An Israeli family has filed a £14 million sterling legal action against the EU, claiming its grants to the Palestinian Authority indirectly helped gunmen who attacked them.
The lawyer for the Blumberg family said the EU was reckless in providing financial aid to the Palestinian Authority.
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Lawyer Mr Nitsana Darshan-Leitner alleged some of the EU funds were redirected by the Palestinian Authority to militant groups - and that Brussels was aware of the practice.
Mrs Techiya Blumberg was killed when Palestinian gunmen opened fire on the family's car in a West Bank drive-by shooting in August. Her husband and 14-year-old daughter were also hurt in the attack and remain paralysed.
"Without the EU's reckless provision of financing to the Palestinians, hundreds of Israeli terror victims would still be alive and thousands of others would never have had to suffer their tragic injuries," Mr Darshan-Leitner said.
A European Commission official said the EU is investigating claims by Israel the Palestinian Authority has used member states' money to carry out attacks against Israelis.
"We have yet to receive any evidence that the Palestinian Authority has misused our funds to fund terrorist activities," the official said.