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In this photo from February 11, 2014, Israeli workers inspect barrels in a winery in the West Bank settlement of Psagot. (AP/Dan Balilty)
In this photo from February 11, 2014, Israeli workers inspect barrels in a winery in the West Bank settlement of Psagot. (AP/Dan Balilty)
A rare case of Israeli government versus settler activists

Grapes of wrath: Israel sours on West Bank winery in spat over EU labeling

Taking the issue to court will likely backfire, officials say they told Psagot, just before verdict is announced; company denies it was warned but decries Jerusalem’s defeatism

Raphael Ahren is the diplomatic correspondent at The Times of Israel.

The Israeli government very rarely publicly locks horns with pro-Israel advocates. But that’s what’s been happening in the last few days, as anonymous officials in Jerusalem criticized Psagot, a winery in the West Bank, for going to court against the European Union’s policy of labeling products made by Israelis in the settlements.

In what could be described as a preemptive blame game, these officials are warning that the European Court of Justice is likely to rule in favor of the controversial labeling policy, and that the suit brought about by Psagot, while just, will ultimately backfire.

The decision, which will be handed down Tuesday, can be expected to further cement the EU’s commitment to labeling, and will consequently not only ensure bad headlines for Israel, but also boost the anti-Israel boycott movement — and worse still, actually harm the business interests of all Israelis exporters, not only those from the settlements.

“We are concerned about the expected verdict,” an Israeli diplomatic source told The Times of Israel two weeks ago.

“The European countries’ maneuvering space will decrease after the ruling,” another source in Jerusalem said. “Those seeking to delegitimize Israel could use the ruling against us, both on the legal level as well as in terms of public perception.”

A third official, also speaking on condition of anonymity, said that the expected ruling this week “will give a great boost to BDS.” The anti-Israel Boycott, Divestment and Sanctions movement is following this case “with great interest,” the official added, lamenting that the entire Israeli government agrees “that this ruling will be very damaging.”

Demonstrators wear shirts reading ‘Boycott Israel’ during a protest against US President Donald Trump’s decision to recognize Jerusalem as Israel’s capital at Republique Square in Paris, France, December 9, 2017. (AP Photo/Kamil Zihnioglu)

The Psagot Winery — located in a settlement by the same name just north of Jerusalem — and its supporters, naturally, take great offense at these accusations. There may be a handful of unnamed officials who, for some reason, have an ax to grind, they insist, but they are not representative of the government.

Still confident that they will win the case, the winery and its impressive host of lawyers also predict that their legal action will greatly benefit Israel, even if the EU’s top court ultimately decides against them and in favor of labeling.

“We’re a private business. But we believe that our actions are serving the interest of the State of Israel,” Yaakov Berg, the CEO of Psagot Winery, told The Times of Israel in a phone interview. “If we thought for a moment that it could hurt the State of Israel, we would stop instantaneously. We are not doing this only for the benefit of our company,” he insisted.

Winemaker Yaakov Berg from the settlement of Psagot in the West Bank near the city of Ramallah, December 13, 2012 (Yonatan Sindel/Flash90)

“I am not aware of a formal Israeli decision to oppose this case. That is a private opinion of two or three officials who apparently have an agenda,” Berg added, underlining his belief that a “majority of the Israeli leadership” approves of the case his company has filed.

“We have and will continue to cooperate with all government ministries. We believe that our fight is just.”

The whole problem started in 2015

The brouhaha has its roots in the EU’s 2015 decision to ban products originating in the settlements from using a “Made in Israel” label, and requiring them to be labeled as settlement-made.

One of the core arguments between Psagot and the Israeli government is whether the European Commission’s “Interpretative Notice” on labeling is legally binding and to what extent EU member states implement the policy.

Many officials in Jerusalem believe that most capitals don’t care much about labeling, and although the “notice” was considered mandatory, few enforced it.

Psagot argues the opposite, saying several European governments recently increased enforcement of the guidelines. It’s therefore important for supporters of Israel to show that labeling settlement goods is not only discriminatory but also not legally binding, the winery and its legal team believe.

A ‘Made in the West Bank’ label is not enough

In November 2016, the French Ministry for the Economy and Finance issued a notice specifying that a label saying “product originating in the Golan Heights” or “product originating in the West Bank” was not enough, because this bald geographical information “is likely to mislead the consumer as to the true origin of the product.” Rather, the ministry insisted, “it is necessary to add, in brackets, the term ‘Israeli settlement’ or equivalent terms.”

Psagot and a French-Jewish advocacy group called Organisation Juive Européenne (OJE) appealed that decision at the French Council of State, a government body that serves as legal adviser to the government.

