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Various groups are calling for a boycott of the firm, which has an Israeli parent company accused of "pillaging" Syrian natural resources to create profit.
Mayanot Eden operates in the Golan Heights, a border plateau captured by Israel from Syria in the Six-Day War in 1967. At a full council meeting on Thursday, the Labour group led calls to cancel the contract, which it linked to the struggle against apartheid.
The Lib Dem/SNP administration indicated it would like to scrap the contract, but warned of a claim for damages by the contractor. Council chiefs are now to seek changes to the law, which prohibit the rejection of tenders on ethical grounds.
But Labour group leader Ewan Aitken said: "I have stood at the Golan Heights, and I could not say to people that I hid behind a legal technicality. We are ready to stand up and be counted."
