Israel is failing to penalise Jewish settlers for attacks on Palestinians in the West Bank who enjoy "virtual impunity" from prosecution, Ramallah-based rights group Al-Haq said on Wednesday.

In a 40-page report, Al-Haq also called on the international community to avoid funding settler groups, a day after Israel and the European Union reached a compromise deal over funding for bodies operating in the occupied West Bank or east Jerusalem.

Settlers carrying out attacks, which involve the use of "live ammunition" and "the destruction and denial of access to property" have been left unpunished by the Israeli authorities, Al-Haq charged.

"Settlers involved in the planning and perpetration of such acts have remained largely immune from the enforcement of the law and, in some cases, have even benefited from official support from state authorities," it said.

"Israeli settlers enjoy virtual impunity for crimes against Palestinians, and benefit from the protection of Israeli domestic laws."

The report was referring specifically to so-called "price tag" attacks, a euphemism for hate crimes by Jewish extremists which often involve vandalism and in some cases physical injury.

Such attacks initially targeted Palestinians in retaliation for state moves to dismantle unauthorised settlement outposts but later became a standard response following any anti-Israeli violence.

Price tag attacks "facilitate the transfer of Palestinians off their land to make way for the construction of settlements," Al-Haq said.

The report also called on the international community not to fund any organisations or individuals associated with Israeli settlements.

And it urged the EU to avoid "lending recognition, aid or assistance to Israeli state and private actors operating in or benefiting (from) settlements," and to ensure "that public and private entities and individuals are not lending support to settler groups."

The report was published a day after the EU and Israel found a compromise which would allow the Jewish state to participate in a key European-funded scientific research programme.

Israel had objected to new EU guidelines which will affect all grants, prizes and funding from 2014 onwards, with none made available to projects in Jewish settlements.

The guidelines angered Israel because it would have to recognise in writing that the settlements -- which are illegal under international law -- are not part of the Jewish state in any future EU agreements.

The compromise will see the EU adding a clause determining that research money will not serve institutions over the 1967 Green Line, while Israel will pen a clause saying it does not recognise the new EU guidelines.