The two members of the Oxford University Labour Club who were accused of engaging in antisemitic acts in front of Jewish students have been cleared by party officials.
Today Labour’s National Executive Committee disputes panel ruled that the investigation into the allegations should be dropped.
It is believed the decision will be formally rubber-stamped by the full NEC in a matter of weeks.
Members of Oxford University Labour Club were claimed to have discussed Zionists rigging British elections, frequently used the abusive term “Zio” and said that European attacks on Jews were justified because of Gaza.
The investigation into the OULC was launched after Jewish students at the university revealed a list of what they said were examples of antisemitism from Labour-supporting students.
It also followed the resignation of former OULC vice-chair Alex Chalmers, who stepped down claiming the club had a “problem with Jews”. He quit after a meeting in which OULC members voted to endorse Israel Apartheid Week.
Labour peer Baroness Royall, who had previously investigated the Jew-hate allegations, said: "I am deeply disappointed by the outcome and fear it will further harm relations between the Jewish community and our party by confirming a widely held view that we do not take antisemitism seriously.
"It also doesn't bode well for the outcome of the ongoing inquiry into Ken Livingstone's behaviour."
Marie van der Zyl, Board of Deputies vice-president, criticised the decision to drop the investigation.
Ms van der Zyl said: "In her original report on allegations of antisemitism at Oxford University Labour Club, Baroness Royall said that there had been 'some incidents of antisemitic behaviour'.
"Now, 11 months later, the Labour Party has dropped the investigation. This inability or unwillingness to confront what is a serious problem is damning for the party and will concern Jewish students on campus who feel their own party offers them no protection against abuse."
The Union of Jewish Students said the NEC decision was "nothing short of disgraceful".
A spokeswoman UJS said in a statement: "The party had an opportunity to put its values into practice, to demonstrate how seriously they take the issue of antisemitism and to show that Labour clubs are welcome spaces for Jewish students, but they have failed miserably.
"They have let Jewish students down and in doing so, they have created an atmosphere in which antisemitism may thrive without fear of being challenged."
Ella Taylor-Fagan, former women’s officer-elect at OULC, said: “Today’s news that Labour Party has decided to drop the investigation into those who viciously attacked myself and my peers at Oxford University Labour Club is thoroughly disappointing and upsetting.”
She added: “I witnessed mocking and delegitimisation of serious incidents of antisemitism and a disdainful tone towards Jewish members.”
Jeremy Newmark, national chair of the Jewish Labour Movement, added: “The decision rides roughshod over concerns and experiences of our student members.
“They have confronted the impact of antisemitism at OULC first hand. They do not feel comfortable attending meetings of their own Labour club.
“This has been looked at by three inquiries and one investigation. They have not heard from the party for nearly a year – even to inform them of this decision.
“It is many months since Chakrabarti recommended an over haul of the complaints and investigations process but seemingly nothing has changed.”
Following the claims last February, Baroness Royall, a Labour peer, conducted an internal inquiry into claims of antisemitism at the club.
She received 300 pages of evidence from more than 40 OULC members and interviewed eight group members.
Writing about the allegations of Jew-hate against OULC members, Baroness Royall said: "It is clear to me from the weight of witnessed allegations received that there have been some incidents of antisemitic behaviour and that it is appropriate for the disciplinary procedures of our Party to be invoked.
"However, it is not clear to me to what extent this behaviour constituted intentional or deliberate acts of antisemitism. This is particularly true of historic hearsay evidence.
"Whilst I want to see the party deal with acts of antisemitism, I see no value in pursuing disciplinary cases against students who may be better advised as to their conduct and who would benefit from training on these issues."
The Labour peer’s report was initially suppressed by Labour’s NEC.
Jennifer Gerber, Labour Friends of Israel director, said at the time the group was “dismayed if unsurprised to see the anti-Zionist, antisemitic nature of much of the abuse disclosed in the report.
“Now the allegations of antisemitism have been proven to have taken place, it’s absolutely vital that the Labour Party takes swift action to ensure that those responsible face the appropriate disciplinary action.
“There must be no more cover-ups so the Jewish community can see Labour is responding to antisemitism with deeds, not just words.”
In his resignation statement publicly posted on Facebook, Mr Chalmers explained that members of the OULC Executive had been "throwing around the term 'Zio' (a term for Jews usually confined to websites run by the Ku Klux Klan) with casual abandon".
Senior members of the club had been "expressing their 'solidarity' with Hamas and explicitly defending their tactics of indiscriminately murdering civilians", he added.
Chalmers said that ever since Labour's defeat at the general election, he had become "increasingly worried about the state of OULC".
Baroness Royall was later made a vice chair of the wider inquiry into claims of antisemitism in Labour led by Shami Charkrabarti.
Labour’s NEC had redacted the names of the individuals accused of antisemitism at Oxford Labour Club pending their inquiry into the findings of Royall’s report.