There is a good article by Danny Ayalon in the Wall Street Journal called “Israel’s Right in the ‘Disputed’ Territories“:

The recent statements by the European Union’s new foreign relations chief Catherine Ashton criticizing Israel have once again brought international attention to Jerusalem and the settlements. However, little appears to be truly understood about Israel’s rights to what are generally called the “occupied territories” but what really are “disputed territories.”

That’s because the land now known as the West Bank cannot be considered “occupied” in the legal sense of the word as it had not attained recognized sovereignty before Israel’s conquest. Contrary to some beliefs there has never been a Palestinian state, and no other nation has ever established Jerusalem as its capital despite it being under Islamic control for hundreds of years

It lays out very clearly the history of the West Bank, and why the term “Occupied Territories” is inaccurate. Good reference material for a discussion on the matter (since most people just accept the fact that this term is correctly applied – the more something is repeated, the more credence it is given).