Rows of Shiraz grapevines at the Psagot Winery (Jessica Steinberg/Times of Israel)

Unwilling to rule on a question of European law, the Council of State then referred two questions to the European Court of Justice, which is based in Luxembourg: Does EU law require West Bank goods to be labeled as coming from an Israeli settlement? And if not, are individual member state allowed to require such labels?

“I am confident that the court will rule according to the plain letter of the EU law, which clearly does not require such politicized and discriminatory labeling,” said Brooke Goldstein, a lawyer and the executive director of The Lawfare Project, a pro-Israel human and civil rights organization based in New York City.

“I am also confident that the court understands the economic Pandora’s box of consequences that will occur should the court decide to turn product labels into political billboards.”

The Lawfare Project advises Psagot on the case, together with the famed French law firm Cabinet Briard, and Washington, DC-based Covington & Burling, where former US ambassador to the EU Stuart Eizenstat is expected to lobby Congress on the winery’s behalf.

“The court will not rule in favor of labeling, because I am confident the judges are more farsighted than that,” Goldstein told The Times of Israel.

“Either way, I do not think that EU member states will be able to enforce any EU regulation that requires it to label only Israeli products. Since most EU member states have robust anti-discrimination laws, it will require any EU regulation to apply, in a non-discriminatory fashion, to any products imported into the EU that come from either disputed territories or territories engaged in human rights violations.”

In other words, if Europe’s top court decides that West Bank products must be labeled, she said, “that means Styrofoam cups from China, wine from Turkey, oil from Iran, will all be mandated to have labels indicating the particular political circumstances of each country. That will obviously be an economic nightmare for Europe and totally unenforceable.”

But according to about half a dozen Israeli officials who discussed the issue with The Times of Israel, this line of argument is likely a massive miscalculation.

It’s possible that a handful of courts, especially those in countries more supportive of Israel such as Hungary or Germany, would rule against labeling on discrimination grounds, they posit, but ultimately, the matter will be referred back to the court in Luxembourg  — the EU’s highest legal instance — where it has already been settled.

Palestinian workers at a date packaging factory in the Jordan Valley, November 2015 (Melanie Lidman/TOI staff)

It’s no secret that Europeans in general aren’t fond of Israel’s settlement enterprise. And as much as Israeli officials abhor the idea of labeling products made by Jews in their biblical homeland, they think it is utterly unrealistic to expect the EU’s top court to come down on the side of the settlements and against consumer protection.

Furthermore, officials in Jerusalem argue, European courts treats various geopolitical situations differently, and it is wishful thinking to assert that a verdict on labeling Israeli West Bank goods would also lead to Brussels having to label products from other disputed areas.

The officials’ skepticism was confirmed to a large extent in June 2019, when the Court of Justice’s Advocate General Gerard Hogan issued an opinion on the matter.

“It is perfectly obvious that in a modern environment some purchases are no longer based solely on considerations such as price or the identity of a particular consumer brand,” he wrote. “For many consumers, such purchases may also be influenced by criteria such as environmental, social, political, cultural or ethical considerations.”

Zooming in on “ethical considerations,” Hogan recalled that many Europeans boycotted South African products in the pre-1994 apartheid era. Today’s customers may similarly refuse to purchases goods from a certain country because they object to its policies, he wrote.

“In the context of the Israeli policies vis-à-vis the Occupied Territories and the settlements, there may be some consumers who object to the purchase of products emanating from the territories, precisely because of the fact that the occupation and the settlements clearly amount to a violation of international law.”

Barrels at an Israeli winery in the West Bank settlement of Psagot, February 11, 2014. (AP/ Dan Balilty/File)

In discussing the importance of international law’s “vital role in the maintenance of international peace and security and as a harbinger of justice in an otherwise unjust world,” Hogan went so far as hinting at a comparison between the settlement movement and Nazi Germany.

Some Europeans, he wrote, can remember the “destructive impact of brute force in an era where some countries had come to believe that international law was simply an empty promise to the oppressed and vulnerable of the world and that it could be disregarded with impunity.”

Hence, Hogan concluded, goods made in a territory captured by Israel in 1967 should indeed indicate the “geographical name of this territory and the indication that the product comes from an Israeli settlement if that is the case.”

Hogan’s opinion is not binding, though in an overwhelming majority of cases the 15 judges follow the advocate general’s lead.

On Tuesday, the Israeli government will hope for the court to overlook Hogan’s opinion, though few officials in Jerusalem believe that is a likely scenario. The Foreign Ministry even commissioned an external expert on European law, who corroborated the instincts of most diplomats, the officials stress.

