A judge has halted a racial harassment trial after ruling there was no such nation as Palestine.

The decision was crucial to the trial of a man accused of hoisting an Israeli flag on a washing line to upset his neighbour and his Middle Eastern family.

Judge Anthony Thorpe, sitting at Chichester Crown Court, yesterday directed a jury to find Andrew Milner, 46, of Gordon Road, Shoreham, not guilty of racially-aggravated harassment.

He said there was no evidence presented to show Palestine was recognised as a bone fide nation, compromising any chance of a conviction.

During an alleged racist campaign against Palestinian Loai El-Oun and his English wife Debbie, Milner was said to have hung the Israeli flag in his back garden, pointed a camera on a tripod at the couple's garden and placed a golliwog doll in a window.

It followed a long-running dispute about a drainpipe protruding from Milner's house onto the El-Ouns' property.

After making the controversial ruling, the judge criticised former Sussex Police officer Brian Mallinger, who has now emigrated to New Zealand, for saying Israel had committed atrocities in the Middle East during an interview with Milner.

Judge Thorpe said: "No doubt we have managed to cause offence to two countries in a case which is essentially a neighbour dispute.

"I take no pleasure that I have undoubtedly caused enormous offence to Palestinians worldwide and the way the police conducted their investigation has caused enormous offence to Israelis."

The racist campaign was said to have happened between May 8 and June 21, 2002.

At the hearing, Judge Thorpe said the Crown Prosecution Service had failed to prove a case of racially-aggravated harassment against Milner because there was nothing to confirm Mr El-Oun's Palestinian background was relevant to the law.

The judge said: "I am bound to decide that whatever the aspirations of the Palestinian people are, they are not a nation and clearly do not fall within any of the groups set out (in the law defining what is a racially-aggravated offence)."

Earlier in the trial, the jury heard how Milner told police he did not know the flag was Israeli or that Mr El-Oun was Palestinian.

He also said the golliwog was part of his wife's collection of 27 dolls and it was not put in the window to offend.

Mr El-Oun told the court Milner knew he was Palestinian and spoke of his anger at his neighbour using the flag and golliwog to harass his family.

The judge said: "Whether the hoisting in England of the flag of Israel - a sovereign nation who is on friendly terms in the United Kingdom - can be harassment of a neighbour who claims to be Palestinian is highly dubious.

"The analogy of the Union Jack flying in a house in Northern Ireland next door to an Irish nationalist may be an apt analogy.

"That too can be seen as the flag of the enemy, which is the way that Mr El-Oun repeatedly described the Israeli flag, although I note he did not mind travelling under it for cheap flights on El Al."