The Palestinian Cabinet promulgated the Bylaw on Non-profit Companies No. 20 of 2022 (“NPC Bylaw”), which was published in Issue 194 of the Palestinian Official Gazette on 25 September 2022. Made in strict confidentiality, the act is part of a flow of regulations passed by the executive branch of government in the context of an accelerating decline in the Palestinian political system at large. The NPC Bylaw is an extension to the Companies Law by Decree No. 42 of 2021 and Anti-Money Laundering and Combating the Financing of Terrorism Law by Decree No. 39 of 2022. A subsequent approach has also been initiated in 2022 to approve a regulation on non-profit organisations with a view to combatting money laundering and the financing of terrorism.
The NPC Bylaw includes amendments that have already been made by the Law by Decree No. 7 of 2021 amending the Law on Charitable Associations and Civil Society Organisations No. 1 of 2000, published in Extraordinary Issue 24 of the Palestinian Official Gazette on 2 March 2021. This amending Law by Decree was suspended under pressure from Palestinian civil society organisations (CSOs). The NPC Bylaw also incorporates amendments devised by the Draft Regulation on Non-profit Organisations to Combat Money Laundering and the Financing of Terrorism. Having been met with opposition by CSOs, the latter was not approved by the Cabinet. Both enactments run counter to the Basic Law (Constitution) and international conventions. By this review of the NPC Regulation, Al-Haq would like to cite the following detailed comments, first within an overall framework and then on key provisions. The comments are concluded with a set of recommendations.
I. Overall Comments
- The NPC Bylaw has been enacted in the context of a vicious attack led by the Israeli occupying authorities against Palestinian CSOs, some of which are registered as non-profit companies (NPCs). Along this vein, Israeli violations involve raids, arrests, closure of premises, and financial blockade targeting Palestinian CSOs. Reaching a climax recently, on 18 August 2022, the Israeli occupying forces raided the offices, and issued orders on the closure of seven Palestinian CSOs. Both CSOs and their staff are vulnerable to lockdowns, prosecution, and detention in an attempt to silence and prevent them from monitoring, documenting, and exposing Israeli crimes and holding Israeli perpetrators to account. Against this backdrop, the NPC Bylaw may be exploited by Israel to cover its tracks and proceed with policies to thwart Palestinian civil society’s efforts to hold the Israeli occupying authorities accountable, ensure that there is no impunity, and bring about international justice.
- The NPC Bylaw infringes on the provisions of the Basic Law (Constitution). The Palestinian constitutional legislature clearly and explicitly opts for enshrining the right to freedom of association. As such, the auxiliary activity of regulating NPCs can only be handled by a “law”. This is confirmed by Article 26(2) of the Basic Law, namely, “Palestinians shall have the right to participate in political life, both individually and in groups. They shall have the following rights in particular: […] (2) To form and establish unions, associations, societies, clubs, and popular institutions in accordance with the law.” Hence, transferring all aspects of NPC Bylaw from a law to a piece of secondary legislation inevitably implies that the latter is unconstitutional.
- By enacting the NPC Bylaw, the Cabinet has impinged on the provisions of the Basic Law (Constitution) and the 2021 Companies Law by Decree, undermining and restricting NPC operations. The NPC Bylaw goes beyond the limits of the mandate set by Article 69 of the Basic Law. It contravenes the constitutional norms delineated by Article 70 of the Basic Law on the promulgation of bylaws and regulations, which are cited as the terms of reference in the preamble to the NPC Bylaw. Bylaws and regulations are tailor made to enforce, rather than derogate from, the provisions of primary legislation. Given that it is an item of secondary legislation with less binding force, a regulation/bylaw can neither be at odds with the provisions of, or add competences under, a law. Along this vein, the NPC Bylaw oversteps the limits of the law by amending and creating many provisions. This means that the NPC Bylaw is illegal and in contrariety with the principles of the rule of law and separation of powers.
