* Seizure illegal, Gaza blockade "crime against humanity"-UN

* Israel's U.N. envoy rejects charges

GENEVA, July 2 (Reuters) - A U.N. human rights investigator on Thursday called Israel's seizure of a ship carrying relief aid for the Gaza Strip "unlawful" and said its blockade of the territory constituted a "continuing crime against humanity".

Israeli authorities on Tuesday intercepted the vessel, which was also carrying 21 pro-Palestinian activists, and said it would not be permitted to enter Gaza coastal waters because of security risks in the area and its existing naval blockade.

Richard Falk, the United Nations special rapporteur on human rights in the Palestinian territories, said the move was part of Israel's "cruel blockade of the entire Palestinian population of Gaza" in violation of the Fourth Geneva Convention prohibiting any form of collective punishment against "an occupied people".

Falk, an American expert on international law, said Israel's two-year blockade of Hamas-ruled Gaza restricted vital supplies such as food, medicine and fuel to "bare subsistence levels".

The International Committee of the Red Cross (ICRC) said in a report this week that Israel was also halting entry to Gaza of building materials and spare parts needed to repair damage from its 22-day invasion late last December.

"Such a pattern of continuing blockade under these conditions amounts to such a serious violation of the Geneva Conventions as to constitute a continuing crime against humanity," Falk said in a statement released in Geneva.

Prior to leaving Cyprus, the ship was inspected by Cypriot authorities in response to Israeli demands to determine whether it carried any weapons, according to the U.N. investigator. "None were found and Israeli authorities were so informed."

"Nonetheless, the 21 peace activists on the boat were arrested, held in captivity and have been charged with 'illegal entry' to Israel even though they had no intention of going to Israel," Falk added.

ISRAEL ENVOY SAYS FALK "BIASED"

Israel's ambassador to the U.N. in Geneva, Aharon Leshno-Yaar, rejected the remarks by Falk whom he said was "known for his bias against Israel and anti-Israel statements".

Israel is allowing relief aid to reach Gaza in coordination with Egypt and the Palestinian Authority, Leshno-Yaar said. "Clearly the purpose of that ship was to create a buzz and serve as a propaganda vehicle against Israel," he told Reuters.

Activists from the U.S.-based Free Gaza movement said that Irish Nobel peace prize laureate Mairead Maguire and former U.S. congresswoman Cynthia McKinney were among those aboard.

Falk, who is Jewish, has had his own difficulties with Israeli authorities in trying to fulfil his independent mandate for the U.N. Human Rights Council.

Last December, he was detained and turned back from Israel, forcing him to abort a planned mission to Gaza -- a deportation denounced by U.N. Secretary-General Ban Ki-moon.

In a report last March, Falk said Israel's year-end military assault on the densely population coastal strip of 1.5 million appeared to constitute a grave war crime.

Amnesty International said in a report on Thursday that Israel inflicted "wanton destruction" in the Gaza Strip in attacks that often targeted Palestinian civilians [IDnL2307109].

A U.N. inquiry into alleged war crimes by both Israel and Hamas militants in the recent conflict held public hearings in Gaza this week and will also hear testimony in Geneva next week. It is led by former U.N. war crimes prosecutor Richard Goldstone, a South African jurist.