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Position Paper
Government-Backed Legislation Curtailing Foreign
Funding Seeks to Undermine Civil Society in Israel

1. Background: Governmental Attempts to Narrow the Space in which Human

Rights Groups Operate

While the Israeli government's attitude toward human rights groups that provide
assistance to Palestinian residents of the Occupied Territory has always been ambivalent,
until recently, human rights groups in Israel could operate with relative freedom.
Freedom of speech and association were relatively protected, and we interacted on a
professional level with military and government authorities through limited procedures
for administrative appeal. In recent months, however, and especially since the Israeli
military operation in Gaza (December 27, 2008-January 18, 2009), the Israeli government
has sought to undermine the legitimacy of human rights groups, especially those who
defend human rights in the occupied Palestinian territory (oPt). The Israeli Security
Agency (Shin Bet or Shabac) interrogated a Palestinian citizen of Israel working at a
human rights organization, warning him not to engage in "political activities" concerning
Gaza; the police opened a criminal investigation and arrested staff members of an Israeli
group supporting conscientious objection from military service; the government
launched a public attack against a group that published testimonies of soldiers who
served in the Gaza offensive, including asking European governments to stop funding
the organization through their human rights programs; and police arrested and detained
more than 830 protesters, especially Palestinian citizens of Israel, while protesting against
the military attack on Gaza. From September to November 2009, the Coordinator of
Government Activities in the Territories office in Gaza shunned Israeli human rights
groups, refusing to respond to appeals on behalf of Gaza residents seeking exit permits,
even in dire humanitarian circumstances, until heavy pressure was exerted by the
international community and the State Attorney's office. Sporadic refusal to respond to
human rights groups representing Palestinian residents continues. In February 2010,
Israeli lawmakers voted to establish a parliamentary sub-committee to "investigate"
human rights groups in Israel which are supported by the New Israel Fund. Although no
such committee has been formed, the pretext for this investigation is that the groups
provided information to the Goldstone Fact-Finding Mission, which inquired into the
Israeli military operation in Gaza. Government spokespersons have given interviews in
the media calling human rights groups "a strategic threat", casting them as traitors and
spreading misinformation about their activities.
We are witnessing an unprecedented attempt to interfere with the activities of Israeli
human rights groups. These governmental attempts to narrow the space in which
human rights groups in Israel operate form the context for a proposed law to
restrict the ability of Israeli human rights groups – and a host of additional civil
society organizations – to receive funding from foreign governmental sources.

2. The Proposed Law

Status of the Bill
On February 14, 2010, the Israeli government voted (by a vote of 8-3 of the Ministerial
Committee on Legislation) to support a legislative bill entitled the "Bill on disclosure
requirements for recipients of support from a foreign political entity – 2010". Civil
society groups have expressed their grave concern over this bill, which passed a
preliminary vote (58-11) in the Knesset plenum on February 17, 2010 and is scheduled to
be brought for a full vote in the next Knesset session, after the Passover holiday.
The proposed legislation, steps away from being approved as law, would restrict the
activities of a host of organizations working on a broad spectrum of issues in Israel and
the oPt – from environmental groups to peace organizations to organizations that
promote human rights.
While the legislation purports to increase transparency concerning foreign funding of
NGOs, in reality it will infringe on the ability of a wide variety of social change
organizations to conduct their work by undermining public legitimacy and limiting
funding opportunities.

The Bill in a Nutshell

The bill would define civil society groups that work to influence public opinion or
governmental policy as engaging in "political activity" and require them to register with
the "Political Parties Registrar". Should they fail to do so, principal activists within these
groups would face fines and imprisonment of up to one year.
Moreover, the bill would force representatives of civil society groups – including lawyers,
doctors, and other professionals – to state in every private and public platform related to
their advocacy work, including public meetings, events, and media interviews, that their
organizations receive funding from "foreign political entities".
Finally, according to the bill, the tax-exempt charity status of NGOs promoting policy
change would be revoked, threatening the ability of donors to support their work.

Treating Civil Society Groups as Political Parties

The bill would characterize nonaffiliated civil society organizations as "political parties",
effectively creating a duplicative regime of regulation. Currently the Law of Associations
of 1980 regulates the registration, organization, and financial reporting of Israeli NGOs
(amutot). NGOs working for social change are not affiliated with political parties but
rather seek to promote issues or ideas – human rights, environmental protection,
women's rights, peace, religious pluralism, tolerance – and to promote policy changes
that serve the public interest. In fact, the NGO community in Israel plays a key role in

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providing information and professional expertise on issues such as civil rights, health
care, education, environment, housing, employment, immigration, minority rights, and
women's rights, among others, and appealing to decision-makers across the political
spectrum to promote these issues.

The bill, however, characterizes civil society groups that work on these issues as
conducting "political activity", a term it defines as activity seeking to influence "public
opinion… or any actor within any governmental authority". Given this extremely broad
and vague definition, the bill mandates that civil society groups register with the
Registrar for Political Parties (a government agency) and report to the Registrar on any
funding they receive from "foreign political entities". It is not clear what status the bill
intends to impose on human rights organizations, as it is unlikely they would be treated
as political parties for purposes of receiving the Israeli government funding that political
parties receive, and they would also continue to be regulated by the Registrar of
Associations.

The practical meaning of this definition is that all groups promoting human rights and
social change will now be subject to far-reaching government regulations on registration
and reporting. Should they fail to comply, principal activists within these groups will for
the first time face severe penalties, including one year in prison or fines. In addition, for
member-based organizations, the bill will make registration of members' identity
numbers and addresses compulsory. This information can also be disclosed to the
public, potentially allowing for harassment and discouraging participation. The bill thus
undermines the ability of various constituencies in Israel to engage in a vigorous
democratic debate for fear of being portrayed as political activists or being exposed and
undermined for their involvement with social change organizations.

