Encoding Unicode URLs in UTF-8 XHTML documents

Question

I would like to include the URI http://beispiel.de/schnäppchen into a link in a XHTML document, which is encoded in UTF-8.

Should I percent-encode the URL and write

<a href="http://beispiel.de/schn%C3%A4ppchen"&gt;foobar&lt;/a&gt;

? "ä" is a legal character in UTF-8 and therefore should be legal in XML/XHTML, no?

Answer 1

Legal in (X)HTML, but not legal in an rfc2396 URL.

Note that the characters are converted using URL %-encoding, and not as SGML entities (with an &)