Multilaterally, Israel takes part in the 1995 Barcelona process (Euro-Mediterranean Partnership), and the subsequent 2008 Union for the Mediterranean, and since 2003 in the European Neighbourhood Policy (ENP).

The EU customs authorities are then able to discern the exact origin and provide preferential treatment only to goods from Israel proper, giving de facto meaning to the EU policy of non-recognition of the territories as part of the State of Israel[7] The 2010 ruling of the European Court of Justice in the Brita case confirmed that products originating in the West Bank do not qualify for preferential customs treatment under the EC–Israel Agreement, and that contrary assertions by Israeli authorities are not binding upon EU customs authorities.

In its reasoning, the ECJ relied on the presence of two, distinct and equal association agreements, one with Israel, applying to the "territory of the State of Israel", and one with the PLO, applying to the territory of the West Bank and the Gaza Strip, and on the general principle of customary international law that an obligation cannot be imposed on a third party without its consent.

"[citation needed] The Prime Minister of Israel, Benjamin Netanyahu, reiterated that the decision was "hypocritical and [set] a double standard", adding that the EU "should be ashamed" of its actions.

[13] Upgrading the Association Agreement has long been on hold following a vote in the European Parliament to postpone the issue in December 2008, due to continuing settlement building and the blockade of the Gaza Strip.

Ratification of the ACAA will make it easier to export Israeli pharmaceuticals and other goods to the 27 EU member countries, and vice versa.

The two sides have granted each other significant trade concessions for certain agricultural products, in the form of tariff reduction or elimination, either within quotas or for unlimited quantities.

The European Commission signed an agreement with Israel in July 2004 allowing for its participation in the EU's Galileo project for a global navigation satellite system.

[21] It has, however, been involved in a wide variety of Euro-Mediterranean regional programmes funded under MEDA: NGO monitor filed a lawsuit at the beginning of 2010 claiming they had identified over US $48 million allocated to Israeli and Palestinian NGOs by the European Commission.

[27] In 2012, the European Court of Justice dismissed the lawsuit citing "public security", "privacy" and "commercial interests" in denying the information request.

[27] The European Union attaches great importance to the finding of a just and final settlement to the Arab–Israeli conflict and supports initiatives to further the Israeli–Palestinian peace process, through the role of the Special Envoy for the Middle East Peace Process through its involvement in support of the Quartet (EU, US, Russia, UN), its programmes of humanitarian and other assistance for Palestinians in the West Bank and the Gaza Strip, by virtue of the commitments entered into by Israel, the Palestinian Authority and the EU in the European Neighbourhood Policy Action Plans, as well as through programmes for civil society and people-to-people contacts.

In 2008, during the French presidency of the Council, the European Union strived to increase co-operation with the US on Middle-Eastern issues, inter alia with a view to coordinating common pressures on Israel.

[33] European Union foreign ministers welcomed Prime Minister Benjamin Netanyahu's conditional endorsement of a future Palestinian state in June 2009, but said it was not enough to raise EU-Israel ties to a higher level and questioned the conditions set for backing a Palestinian state and Netanyahu's defense of Jewish settlements.

In December 2010, a group of 26 former EU statesmen, including former Foreign Affairs Chief Javier Solana, submitted a written petition calling for the EU to ban imports of settlement products, force Israel to pay the majority of aid required by the Palestinians, link an upgrade in diplomatic relations to a settlement freeze, and send a high-level delegation to east Jerusalem to support Palestinian claims to sovereignty.

[35] The EU has also been highly critical of Israeli military actions in the Palestinian territories and Lebanon, often referring to them as "disproportionate" and "excessive force" and calling for an immediate cease-fire.

During Operation Defensive Shield in 2002, the European Parliament passed a non-binding resolution calling for economic sanctions on Israel and an arms embargo on both parties.

When Palestine was admitted to UNESCO as a full member in October 2011, five EU members states were among the 14 countries that joined Israel in voting against (Czech Republic, Germany, Lithuania, Netherlands and Sweden); eleven voted in favour of Palestinian membership (Austria, Belgium, Cyprus, Finland, France, Greece, Ireland, Luxembourg, Malta, Slovenia, Spain) and eleven abstained (Bulgaria, Denmark, Estonia, Hungary, Italy, Latvia, Poland, Portugal, Romania, Slovakia, United Kingdom).

In 2011 incoming president of the European Parliament Martin Schulz confirmed that relations with Israel will remain frozen until there is movement on the peace process.

A classified document by EU delegates, obtained by Ynet, suggested funding Palestinian construction projects in Area C of the West Bank without Israel's cooperation, undermining Israeli control.

Under one interpretation of the proposal, the Commission would use legislation to force companies in Europe to break their links with businesses involved in settlement construction and commercial activities.

[43] Adnan ended his hunger strike after 66 days, after reaching a deal with prosecutors an hour before his case was due to be heard by the Supreme Court of Israel.

[47] The guidelines prohibit the issuing of EU grants, funding, prizes or scholarships to Israeli entities unless a settlement exclusion clause is included.

Faster advancement of such plans is somewhat hampered by the current instability in the Middle East and conflicts in the West Bank, Gaza Strip, and Lebanon.

[53] Former Spanish foreign minister Miguel Ángel Moratinos spoke out for a "privileged partnership, offering all the benefits of EU membership, without participation in the institutions".

On 11 January 2005, industry commissioner and vice president of the commission Günter Verheugen even suggested the possibility of a monetary union and common market with Israel.

[citation needed] Moreover, like most western European countries, Israel is a member of the OECD and from an economic perspective matches the European Union extremely well, with essentially every significant economic indicator (GDP per capita, government deficit, public debt level, current account surplus, inflation level, etc.)