There's a world of difference between disputing over territory and occupying it. Moreover, Jerusalem is, by Israeli law, the capital of Israel, and we don't give a hoot what other countries think in this matter. When the US ambassador wants to meet with any Israeli official, he has to make a trip to Jerusalem - East Jerusalem, if the Israeli official's office is located there. The same goes for British, French, Egyptian, Jordanian, Russian and Lower Slobovian ambassadors.
Justice Ministry: Information examined by AG about Gal Hirsch didn't come from police (Haaretz)
from the article: Hamas demands Palestinian elections be held in East Jerusalem