JERUSALEM (Reuters) - Settlers due to be evicted from an outpost in the occupied West Bank under an Israeli court order accepted a government-proposed deal on Sunday to head off a forced evacuation and confrontation with troops.

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The Supreme Court had ruled that the Amona outpost, where 330 settlers live, must be evacuated by Dec. 25. The court found that Amona was built illegally on privately-owned Palestinian land.

The case, a test of authority between an increasingly politically powerful far-right in Israel and an independent judiciary, led to legislation that would retroactively legalize settlement homes on Palestinian-owned tracts.

The proposed law has been promoted by ultranationalist partners in Prime Minister Benjamin Netanyahu’s coalition government and received backing from the Israeli leader.

It needs to pass two more parliamentary votes to go on the books, but ultimately could be overturned by the Supreme Court, where it is expected to face legal challenges by settlement opponents.

Due to the existing court eviction order, Amona was not included in the bill. The legislation was condemned by Western powers and the United Nations, and described by Palestinians as a land grab and step towards annexation of the West Bank.

With concern mounting over possible clashes with Amona settlers and militant supporters, Netanyahu and far-right coalition member Naftali Bennett held late-night talks with settler leaders on Saturday.

“ABSENTEE” OWNERS

They agreed to increase the number of mobile homes that would be placed at a new site in Amona, on what Israel describes as land it holds in custodianship for absentee Palestinian owners. Settlers accepted the deal in a vote in Amona’s synagogue on Sunday.

But the proposal could face a snag: “absentee” status can be challenged in court if an property owner comes forward. An Israeli anti-settlement group said on Sunday it had located a Palestinian owner who would bring legal action.

Since Israel captured the West Bank in a 1967 war, it has built about 120 formal settlements in the territory. Most of the world deems them illegal and an obstacle to the establishment of a Palestinian state in the West Bank and Gaza Strip.

As well as the main settlements that Israel fully supports, settlers have created over 100 outposts - many on hilltops across the West Bank, often with tacit government backing.

Right-wing politicians in Israel have been buoyed by signals from U.S. President-elect Donald Trump of a more accepting U.S. stance on settlements. Trump has said he would move the U.S. Embassy from Tel Aviv to Jerusalem, which would break longstanding U.S. foreign policy and anger the Muslim world.