- The NPC Bylaw has misgivings about NPCs, violating the Basic Law (Constitution) and international conventions, which the State of Palestine acceded to without reservations. It is further in contravention to the foundations of transparency, highlighted by the National Policy Agenda 2017-2022 and requirements of good governance. In the West Bank and Gaza Strip, many CSOs are registered as NPCs and governed by relevant legal provisions. NPCs serve as observers of the human rights situation in Palestine.
II. Detailed comments
- Article 8(3) of the NPC Bylaw obliges NPCs to submit periodic technical, financial, and administrative reports to the relevant authority every three months. By contrast, Article 29(2)(e) of the 2021 Companies Law by Decree, referenced in the preamble to the NPC Bylaw, provides that companies should submit the said reports within the first three months after the end of the fiscal year in question, rather than on a quarterly basis. Therefore, this provision runs counter to the Companies Law by Decree as well as to the constitutional norms, which prescribe that a regulation/bylaw may not contradict the law.
- Article 9(2) of the NPC Bylaw stipulates that NPCs obtain the prior authorisation of the Registrar of Companies so that they can raise or make contributions in cash or in kind inside or outside Palestine. However, it does not provide any procedures, controls, or time limits for taking the prior authorisation from the Registrar of Companies, or any processes or deadlines for filing complaints in the event applications are rejected by the Registrar. As a result, implementation may be confused or additional instructions are issued forth.
- Entitled “Salaries and Operational Expenses,” Article 11 of the NPC Bylaw provides that the Executive power will seize control of NPC budgets, budget line items, distribution, and ceilings. It prescribes that staff salaries and the amount of operational expenses may not be in excess of 25 percent of the NPC total budget. This ignores the nature of NPC activities and implementing agents, and without specifying any principles or criteria for this interference. It does not take account of the nature of operations of institutions registered as NPCs. Rather than providing in-kind or cash assistance, NPCs rely on staff members to deliver services directly to beneficiaries. Nevertheless, without setting any controls or conditions, Article 11(3) of the NPC Bylaw excludes some agencies from the restriction on salaries and operational expenses, allowing much room for discrimination among NPCs per se.
- Article 12(2) of the NPC Bylaw requires that prior authorisation be given by the Cabinet and/or Minister of Economy to accept donations, contributions, grants, funding, and aid. This reflects a departure from, and violation of, the limits stated in the 2021 Companies Law by Decree, which does not vest the government with any powers to exercise prior financial control over NPCs.
- According to Article 13 of the NPC Bylaw, assistance can be sought from certain agencies for appointments, licences, and authorisations, reflecting the current practice of “security clearance”. This is in contravention to relevant international conventions, the decision made by the Cabinet in its Session No. 133, dated 24 April 2012, on removing the requirement for security clearance, and recent ruling of the Palestinian Administrative Court on Case No. 49/2022, dated 17 October 2022. The latter considered that “the requirement of security clearance for receiving the licence of a driving instructor shall be null and void”. The court abolished the decision made by the Ministry of Transportation not to issue a driving licence to the (affected) plaintiff. Of note, as characterised by Article 106 of the Basic Law (Constitution), failure to enforce, or obstruction of enforcing, court decisions, constitutes a “constitutional crime” and requires accountability and removal from office.
- Article 16(2) of the NPC Bylaw is in contradiction with institutional freedom of action and independence enshrined in relevant international conventions and domestic legislation. In spite of apparent differences, it provides that “companies” will operate in line with the plan of action of the competent ministry, not in accordance with a company’s own vision, goals, and programmes. While government plans are endorsed without actively engaging CSOs, a major part of “companies’” operations focuses on influencing and placing pressure on the government in particular issues.
