The Palestinian Islamist group Hamas should be removed from the European Union's terrorist list, an EU court ruled on Wednesday, saying the decision to include it was based on media reports not considered analysis.
However, in its ruling, the bloc's second highest tribunal said member states could maintain their freeze on Hamas's assets for three months to give time for further review or for an appeal to be launched.
Israel, which has clashed repeatedly with Europe in recent years over Palestinian statehood ambitions, reacted with dismay.
"We expect them to immediately put Hamas back on the list," said Israeli Prime Minister Benjamin Netanyahu, denouncing Hamas as "a murderous terrorist organization".
Looking to limit the fallout, the EU's foreign policy arm said the bloc continued to view Hamas as a terrorist group.
"This was a legal ruling of the court based on procedural grounds. We will look into this and decide on appropriate remedial action," spokeswoman Maja Kocijanic said.
Hamas holds sway in the Gaza Strip and its founding charter calls for the destruction of Israel. It has regularly battled Israel, most recently in a 50-day war this summer.
Most Western countries, including the United States, agree with Israel that it is a terror organization, pointing to years of indiscriminate rocket strikes out of Gaza and waves of suicide attacks, primarily between 1993 and 2005.
Hamas says it is a legitimate resistance movement and contested the European Union's decision in 2001 to include it on the EU terrorist list. It welcomed Wednesday's verdict.
"The decision is a correction of a historical mistake the European Union had made," Deputy Hamas chief Moussa Abu Marzouk told Reuters. "Hamas is a resistance movement and it has a natural right according to all international laws and standards to resist the occupation," Marzouk said.
The EU court did not ponder the merits of whether Hamas should be classified as a terror group, but reviewed the original decision-making process. This, it said, did not include the considered opinion of competent authorities, but rather relied on media and Internet reports.
"The court stresses that those annulments, on fundamental procedural grounds, do not imply any substantive assessment of the question of the classification of Hamas as a terrorist group," the court said in a statement.
It added that if an appeal was brought before the EU's top court, the European Court of Justice, the freeze of Hamas funds should continue until the legal process was complete.
In a similar ruling, an EU court said in October that the 2006 decision to place Sri Lanka's Tamil Tigers on the EU list was procedurally flawed. As with Hamas, it also said the group's assets should remain frozen pending further legal action and the European Union subsequently filed an appeal.
Israeli Economy Minister Naftali Bennett called Wednesday's verdict immoral. "Israel is strong and can defend itself against its enemies, but those who will suffer from strengthening terrorist groups will be the Europeans themselves," he said.
The judgment came as the European Parliament approved a non-binding resolution supporting Palestinian statehood. The text was a compromise, representing divisions within the EU over how far to blame Israel for failing to agree peace terms.