Israel Is Furious Over a European Ruling About Wine Labels
Wine labels, it turns out, can be a diplomatic nightmare.
Such is the result of a much-anticipated ruling Tuesday by Europe’s highest court, which said European consumers must be informed when the food they buy comes from Israeli settlements in territories such as the West Bank and the Golan Heights.
The ruling—in a case involving a West Bank boutique winery named Psagot—will likely have political repercussions, due to the contentious status of those territories.
Here’s how the case came about, and what the fallout is already looking like.
What’s the deal with the West Bank?
The West Bank (including East Jerusalem) has, along with the Gaza Strip and the Golan Heights, been controlled by Israel for over half a century. This situation began in the 1967 “Six-Day War” between Israel and its neighbors, during which Israel occupied the areas.
These days, Israel considers the Golan Heights to be part of Israel (as does U.S. President Donald Trump,) the West Bank to be “disputed” territory, and Gaza to be self-governing. The Palestinians consider the West Bank and Gaza to be part of the State of Palestine, which is recognized by most of the world. Most of the world therefore sees the West Bank as being illegally occupied by Israel.
However, hundreds of thousands of Israeli settlers have built homes and businesses in the West Bank—illegally, in the eyes of the European Union (and many other countries.)
One of those businesses is the Psagot Winery, in the eponymous West Bank settlement. Psagot produces 350,000 bottles of wine annually, most of which it exports.
How did this case come about?
Four years ago, the EU issued guidelines saying that foodstuffs originating in the settlements should be labeled as such—as in, bearing a phrase such as “product from West Bank (Israeli settlement).” The move was political dynamite. Israeli Prime Minister Benjamin Netanyahu suspended diplomatic contacts with EU bodies that were involved in peace efforts; Israeli Foreign Minister Avigdor Liberman had previously claimed the labeling requirements were comparable with the Nazis requiring Jews to wear yellow stars.
A year later, in November 2016, France became the first EU country to start trying to enforce the guidelines.
The Psagot Winery and a French-Jewish advocacy group appealed against the decision, and the case made its way to the Court of Justice of the European Union, which on Tuesday upheld the EU rules.
“The indication of the territory of origin of the foodstuffs in question is mandatory, within [EU law], in order to prevent consumers from being misled as to the fact that the State of Israel is present in the territories concerned as an occupying power and not as a sovereign entity,” the court said in a statement.
“The provision of information to consumers must enable them to make informed choices, with regard not only to health, economic, environmental and social considerations, but also to ethical considerations and considerations relating to the observance of international law,” the court said.
What’s the fallout?
The Israeli government is not happy at all.
“The ruling’s entire objective is to single out and apply a double standard against Israel. There are over 200 ongoing territorial disputes across the world, yet the [court] has not rendered a single ruling related to the labeling of products originating from these territories. Today’s ruling is both political and discriminating against Israel,” its foreign ministry said in a statement.
What’s more, the Israeli government is claiming that the ruling “diminishes the chances of reaching peace” in the Israeli-Palestinian conflict, and “emboldens radical anti-Israel groups that advance and call for boycotts against Israel and deny its right to exist.” Foreign Affairs Minister Israel Katz said he would talk to his European counterparts about it.
Interestingly, the Times of Israel reported Monday that some anonymous figures in the Israeli government were critical of Psagot Winery for pushing the case, on the basis that the outcome would backfire on Israeli businesses.
The Lawfare Project, a U.S.-based group of lawyers who defend Jewish civil rights, said Tuesday that the ruling was discriminatory because it “mandates religious discrimination, treating Jewish-owned and Muslim-owned businesses differently even if they operate in the same geographic location.”
Others see the ruling quite differently.
“If anything, the labelling guidelines should be slightly underwhelming,” said Hugh Lovatt, a policy fellow at the European Council on Foreign Relations, in an email. “Israeli settlement products will still be sold in the EU market. Nor do the guidelines even apply to all types of settlement products (they mostly related to foodstuffs).”
Lovatt also noted that enforcement of the rules has been “very minimal” over the last few years, though many EU countries may have been holding off pending Tuesday’s court decision.”I would expect some states to [enforce the rules] more pro-actively,” he said. “Others, particularly those in Central/Eastern Europe, will likely continue resisting, even if this puts them in technical violation of EU law.”
More must-read stories from Fortune:
—China’s Singles’ Day sales blew past Black Friday and Cyber Monday
—Energy companies say the oil glut—and shrinking profits—aren’t over
—Why China’s digital currency is a “wake-up call” for the U.S.
—Fintechs TransferWise and GoCardless team up
Catch up with Data Sheet, Fortune’s daily digest on the business of tech.