At a seminar at the European Parliament which he co-sponsored, Dr Bennion said increasing dialogue between the Indian and Pakistan governments was 'a clear opportunity' for progress to genuine reconciliation, but that any temptation for a bilateral carve-up of Kashmir without a plebiscite of the local population should be resisted.
The West Midlands MEP said: "As MEP for Birmingham and the West Midlands, I have hundreds of thousands of constituents with close family links to this territory, which has seen the longest running unresolved armed conflict of recent times.
"It is clear there is a trend towards increased dialogue and broad support for a reconciliation process, which is welcome. The recent rapprochement between India and Pakistan is an opportunity. There is a better chance of a positive resolution if these two governments are talking.
"However, I do recognise that if relations are fully normalised it is possible the two powers could agree to carve up Kashmir between them.
"This temptation must be avoided. A sustainable and just peace settlement can only be reached by involving the population of the territory, which is why I support a plebiscite as a key part of a peace process.
"The EU as an 'honest broker' has an important role to play. It should try to prevent any bilateral carve-up and push very hard for the people of Kashmir to be fully involved in the decision.
"There are lessons to be learned from examples such as Northern Ireland, where international mediation did help to encourage progress and where the people were consulted.
"I do believe recent pressure from the international community, especially the EU, has helped to move things forward over Kashmir. I look forward to visiting Pakistan next week as part of the official European Parliament delegation, which will be exploring constructive ways the EU can help both governments and the people to resolve the issues which confront them."
Asked by a journalist at a press conference afterwards whether the Kashmiri people were 'freedom fighters or terrorists' the MEP gave a robust response on the distinction.
"There may be freedom fighters who retaliate directly to armed attacks or repression but putting a bomb in a market place is designed to cause terror, so any perpetrators of that are by definition terrorists.
He added: "I do not condone terrorism but just as in Ulster, a peace process has to involve dialogue and reconciliation between all sides and also involve the people directly."
Notes: The seminar on human rights and prospects for progress in Kashmir was held at the European Parliament in Brussels on July 10. It was organised by ALDE MEP Ivo Vajgl and co-sponsored by Lib Dem (ALDE UK) MEPs Phil Bennion (West Midlands) and Sarah Ludford (London). Other speakers included Prof. Nazir Ahmed Shawl, Chairman of the Kashmir Centre in London, Prof Mansoob Murshad and members of the South Asia Democratic Forum.
Dr Bennion, a member of the European Parliament's South Asia Delegation, is one of two UK MEPs in the EP delegation which flies out to Islamabad next week for top level talks with the Pakistan government and leading figures from opposition parties and NGOs.