pursuing non-commercial objectives, provided they govern trade. The duty of non-recognition, as reaffirmed by the ICJ, is not external to the CCP but rather a principle that the CCP is explicitly required to uphold.

Where the measure includes internal market enforcement mechanisms—such as prohibitions on the sale or marketing of settlement goods within the EU—Article 114 TFEU could serve as a complementary legal basis. The Court has accepted that Article 114 may be used to harmonize rules governing the placing of goods on the market, even where such rules pursue non-economic objectives, provided they contribute to the establishment or functioning of the internal market. A dual legal basis of Articles 207 and 114 TFEU would therefore be procedurally compatible, as both provisions require the ordinary legislative procedure.

Option 2: Articles 29 TEU and 215 TFEU (CFSP)

The CFSP route is not without legal merit. Articles 29 TEU and 215 TFEU allow for the adoption of restrictive measures interrupting economic relations with third countries, and the Court has not excluded their use in situations involving serious breaches of international law. However, the doctrinal foundations for this approach are less stable in the present context.

The Court’s case law on CFSP legal bases has relied heavily on contextual factors external to the measure itself. In Restrictive Measures and Tanzania, the Court upheld CFSP legal bases where the measures were part of broader EU engagements with threats to international peace and security, such as UN-mandated sanctions or CSDP operations. The proposed measure on Israeli settlements lacks this security-oriented framing. The EU has not characterized the situation as a threat to "European and global security and stability," nor is the measure tied to a CSDP mission or UN Security Council mandate.

Furthermore, the absence of CFSP-specific objectives complicates the application of the centre-of-gravity test. Since the Lisbon Treaty, the CFSP no longer possesses its own distinct set of aims; its objectives are now embedded within the general objectives of the Union’s external action, which also inform Article 207 TFEU. This overlap makes it difficult to identify a CFSP-specific aim or content that would clearly distinguish a CFSP measure from a CCP measure.

Institutional Implications

The choice of legal basis carries significant institutional consequences. Under Article 207 TFEU, the measure would be adopted through the ordinary legislative procedure, requiring qualified majority voting in the Council and the approval of the European Parliament. Under the CFSP route, the measure would be adopted by unanimity in the Council, with no role for the Parliament.

The Commission’s reported preference for the CFSP route is notable, as it departs from the traditional role of the Commission as the guardian of the CCP. Meanwhile, Member States and the Council’s legal service have reportedly favoured the trade policy approach, which would give the Parliament a seat at the table and lower the threshold for adoption. This inversion of institutional preferences is unusual and warrants further reflection.

Conclusion: Article 207 TFEU as the More Coherent Legal Basis

The analysis above demonstrates that both legal bases are plausible, but neither maps neatly onto the proposed measure. The post-Lisbon ambiguities—the expansion of the CCP into values-based regulation, the erosion of CFSP-specific objectives, and the Court’s contextual approach to legal basis review—create a landscape in which the traditional aim/content dichotomy does not yield a straightforward answer.

However, when assessed through the lens of the Court’s recent jurisprudence, Article 207 TFEU emerges as the more coherent legal basis. The measure’s primary effect is the regulation of trade, and the Court has accepted that the CCP can encompass instruments pursuing non-commercial objectives, provided they govern trade flows. The duty of non-recognition, as reaffirmed by the ICJ, is embedded within the normative framework of Article 207 TFEU, which requires the CCP to be conducted in the context of the Union’s external action objectives.

The CFSP route remains a legal possibility, but it rests on less stable doctrinal foundations. The absence of CFSP-specific objectives, the lack of a security-oriented framing, and the Court’s reliance on contextual cues external to the measure itself make it difficult to articulate a convincing centre of gravity pointing towards the CFSP.

Ultimately, the choice of legal basis is not just a technical question—it is a constitutional one, with implications for the EU’s institutional balance and democratic legitimacy. The trade policy route offers a more coherent legal foundation and a more inclusive procedural framework, aligning with the EU’s post-Lisbon trajectory of using the CCP to address geopolitical challenges through trade governance.

‍This blog post summarizes the findings of a legal expert memo drafted at the request of the European Middle East Project, https://eumep.org/, and Coopération internationale pour le développement et la solidarité (CIDSE), https://www.cidse.org. Read the full memo here.