- Chapter Two of the NPC Bylaw endows on the “Registrar”, in his capacity as an administrative authority, the power to take action against companies in the context of combatting money laundering and the financing of terrorism. This is contrary to relevant international principles and standards, which require that such action is provided by “an independent and impartial judicial body.” To this avail, the Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism emphasises that “the determination of whether the organization does qualify as terrorist and thus shall be proscribed must be made by an independent judicial body and there must always be a possibility to appeal a proscription decision to a judicial body.” According to the Special Rapporteur, “any decisions which limit human rights must be overseen by the judiciary, so that they remain lawful, proportionate and effective, in order to ensure that the Government is ultimately held responsible and accountable.”
- Under the guise of “risk assessment,” Article 20 of the NPC Bylaw vests the supervisory agency with broad powers over NPCs, targeting all activities carried out by these companies. This can potentially lead to interfering with and compromising all NPC affairs and operations. While Article 20(c) also gives him legislative powers, Article 17 of the NPC Bylaw confers on the “Registrar” oversight powers to liquidate NCPs, adding instances not originally provided for by the law and effectively infringing on the principles of the rule of law and separation of powers.
- Article 23 of the NPC Bylaw obliges NPCs which, by virtue of their activities, size or characteristics are susceptible to the risk of abuse for the purposes of terrorist financing, to put in place the two actions provided for by Article 22. Namely, these NPCs are required to gain access to the identities of respective beneficiaries, allegedly to avoid their being abused. This is in violation of the provisions of Articles 9 and 26 of the Basic Law (Constitution), which prohibit discrimination on the basis of political opinion and safeguard the right to freedom of association. In addition to the Cabinet’s decision on abolition of the requirement for security clearance mentioned above, it contravenes international standards, particularly Article 22 of the International Covenant on Civil and Political Rights (ICCPR). Worth of note is that several agencies already exercise control over NPC operations, including internal control units. The Ministry of National Economy also monitors financial and administrative reports of NPCs. In addition, according to Article 9(1)(g) of the Law by Decree No. 18 of 2017 Amending the Law on the State Audit and Administrative Control Bureau (SAACB), the SAACB provides compliance control over NPCs. NPC activities are also controlled by the Palestinian Anti-Corruption Commission.
- Articles 22 and 26 of the NPC Bylaw provide that NPCs access and disclose beneficiary information to the Registrar. Unless proven otherwise, this puts NPCs under suspicion and violates the Basic Law (Constitution), which prescribes that “[a]n accused person shall be considered innocent until proven guilty in a court of law” (Article 14). Both articles of the Bylaw also seriously impinge on Palestinian citizens’ personal liberty and right to access legal aid. In addition to the fact that they are not for profit, some NPCs achieve the same goals pursued by charitable associations.
- Article 27 of the NPC Bylaw oversteps the limits of the 2022 NPC Law by Decree. According to Article 29 of the latter, NPC administrative and financial reports fall within the purview of the “competent agency,” rather than the Registrar, thus violating the provisions of the said law by decree. This also applies to Article 28 of the NPC Bylaw.
- Article 29 of the NPC Bylaw prescribes that NPCs must adhere to cooperating and coordinating with supervisory agencies to the maximum extent possible in relation to identifying real beneficiaries. This can force NPCs to play roles that are not at the core of their functions. If they are unable to provide the identification, NPCs may be deemed in violation of the NPC Bylaw, furnishing an opportunity to take action against violating companies. This exercise is in breach of the Constitution, law, and international standards which regulate and establish the working relationship between both parties on the basis of respect for the law and public order.
- Article 33 of the NPC Bylaw commits the “Registrar” to providing domestic cooperation and coordination to greatest extent possible for exchanging information with “competent authorities, the Unit, and supervisory authorities.” However, according to Article 1 of the Anti-Money Laundering and Combating the Financing of Terrorism Law by Decree, the power to initiate cooperation is contained in relevant laws. Since the Companies Law by Decree does not give this power to the Registrar, Article 33 is in violation of the Anti-Money Laundering and Combating the Financing of Terrorism Law by Decree.
