Economic Dealings With Occupied Territories

55 Pages Posted: 13 Sep 2014 Last revised: 4 Jun 2015

See all articles by Eugene Kontorovich

Eugene Kontorovich

George Mason University - Antonin Scalia Law School

Date Written: September 11, 2014


In recent years, the international legality of economic activity in occupied territories has emerged as matter of significant debate, largely focused on Israeli-controlled territories. Some European officials, supported by prominent scholars and a wide range of NGOs, claim that international law requires limiting or prohibiting economic relations involving the Israeli-controlled West Bank and Golan Heights. Claims are increasingly being heard that international law requires a boycott of Israeli settlements, or at least the clear labeling of goods produced there.

The question of the lawfulness of such activity has even greater salience and urgency with Russia’s annexation of Crimea and belligerent occupation of Eastern Ukraine. These areas have a significantly greater economic potential than most currently occupied territories, and Moscow is actively seeking foreign investment there.

Discussions of these legal issues have proceeded largely along theoretical lines, ignoring the rich trove of relevant state practice from other occupied territories such as Western Sahara, Northern Cyprus, Nagorno-Karabakh and Abkhazia. The EU, the U.S. and other states have adopted a variety of formal positions regarding activities in these territories. Moreover, recent years have seen a proliferation of state practice and, for the first time, judicial decisions, involving these very questions.

This article conducts a comprehensive survey of the relevant current state practice and judicial precedent regarding occupied territories, aside from the well-examined case of Israel. Much of this practice has never been considered by scholars, let alone examined holistically. Clear patterns emerge when state practice is examined globally, and the principles they suggest are in turn reaffirmed by recent path-breaking decisions of European national courts.

State practice and decisions of important national courts support a fully permissive approach to economic dealings by third-party states or nationals in territories under prolonged occupation or illegal annexation. There is no obligation on third-party states to block such activity, or to insist on particular language on product labels, or to ensure that their foreign aid funds do not cross into occupied territory. That does not mean that third countries are prohibited from taking such actions for diplomatic, rather than legal, reasons – though given in the absence of a public law prohibition, WTO and other trade rules may actively bar third-country restrictions on such activity. Practice is most varied on the question of trade treaties extending to occupied territory, as this seems to depend more on the interpretation of the particular instruments, rather than general principles.

Keywords: international humanitarian law, non-recognition, trade relations, Israel, Palestine, occupation

JEL Classification: F14, K30, K33

Suggested Citation

Kontorovich, Eugene, Economic Dealings With Occupied Territories (September 11, 2014). 53 Columbia Journal of Transnational Law 584 (2015), Northwestern Public Law Research Paper No. 14-46, Available at SSRN: or

Eugene Kontorovich (Contact Author)

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