BRUSSELS (Reuters) - 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.
In its ruling, however, the bloc's second highest tribunal said member states could keep Hamas's assets frozen for three months to give time for further review or for an appeal.
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.
The United States urged the European Union not to change its stance.
"We believe that the E.U. should maintain its terrorism sanctions on Hamas," U.S. State Department spokeswoman Jen Psaki told a regular news briefing.
Israel, which has clashed repeatedly with Europe in recent years over Palestinian statehood ambitions, demanded Hamas remain blacklisted and said the ruling showed "staggering hypocrisy" towards a Jewish state founded after the Holocaust.
"It seems that too many in Europe, on whose soil six million Jews were slaughtered, have learned nothing. But we in Israel, we've learned," Prime Minister Benjamin Netanyahu said. He branded Hamas "a murderous terrorist organisation".
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 say it is a terrorist organisation, 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 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 said. "Hamas is a resistance movement and it has a natural right according to all international laws and standards to resist the occupation."
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.
It said 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 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.
The European Parliament has 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.
Additional reporting by Alastair Macdonald in Brussels, Maayan Lubell and Ori Lewis in Jerusalem, Nidal al-Mughrabi in Gaza and David Brunnstrom in Washington; Editing by Janet Lawrence and Grant McCool