- Articles 34 and 37 of the NPC Bylaw confer on the supervisory agency “investigative competences” upon suspicion or when there are reasonable grounds for suspecting that an NPC serves as a front organisation to raise funds or is abused as a conduit for funds for terrorism by a terrorist group. These provisions constitute an infringement on the constitutional and legal powers of the Public Prosecution, which is authorised by society to open investigations in accordance with the Basic Law (Constitution) and Penal Procedures Law. Both articles also breach the provisions of Article 22 of the ICCPR, as the conditions of necessity and proportionality are not met. In this context, a judicial role is also lacking. States that decide to criminalise the individual belonging to a “terrorist organisation” should only apply such provisions after the organisation has been qualified as such by a judicial body.
- Article 36(2) of the NPC Bylaw is in contrariety with Palestinian legislation with respect to the Registrar’s obligation to immediately enforce decisions of the Committee on the Implementation of the United Nations Security Council Resolutions. Regulating the powers of this committee, Presidential Decree No. 14 of 2022 does not empower the Registrar of Companies to initiate actions together with the committee against NPCs.
- Although they are only provided by law, judicial control/law enforcement competences are given to the Registrar of Companies under many provisions of the NPC Bylaw. For example, Articles 21 and 32 provide for office and field control as well as procedures for investigation and detection. While Article 32 addresses inspection by the Registrar, Article 38 governs resource allocation. These provisions are all in breach of effective legislation, specifically the Penal Procedures Law.
- Although it provides for international cooperation, Article 39 does not include any guarantees and remedies against anti-terrorism actions. This contravenes the United Nations General Assembly Resolution 40/34 of 29 November 1985, which states that “compensation or restitution needs to be made available, in line with the Declaration of Basic Principles of Justice for Victims of Crime and Abuse of Power.” It is also contrary to international standards outlined by the Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism, namely, “States should provide redress for victims of crimes and abuse of power.”
- Under concluding provisions on disciplinary actions against NPCs, Article 40 of the NPC Bylaw entitles the Registrar and Minister to apply penalties as though both assume the role of the judiciary. Besides infringing on the principle of separation of powers, this is in clear violation of Article 15 of the Basic Law (Constitution), which prescribes that “[p]unishment shall be imposed only by judicial order.” Article 40 of the NPC Bylaw further “makes it permissible” that information on the actions taken against NPCs be made publicly available and that penalties do not preclude civil and criminal liability. In our opinion, such “permissibility” of publication raises serious questions about impingements on the Constitution and basic right of access to information and community oversight.
III. Findings and recommendations
- The foregoing review of the provisions of the NPC Bylaw clearly unveil impingements on the constitutional norms, by which the Cabinet should adopt regulations/bylaws. It places restrictions on the right to freedom of association and right to free exercise of their activities, both enshrined in Article 26 of the Basic Law as well as in national legislation on the formation and functions of NPCs. The Bylaw contravenes many international standards and principles relating to organisational freedom of action and independence, including Article 20 of the Universal Declaration of Human Rights and Article 22 of the ICCPR.
- The NPC Bylaw is in contravention to many resolutions of the United Nations Human Rights Council (HRC), including Resolution A/HRC/RES/22/6, dated 21 March 2013, which calls on States to ensure that reporting requirements placed on individuals, groups and organs of society do not inhibit functional autonomy, and that they do not discriminatorily impose restrictions on potential sources of funding.” Also, the Special Rapporteur on the rights to freedom of peaceful assembly and of association considered that funding was a key issue, which falls under his mandate. In his report to the HRC, dated 24 April 2013, the Special Rapporteur underlined that “legislation limiting foreign funding to registered associations only […] violate international human rights norms and standards pertaining to freedom of association.” Furthermore, he asserted that “[i]t is paradoxical that some of the States stigmatizing foreign-funded associations in their own countries are receiving foreign funding themselves (in the form of loans, financing or development assistance), often in substantially greater amounts than that flowing to CSOs in their country.” The Special Rapporteur recommended to “create and maintain, in law and in practice, an enabling environment for the enjoyment of the right to freedom of association” and “ensure that those who violate and/or abuse the right of individuals to freedom of association are held fully accountable.”
