Vitens, Netherlands' largest drinking water supplier, said Tuesday it will no longer work with Israel's national water corporation Mekorot, the Jerusalem Post and Israel Radio reported.
The Dutch company's announcement came just a day after Israel, the Palestinian Authority and Jordan signed an agreement to share water once the new Red Sea-Dead Sea pipeline is laid.
Less than a month ago, the Dutch and Israeli companies signed a cooperation agreement for the future development of a number of projects.
A representative for the Dutch company said the firm came to the decision to halt deals with Israel after consulting with the Foreign Ministry, Israel Radio said.
The Dutch firm alleged Israel's violation of international law as the reason it decided to renege on the agreement, saying it places great emphasis on moral standards and abiding by international rules and could not continue projects with Israel, the Post said.
Israeli Foreign Ministry spokesman Yigal Palmor said the Dutch decision lacked common sense, especially as the Palestinian Authority cooperates with Mekorot.
"It is more than strange that this Dutch company should boycott an [Israeli entity] that works with the World Bank on a very important regional cooperation project, which includes the Jordanians and Palestinians," Palmor told the Post. "This only shows that by caving in to boycott pressures, one makes absurd decisions."