The claim by Israel that the settlements are illegal is based entirely on its refusal to accept the fourth Geneva Convention - cherrypicking which law it will obey and which it ignores.
The international lawmakers and administrators, The Security Council say that they are illegal, Israel says they they aren't.
The judge, jury, witnesses - the rest of the world says he is guilty; Bill the Burglar says he isn't!
All of which does not get around the fact that to accelerate building on (at the very least, disputed land in the middle of peace talks is an act of open provocation showing that has no desire whatever for a peaceful settlement
When Palestine was given observer status by the U.N. Israeli retaliated by accelerating their Settlement programme, thus more or less guaranteeing continuing bloodshed - both Palestinian and Israeli, thus proving they are prepared to sacrifice the lives of their own people in order to prevent Palestine having even a limited voice in international affairs.
Jim Carroll

The international community considers the establishment of Israeli settlements in the Israeli-occupied territories illegal under international law,[1][2][3][4][5] but Israel maintains that they are consistent with international law[6] because it does not agree that the Fourth Geneva Convention applies to the territories occupied in the 1967 Six-Day War, due to lack of a legal sovereign of these territories.[7] The United Nations Security Council, the United Nations General Assembly, the International Committee of the Red Cross, the International Court of Justice and the High Contracting Parties to the Convention have all affirmed that the Fourth Geneva Convention does apply.[8][9]
Numerous UN resolutions have stated that the building and existence of Israeli settlements in the West Bank, East Jerusalem and the Golan Heights are a violation of international law, including UN Security Council resolutions in 1979 and 1980.[10][11][12] UN Security Council Resolution 446 refers to the Fourth Geneva Convention as the applicable international legal instrument, and calls upon Israel to desist from transferring its own population into the territories or changing their demographic makeup. The reconvened Conference of the High Contracting Parties to the Geneva Conventions has declared the settlements illegal[13] as has the primary judicial organ of the UN, the International Court of Justice[14] and the International Committee of the Red Cross.
The position of successive Israeli governments is that all authorized settlements are entirely legal and consistent with international law,[15] despite Israel's armistice agreements having all being with High Contracting Parties.[16] In practice, Israel does not accept that the Fourth Geneva Convention applies de jure, but has stated that on humanitarian issues it will govern itself de facto by its provisions, without specifying which these are.[17][18] The majority of legal scholars hold the settlements to violate international law, while others have offered dissenting views supporting the Israeli position.[2]
http://en.wikipedia.org/wiki/International_law_and_Israeli_settlements