A UN official has warned that Waltham Forest Council may break international law if it gives public money to a firm which he says is complicit in the running of Israel's illegal settlements.

French multinational Veolia is currently in contention for several waste contracts in the borough, but Richard Falk, the UN's human rights special rapporteur for the Palestinian territories, says the firm should be rejected from the bidding process.

Veolia has attracted criticism for its involvement in projects such as the Jerusalem Light Rail (JLR), which the UN Human Rights Council has described as being in "clear violation of international law" because it links parts of Israel with its illegal settlements in the West Bank.

Veolia, which was due to operate the route but pulled out of the project last year, strongly denies supporting illegal activity and says it was not consulted on the route of the JLR.

Mr Falk said the firm owns approximately 80 per cent of Connex Jerusalem, which is the company that operates the trains.

The Israeli government disputes the UN's claim that it is in violation of international law and denies persecuting Palestinians.

Mr Falk wrote to the council stating that any transfer of public funds to Veolia "may contravene the UK’s international legal obligation not to facilitate Israeli violations of international law".

Veolia is currently tendering for two related contracts for The North London Waste Authority (NLWA), which the council is a member of and which is chaired by cabinet member Cllr Clyde Loakes.

The contracts, a worth a total of between £3-4 billion of taxpayers' cash, are to oversee rubbish disposal in the region for the next 25 to 35 years.

Campaigners say Veolia is also on the shortlist to take over the council's street cleansing and grounds maintenance contract in Waltham Forest, although this has not been confirmed by the authority.

In a letter to the council, Mr Falk said: "the failure to bring Israel’s occupation of Palestinian territory to an end after more than 45 years creates an augmented international responsibility to uphold the human rights of the Palestinian people.

"I urge you to take the just and principled decision not to award Veolia any public service contracts."

In response, a spokesman for Veolia cited comments by the US Ambassador to the UN, Susan Rice, who described Mr Falk as “highly biased”.

He added: “Veolia Environnement has a presence in Israel through its operating local subsidiaries owned by Veolia Israel.

“In relation to the Occupied Territories, there are no current plans to undertake any further activities or to service the Israeli settlements situated therein”.

A spokesman for the NLWA said that following legal advice it could not exclude Veolia on the grounds laid out by Mr Falk.

The Guardian is awaiting a comment from the council.