“What do these anonymous Israeli government officials intend the effect to be of their broadcasting to the world a defeatist attitude?”

Representatives from the Foreign Ministry, the National Security Council, the Prime Minister’s Office and the Justice Ministry tried to convince Psagot to withdraw the case. “However, the company decided to continue the process, which in the future may create a more difficult reality that could harm Israeli food exporters,” an official said.

Psagot’s lawyers not only deny that the government made such a recommendation, but also decry the government’s fatalism.

“What do these anonymous Israeli government officials intend the effect to be of their broadcasting to the world a defeatist attitude?” thundered Goldstein, the New York lawyer who advises Psagot on the case.

“We have not sought permission or support and neither do we take strategic direction or control from the Israeli government,” she emphasized. “However, at no time did we get any credible message that it is the position of the Israeli government that Psagot should not file its case or should drop its case. The client has kept the relevant parties informed at all stages.”

France issued a discriminatory regulation forcing Israeli companies to place a derogatory label on their products to mark them as as illegitimate, and the government in Jerusalem is discouraging its citizens from fighting back, Goldstein lamented.

“How shameful for an anonymous Israeli government official to chastise a Jewish-owned company for bravely fighting against discrimination and how disturbing that this government official should blame that company for making anti-Semitism worse,” she went on. “Have we learned nothing from our history that we should be intimidated to remain silent?”

Psagot and its supporters are also wondering why Israeli officials would publicly doubt the merits of Psagot’s case even before the court has published its ruling. If Jerusalem is worried about losing, it could say “told you so” after the verdict, they note. But why torpedo the case by signaling to the court that the government expects a loss and is prepared to blame its own citizens for it?

Israeli officials respond to these charges by saying that it is of course the winery’s right to act as it sees fit, but that it is needlessly risking breathing new life into an issue that was until today not much more than a nuisance.

As opposed to Psagot and its lawyers, Israeli diplomats are convinced that a foreign policy issue as thorny as West Bank products is better left untouched. There are enough global efforts to delegitimize the settlements and to criminalize trade with them — including, for instance, legislation in Ireland, and a proposed UN Human Rights blacklist of companies that operate in the West Bank — so why wake a sleeping lion?

If the judges in Luxembourg on Tuesday morning adopt the position of the advocate general, the issue will generate headlines and much bad press for Israel, the Israeli officials worry. Worse, EU members states will henceforth be legally obligated to label settlement goods, they warn, because the court’s decision is final and cannot be appealed.

Illustrative – A hearing of the Court of Justice of the European Union. (Court of Justice of the European Union)

Psagot’s lawyers disagree, positing that labeling is already widely enforced and that a loss in court would simply mean a continuation of the status quo.

If Psagot does win the case, however, not much will change, the Israeli officials say. After all, the court was only asked to determine whether labeling is mandatory under EU law. Even if it is not, this can hardly be considered a major victory, they contend.

The officials also reject accusations claiming the government has sought to actively harm Psagot’s case by criticizing it before the verdict. It is absurd to assume that a European court would change its decision because of anonymous comments made a few days before it was announced, they maintain.

What if the court decides that labeling is legally binding?

Psagot and its lawyers are not worried. There are hundreds of European laws that aren’t implemented, so what difference does it make if the court rules in favor of labeling, argued Berg, the winery’s CEO.

“We knew of course that this court is not very fond of Israel. It’s a difficult, complicated case. But will I do nothing because just because it’s difficult? I don’t accept that,” he said.

Psagot hired “the best advocates in the world” and they are fighting a just battle that has a “significant chance” of success, Berg estimated.

Yaakov Berg posing at his Psagot Winery in the West Bank, June 21, 2017. (Andrew Tobin/JTA)

“By the way,” he added, “this court decision is just the beginning of the fight we’re preparing to put up. We won’t agree to a double standard. It cannot be that products from Tibet are considered ‘Made in China’ while I am labeled. I — who am working the field where my ancestors were already making wine during the Second Temple period. There is no historical debate over this; all historians agree that this was the homeland of the Jewish people.”

If the court confirms the legal necessity of labeling settlement goods, Berg will “see to it that the same principle is also applied to most powers,” he vowed, noting that Russia, Britain, France and even the US have their own territorial disputes.

“My grandmother escaped the Nazis; they labeled her as a Jew. I grew up in Russia, where they labeled us as Jews. They shall not stick special labels on us,” he declared. “It just won’t happen, certainly not in Europe. We won’t accept it.”

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