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A cooperation agreement between the Israel Police and Europol, the European Union's law enforcement agency, is being hampered because the Public Security Ministry and the national police headquarters are situated in the East Jerusalem neighborhood of Sheikh Jarrah, Haaretz has learned.

The agreement stipulates that Europol would send representatives to meet with Israeli officials from the police headquarters and the ministry. European diplomats told Haaretz that according to EU policy, union institutions are not permitted to work with Israeli government ministries and agencies headquartered beyond the Green Line.

The problem was further aggravated, the diplomats said, by the eviction of Arab families from the neighborhood, the establishment there of a Jewish settlement and the authorization to construct new housing at the site of the Shepherd Hotel, located near the national police headquarters.

The Foreign Ministry told Haaretz that negotiations with Europol were underway, in a bid to find a solution that would satisfy all parties. The Europol spokesman confirmed the organization was negotiating a cooperation agreement with Israel, and that a draft was being considered by the Europol directors.

Europol was set up by the European Union in 1992, and began operating from its headquarters in the Hague in 1998. Apart from member states, the organization has signed cooperation agreements with a number of countries - including Australia, Canada, the United States, Russian and Switzerland - as well as with international organizations.

Six months ago, Europol exposed an international network of fashion product forgery, which also operated in Israel.