- The NPC Bylaw involves impingements on effective protocols and processes prescribed by the Palestinian legal system in the context of anti-money laundering and counter-financing of terrorism. It is also in breach of relevant international conventions, to which the State of Palestine is a party. These might be abused to undermine, restrict, and obstruct functions of NPCs, particularly those monitoring Israeli violations of Palestinian rights and freedoms and calling for justice against systematic international crimes, which fall within the jurisdiction of the International Criminal Court.
In the light of the foregoing, Al-Haq recommends that:
- The NPC Bylaw be repealed because it violates the provisions of the Basic Law (Constitution) as well as the international conventions and standards that guarantee the right to freedom of association and independent activity.
- Joint action be promoted among government bodies and CSOs to defend Palestinian inalienable rights in the face of the systematic crimes committed by the Israeli colonial apartheid regime. Away from any considerations of doubt, this should be a national priority at this critical moment of the Palestinian people from across the spectrum.
- Necessary instructions be issued forth to competent agencies, stating that control over CSOs should be within the bounds of the Basic Law (Constitution) and international conventions, which the State of Palestine acceded to, particularly the ICCPR in relation to the right to freedom of association, to be maintained free from constraints and exclusion.
 See Al-Haq, Al-Haq Position Paper on the Law by Decree Concerning the Amendment of the Law on Charitable Associations and Civil Society Organisations, (Al-Haq 10 May 2021), available at: https://www.alhaq.org/advocacy/17959.html.
 See Al-Haq, Al-Haq Comments on the Draft Regulation on Non-profit Organisations, enclosed with a letter from civil society coalitions and networks, CSOs, and non-profit companies to Prime Minister Dr. Mohammad Shtayyeh regarding the Draft Regulation on Non-profit Organisations to Combat Money Laundering and the Financing of Terrorism of 2022, (Al-Haq 2 July 2022), available at: https://www.alhaq.org/ar/advocacy/20249.html (in Arabic).
 According to Article 13(3) of the NPC Regulation, “[t]he Minister shall refer the application for approval, enclosed with his opinion, to the Council of Ministers for an appropriate decision in the event the total annual funding sources exceeds the amount of one hundred thousand dollars (US$ 100,000) or its equivalent in legally circulated currency. Article 15(1) provides that “[b]y a decision from the Minister and based on a recommendation of the Registrar, non-profit companies shall be exempted from the approval of donations, contributions, grants, funding, and aid in the event their annual total does not surpass one hundred thousand dollars (US$ 100,000) or its equivalent in legally circulated currency in all of their bank accounts.”
 See Report of the Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism, UN Doc. A/61/267, Para. 26. In the same vein, the Independent Expert on the protection of human rights and fundamental freedoms while countering terrorism, Robert K. Goldman, confirms that “civilian courts must have jurisdiction to review the provisions and supervise the application of all counter-terrorist measures without any pressure or interference, particularly from the other branches of Government.” See Report of the Independent Expert on the protection of human rights and fundamental freedoms while countering terrorism Robert K. Goldman, UN Doc. E/CN.4/2005/103, Para. 15. This is a key principle in the fight against terrorism. Governments can hide behind the banner of classified information that can neither be verified nor countered.
 Report of the Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism, UN Doc. A/61/267, Para. 29.
 See also Article 258 under Title Nine, Liquidation and Dissolution of the Company, of the 2021 Compan
y Law by Decree.
 Report of the Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism, UN Doc. A/61/267, Para. 26.
 Report of the Special Rapporteur on the promotion and protection of human rights and fundamental freedoms while countering terrorism, UN Doc. A/61/267, Para. 23.
 Report of the Special Rapporteur on the rights to freedom of peaceful assembly and of association,Maina Kiai, A/HRC/23/39, Para. 29.