International Law Advisory - Hamas Government Takes Control of Palestinian Authority

State Department Officials Prohibited from Contacts with Hamas-Led Palestinian Authority Government; Implications for U.S. Companies Unclear

As a result of the swearing-in of the Palestinian Authority government led by Hamas, a designated Specially Designated Global Terrorist ("SDGT") and Foreign Terrorist Organization ("FTO") under U.S. law, the State Department instructed its officials on March 29 that all contacts with any Palestinian Authority representative under the authority of the Prime Minister or any other government minister, whether or not members of Hamas, were prohibited.  Contrary to some press reports, we understand that the State Department’s directive applies only to U.S. Government officials, and does not apply to contractors hired by the United States or U.S. companies working directly with the Palestinian Authority. Contact with Palestinian legislators who are not Hamas members, President Abbas and his staff, and any Palestinian Authority representative under the authority of the office of the President are not prohibited.

Despite this clarification for U.S. Government officials, the ramifications of Hamas’ leadership for U.S. companies doing business directly with the Palestinian Authority and U.S. companies working with the Palestinian Authority as U.S. Government contractors remain unclear.  While regulations administered by the Treasury Department's Office of Foreign Asset Controls ("OFAC") and the Antiterrorism and Effective Death Penalty Act of 1996 restrict U.S. persons from virtually all dealings with SDGTs and FTOs, respectively, the State Department thus far has declined to clarify whether it interprets the applicable prohibitions to extend to U.S. companies in the region working with a Hamas-led Palestinian Authority.   Further guidance from the State Department is expected in the near future.

Indications are, however, that the U.S. Government could adopt a more  aggressive stance on the issue in the future.  Secretary of State Rice reiterated in a March 29, 2006 press conference that no U.S. funding would be provided to the Palestinian Authority under Hamas’ leadership without the acceptance of far-reaching political concessions, including the recognition of Israel.  This issue is likely to become clearer as the political situation develops.  Therefore, U.S. persons should monitor developments at the State Department, OFAC and BIS to see if U.S. antiterrorism provisions are applied more broadly to transactions with the Palestinian Authority.

We will continue to keep you apprised of this and other developments related to sanctions and export controls issues.  If you have any questions, or desire further information on this or any related topic, please feel free to contact Ed Krauland at 202.429.8083.