Four activists who chained themselves to concrete block inside the London branch of Israel cosmetics shop Ahava were illegally trespassing, a judge has ruled.

All four defendants, who have been conditionally discharged, argued the store was committing "war crimes" by selling products from an Israeli settlement, Mitzpe Shalem, in the West Bank. They plan to appeal the verdict.

But District Judge Ian Baker said at Highbury Magistrates' Court that although he had "considerable hesitancy" in calling Ahava's business legal, it had never been proved to be illegal in the UK.

He said: "Until such time as Ahava UK Ltd is prosecuted and defence arguments herein properly tested, I can do no more that accept it is trading lawfully."

But he did not rule out the possible successful prosecution of Ahava in the future, though acknowledging this had been previously dismissed by the police and Camden Trading Standards had failed to produce a conviction. He said: "Legal remedies may be available against the company for any wrongdoing. That does not mean that employees, acting lawfully, are doing anything other than lawful activity…the law affords them protection from disruption."

The four, who arrived in court dressed in casual T-shirts and supported by many pro-Palestinian activists, occupied Ahava in Covent Garden on two separate occasions last year. The protests by Matthew Richardson, 24, and Gwendolen Wilkinson, 20, were on October 2 2010 and by Christopher Osmond, 30, and Jessica Nero, 33, on November 22. All were convicted of aggravated trespass after a three day trial at Stratford Magistrates' Court last month.

The protesters lay on the floor and chained themselves to each other and a concrete bollard, until they were cut free by police, and the store was forced to close.

All four were ordered to pay £250 in costs. Both Mr Richardson and Ms Wilkinson argued they had no income, and Ms Wilkinson said she has no bank account in her name. After Judge Baker asked "how they keep body and soul together", Mr Richardson claimed he ate leftover food from supermarkets.

Judge Baker acknowledged the activists had trodden carefully in order to try to act legally but added: "Unfortunately, I don't agree with your analysis of the law."

He added: "The defendants cite financial reasons why they were unable to pursue judicial reviews or private prosecution…that does not justify an unlawful course of trespass and disruption instead. The defendants are free to hold protests…outside the shop. They are not free to act in the way they did on this occasion."

The four released a statement saying: "Today's judgement illustrates the complicity of the authorities in allowing companies to profit from the occupation. Throughout the trial neither the Judge nor the prosecution challenged the assertion that the settlements are illegal in international law."

Lawyers for the four were instructed by the law firm Irvine Thanvi Natas, whose partner Simon Natas is involved with Lawyers for Palestinian Human Rights. Mr Natas said all four would appeal the verdict.