European Commission asks for partial suspension of EU-Israel trade

On 17 September 2025, the European Commission formally presented a proposal to suspend key trade-related provisions of the EU-Israel Association Agreement and to impose targeted sanctions on specific individuals and entities. These measures are based on the Commission’s assessment that Israel has breached Article 2 of the EU-Israel Association Agreement, which identifies respect for human rights and democratic principles as essential elements of the bilateral relationship.

Background and approval process

The EU-Israel Association Agreement, in force since 2000, governs trade and cooperation between the EU and Israel. The Commission’s proposal follows a review concluding that recent developments of the conflict in Gaza constitute a material breach of Article 2.

To take effect, the proposed suspension of trade provisions must be approved by a qualified majority in the Council of the European Union (i.e. at least 15 Member States representing 65% of the EU population). The proposed sanctions package, which targets individuals under the EU Global Human Rights Sanctions Regime, requires unanimous approval.

• Expected timeline: The proposal may be discussed at the Foreign Affairs Council meeting in October 2025, although an earlier extraordinary meeting remains possible.
• Political outlook: In May 2025, 18 Member States (representing ~60% of the EU population) supported a request for the Commission to draft these measures. A modest increase in support could meet the qualified majority threshold. The qualified majority requirement opens the door to the possibility of adopting suspension measures despite the opposition of some Member States governments.

Proposed measures

If adopted, the proposal would suspend the following provisions of the EU-Israel Association Agreement:

• Title II – Free Movement of Goods: The EU-Israel free trade area would be suspended, meaning that trade between the EU and Israel would no longer benefit from preferential tariffs. Instead, goods exchanged between the two parties would be subject to the standard duties applied to third countries without a trade agreement. This change could affect approximately €5.8 billion in Israeli exports to the EU, as well as a significant volume of EU exports to Israel, potentially increasing costs and administrative burdens for businesses on both sides.
• Title III – Right of Establishment and Supply of Services: The suspension would allow Member States to restrict the establishment of Israeli companies and the cross-border provision of services.
• Title IV (Chapters 2–4) – Public Procurement, Competition, and Intellectual Property: These provisions, which promote mutual access to public markets and regulatory alignment on the protection of free competition and intellectual property rights such as patents and trademarks, would also be suspended.

The free movement of capital and payments would remain unaffected, meaning Israeli investments and financial transfers would continue to be protected under existing EU law.

Sanctions on certain individuals and entities

The Commission also proposed targeted sanctions against the leadership of Hamas, two Israeli ministers and nine individuals and five entities linked to violent actions in West Bank settlements. The proposed sanctions may include asset freezes, travel bans, and restrictions on financial transactions.

To be adopted, the sanctions package must receive unanimous approval from the Council, meaning all Member State governments must agree. These measures are intended to be narrowly focused on the individuals and entities identified, and are not expected to have broader implications for Israeli companies or citizens.

Implications for businesses

The EC’s proposal represents a significant development in EU-Israel relations. Businesses with interests in Israel or the EU should monitor the situation closely, and consider impacts on tariffs, market access, and regulatory cooperation. The suspension of preferential treatment may increase costs and administrative burdens for EU importers and investors.

For more information or to discuss how these developments may affect your business, please contact our team.