(Adds Ben-Eliezer, Israeli foreign ministry comments)

MADRID, Jan 29 (Reuters) - Spain's High Court will launch a war crimes investigation into seven Israelis, including a former defence minister, over a 2002 attack that killed 14 civilians and a Hamas commander in the Gaza Strip, court papers said.

Spanish law allows the prosecution of foreigners for such crimes as genocide, crimes against humanity and torture committed anywhere in the world. Israeli Defence Minister Ehud Barak called the Gaza legal case "delusional" on Thursday.

The Gaza-based Palestinian Centre for Human Rights is bringing the case against then-Defence Minister Binyamin Ben-Eliezer and six military men, most of whom are now retired from active duty, involved in the decision to drop a one-tonne bomb from an F-16 plane onto a housing block on July 22, 2002.

The blast killed Hamas commander Salah Shehada, but the organisation said it was bringing the case on behalf of only the families of 14 civilians killed, nine of whom were children, and 96 injured.

"If Israel would like to be a civilised nation it will have to accept the rule of law, and the rule of law is not served with a 1,000-kg bomb," the Palestinian Centre's lawyer Gonzalo Boye said.

"I do not justify the actions of Hamas. I think both parties are guilty. The only people that are innocent are the civilian victims. We have excluded from our criminal case that person from Hamas who was the target of the Israeli army."

Spanish Judge Fernando Andreu's investigation, which is expected to last several years, was brought after Israel declined to reply to a question from the court last August as to whether the seven would be tried at home.

After hearing the news Ben-Eliezer said the decision was "outrageous", adding that "terror organisations are using the courts of free nations under the guise of democracy in order to fight those who fight against terrorism."

He added that Shehada was a "mass murderer responsible for the death of 100 Israelis ... he sent tens of suicide bombers out onto the streets."

In Tel Aviv, Barak said in a statement he "objected strongly" to the "delusional announcement" by Spain and would vehemently defend the charges.

"UPSIDE-DOWN WORLD"

"Anybody calling the liquidation of a terrorist a 'crime against humanity' is living in an upside-down world. All senior personnel in the military establishment acted appropriately, in the name of the state of Israel, through their commitment to ensure the security of Israeli citizens," Barak said.

The Israeli foreign ministry said its legal department would act as swiftly as possible to cancel the Spanish legal move and would defend all the accused who acted on Israel's behalf.

A statement said Israeli Foreign Minister Tzipi Livni had spoken to her Spanish counterpart Miguel Angel Moratinos on the matter.

Spanish court papers said the bombing killed 15 people, the majority of them children and babies, and injured 150.

Former Israeli Prime Minister Ariel Sharon at the time hailed the air strike as a great success. Washington described it as heavy-handed and the European Union accused Israel of hurting the chances of a deal to end suicide bombings in Israel.

Boye said the offensive which Israel launched in Gaza on Dec. 27 and killed more than 1,300 Palestinians as Israel sought to end Palestinian rocket attacks, could result in more Spanish prosecutions.

"We may have more work to do. Israel has demonstrated in recent weeks that it has no respect for human life if they are not (Israeli) lives," he said.

International calls to investigate Israel over alleged war crimes during the latest Gaza conflict have prompted Israeli Prime Minister Ehud Olmert to promise military personnel state protection from foreign prosecution. [ID:nLP689219]

Israeli media reports said the military had been advising its top brass to think twice about visiting Europe.

In 1998, a Spanish judge nearly succeeded in extraditing former Chilean dictator Augusto Pinochet from Britain on charges of political killings and torture in Chile. (Additional reporting by Inmaculada Sanz in Spain and Ori Lewis in Jerusalem; editing by Sophie Hares)