The World Trade Organization has said an unofficial EU moratorium from 1998 to 2004 on the approval of genetically modified organisms was illegal.
In 1999 there was widespread alarm in Europe about GM crops
The judgment came in a preliminary ruling on a case brought against the EU by the US, Canada and Argentina.
The text remains officially confidential until a final ruling is released, but officials have leaked the headlines to journalists.
The BBC News website explains what the case is all about.
What is the accusation?
The US, Canada and Argentina say that the de facto EU moratorium - a period of six years in which the EU authorised no genetically modified organisms - was not scientifically justified and amounted to an unfair trade barrier.
The complainants also say the EU system for approving GM products is still not working properly, even though the moratorium has been lifted.
What is the EU's defence?
The EU says every country has the "sovereign right to make its own decisions on GMOs in accordance with the values prevailing in its society".
It began to authorise GMOs again in 2004 after introducing two sets of new rules on:
- Labelling - ensuring consumers would know when they were buying a GM product
- Traceability - ensuring products containing GMOs could be traced and recalled if necessary.
The EU says its current system for authorising GM products on a case-by-case basis is designed to ensure they are safe for the environment, human health and animal health.
What does the WTO say?
According to unnamed US officials quoted by news agencies, the WTO's preliminary ruling says the EU broke the rules of international trade by applying an effective moratorium on GM imports.
It also ruled that national bans on certain types of GM food in six EU states - Austria, France, Germany, Greece, Italy and Luxembourg - were illegal.
How much economic damage did the moratorium do?
US farmers say that the ban cost them $300m per year in lost sales. For example, US maize exports to Europe fell sharply.
However, the EU says this is partly due to the fact that the US is now less competitive than some other exporters, such as Brazil and Argentina.
It says imports from these countries have not been affected by its rules on GMOs.
Is the EU now approving GMOs again?
There have been 10 approvals since mid-2004 (though three were for different uses of the same product).
Overall, more than 30 GMOs or derived food and animal feed products have been approved for marketing in the EU since 1994.
What is the point of the case, now that GMOs are being approved again?
The US says it still needs to be convinced that the EU is judging applications for approval of GM products on scientific rather than political grounds.
The EU responds that its approval process "may appear to be lengthy for some countries which adopt a more lenient approach towards food and environmental safety issues".
The US also hopes that a sympathetic WTO ruling will prevent other countries following the EU's example.
Washington was alarmed when when Zimbabwe refused a shipment of US food aid in 2002. Zambia and Ethiopia have also raised concerns about GM food donations.
Are Europeans still opposed to GM foods?
Yes. One Eurobarometer poll published in 2005 indicated that 54% of European consumers think GM food is dangerous.
GMO ROW TIMELINE
1994: EU authorises first GM product
1997: Austria bans a type of GM maize even though it has EU approval
1998: EU approves GM food product for last time until 2004
1999: France and Greece lead calls for de facto moratorium on GMO approvals
2003: US, Canada and Argentina take case against EU to WTO
2004: EU laws on labelling and traceability come into effect, and GMO approvals resume
However, it's not top of most people's of environmental worries. Another Eurobarometer poll published in 2005 indicated that "GMOs in farming" came 11th on a list of 15 environmental concerns.
Most European supermarkets choose not to stock products containing GM products on the grounds that many clients would decide to shop elsewhere.
The environmental lobby group Friends of the Earth says a WTO ruling against the EU could increase this popular opposition.
Why is there such a difference between European and US attitudes to GMOs?
One reason is that Europe has experienced a number of serious food scares, from mad cow disease and foot-and-mouth to bird flu.
Some experts also say that US citizens trust the Food and Drug Administration far more than Europeans trust their food safety regulators.
How long has this argument been rumbling on?
France and Greece originally called for a de facto EU moratorium on approvals of GMOs in June 1999. It came into effect a bit later, when they won the backing of Italy, Denmark, Luxembourg, Belgium and Austria.
The US announced its intention to bring a case to the WTO in May 2003. It was formally lodged in August 2003.
The WTO decided to gather the views of independent scientists from both the US and Europe, which lengthened the process.
The preliminary ruling has been delayed more than once, and stretches to more than 1,000 pages - both signs of the complexity of the case.