Labelling a wine from the West Bank as a "Product of Israel" is misleading and deceptive, a Federal Court judge declared Monday in a ruling that tosses the politically charged file back to federal officials for a decision.

The decision — the latest twist in a three-year-old dispute over whether bottles from the Psagot Winery and Shiloh Winery in the West Bank can be characterized as coming from Israel — means the Canada Food Inspection Agency must decide anew how the wines should be labelled.

The agency initially stripped the wines of the label in July 2017 after a formal complaint, but then reversed course shortly afterward following an outcry from some Jewish groups.

None of the parties and interveners in the case considered the West Bank to be territory of the state of Israel, which means the labels are fundamentally inaccurate, the Federal Court ruling noted.

The court went on to say that because the wines weren't labelled as products of the West Bank, Canadians were unable to make informed decisions as consumers, particularly if they wanted to "buy conscientiously."

"You can't label the products (as) 'Product of Israel' if they weren't produced in Israel. End of story," said Winnipeg resident David Kattenburg, who filed the court challenge.

Neither winery has responded to a request for comment.

A spokesperson for the Israeli ministry of foreign affairs told CBC News the court ruling "encourages and lends support to boycotts and the BDS (boycott, divestment and sanctions) movement. Israel objects to this.

"The Ministry of Foreign Affairs and the Israeli embassy in Canada will continue to act against discriminatory treatment and the singling out of Israel in the matter of product labelling in Canada."

'Peaceful' purchasing decisions

Kattenburg first raised concerns about the wine labels in January 2017 to the Liquor Control Board of Ontario, or LCBO. He followed up with a formal complaint that March, after which the CFIA determined the labels were misleading and in violation of federal law.

News of that decision became public on July 11, 2017, after the LCBO sent a letter to vendors, but the agency reversed itself following the ensuing outcry. The president of the agency held two meetings with senior staff and also examined information from Global Affairs Canada that suggested the West Bank could be considered Israeli territory under the Canada-Israel free trade agreement.

Kattenburg challenged the agency again, but lost. So he turned to the courts to settle an issue deeply rooted in the complex, emotionally fraught dialogue among Canada's Jewish community regarding Israeli settlements in the West Bank.

For political reasons, some consumers seek out products made in Israel, while others avoid them, he noted — a concern echoed in the court ruling.

"There are few things as difficult and intractable as Middle East politics, and the presence of Israeli settlements in the West Bank raises difficult, deeply felt and sensitive political issues," Justice Anne Mactavish wrote in her decision.

"One peaceful way in which people can express their political views is through their purchasing decisions. To be able to express their views in this manner, however, consumers have to be provided with accurate information as to the source of the products in question."

CIJA calls it 'misguided'

Kattenburg's lawyer said the ruling goes beyond just two brands of wine. Dimitri Lascaris said consumers now have an avenue to complain about matters of conscience in product labelling.

"If you deprive a consumer of information that they consider important to a matter of conscience, you are violating Canada's consumer protection laws," Lascaris said in an interview.

"That is a very important aspect of this decision and has implications way beyond the question of Israel settlements, and way beyond the question of whether these food products were accurately labelled."

The Centre for Israel and Jewish Affairs urged the government to appeal, calling the ruling "misguided."

"Following a preliminary review of the court's ruling, CIJA believes there are substantive errors in the judgment. Current labelling practices are fully consistent with the Canada-Israel Free Trade Agreement, as well as Canadian and international law," the advocacy group's president, Shimon Koffler Fogel, said in a news release.

Fogel said if the government does appeal, it will seek intervenor status.