Imposing Speech Burdens that Undermine Critical Voices

The unrealistic and unnecessary requirements of the law would force any spokesperson
for an organization to announce, in any written material, electronic communication,
meeting, interview, or public appearance related to advocacy, public or private, that her
organization receives funding from "foreign political entities". This provision not only
places an unreasonable burden on the shoulders of public speakers but, more
importantly, its ultimate goal is to taint these speakers and their message as illegitimate or
serving foreign interests.

To give an example: The executive director of a women's rights organization is invited to

be interviewed on the radio to promote a change in government policy regarding
domestic violence. In the 30 seconds allotted for her comments, she would also need to
announce that foreign government donors support the work of her organization. The
same "disclosure" requirement would apply to a private conversation with a member of
the public, an e-mail response to a question from an ordinary citizen, or a written
advertisement against domestic violence, so long as those communications are aimed at
influencing public opinion or public policy. Volunteers and experts representing NGOs
will also be required to announce themselves as recipients of foreign government sources
of funding at every opportunity, a burden that would potentially deter them from
becoming involved in social change activities.

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 Limiting Funding Opportunities for Civil Society Organizations
The bill would significantly restrict funding opportunities for civil society organizations
by revoking the tax-exempt charity status of groups that promote policy change and
receive foreign government funding. That means that a social change organization may
actually have to pay tax on donations or other income – even though, as organizations
serving the public good, we have no profits that could properly be taxed. This tax
burden would have tremendous financial consequences. In addition, because many
donors, governmental and private, have contractual limitations on their ability to pay
taxes to a foreign government, removing our tax-exempt status would threaten our
ability to receive donations entirely, including from private foundations.

By weakening the ability of NGOs to raise funds locally and abroad, the bill seeks to
weaken the impact of these groups in the public debate and ultimately to silence their
voices.

3. Overview of Foreign Government Support for Israeli Civil Society

The rhetoric surrounding the bill's proposal has sought to cast human rights
organizations in Israel as "agents" of foreign governments, as though there were
something suspicious or untoward about foreign governments donating money to
promoting human rights. In actuality, foreign support for human rights groups is based
on the promotion of shared values, including democracy and respect for human rights.
Such support constitutes a tiny fraction of extensive programs in which friendly
countries engage Israel at all levels – including through cultural, academic, scientific, and
civil society organizations which receive generous funding.
Small Share of Human Rights Organizations in Overall Foreign Government Funds for Israel
The share of foreign governments' funds received by human rights organizations, within
the overall sum allocated to Israel (for government ministries, public sector bodies and
other organizations), is tiny relative to other sectors. In 2007, for example, the European
Union allocated grants totaling €261 million for activities in Israel, including economic
cooperation, peace and security, democracy and human rights, scientific and technology
cooperation, environmental cooperation, education and cultural cooperation. These
activities are based on various agreements between the State of Israel and the EU1, and
their shared commitment to values of democracy, good governance and the rule of law,
respect for human rights and basic freedoms, sustainable development, and market-
economy principles. Of these grants, the funds allocated to human rights organizations
amounted to €1.4 million or 0.5 percent of EU resources for Israel in that year. By way
of comparison, in the years 2007-2009, Israeli universities, researchers and industry
received €241 million in funding from the EU. In addition, over the past five years, the
European Investment Bank has financed infrastructure projects in Israel valued at €453.3
million2.

                                                             

1 Such as the Association Agreement, which is the basis for Israeli-EU cooperation, the
Agreement on Scientific and Technological Cooperation, and others.
2 http://www.eib.org/projects/loans/regions/mediterranean-countries/il.htm.

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 It's Not Just Human Rights Groups That Would Be Affected
The bill, as recalled, applies to NGOs that receive support from foreign entities3 for
"political activities". The sweepingly broad definition of political activity in the bill would
make it applicable to a vast array of social change, environmental, and perhaps even
academic institutions that receive funding from foreign governments. These
organizations use advocacy as a tool to influence public opinion or specific government
organs or entities, in order to bring about change. NGOs affected would include, for
example, The Society for the Protection of Nature; Life and Environment - The Israeli
Union of Environmental NGOs; Women Against Violence; Isha I'Isha (dealing with
women's rights and prevention of trafficking in women); Itach – Women Lawyers for
Social Justice (working for economically and socially under-privileged women); Hotline
for Migrant Workers; The Movement for Freedom of Information; Friends of the Earth-
Middle East, and many others. It should be noted that the organizations listed above
engage in non-partisan activities aimed at bringing about social change; they are not
affiliated with any political party.

4. An Unnecessary Law; a Worrying Deterioration in Israeli Democracy

Why is the law unnecessary? Because each non-profit organization in Israel is already
required to list its donors and other financial information on its website and to report
annually to the government, specifying whether foreign governments have donated
money. This information is readily available. There already is complete regulation
concerning the disclosure of funding, mission, and activities of Israeli NGOs that receive
funding from foreign governments. Any changes or amendments that may be desirable
can be made via the existing and extensive legislation, primarily via the "Law of
Associations" (Amutot (Nonprofit Societies) Law) which regulates Israeli NGOs4. In
addition, it is not clear why these new requirements should be imposed on organizations
receiving funding from public foreign sources, but not on organizations receiving
funding from private foreign sources.
As Israeli NGOs, we fully support the transparency of civil society as well as of
government actors. But this bill would create a duplicative and unnecessary system of
regulation that especially targets a particular sector of civil society in ways inappropriate
to the declared goal. We are concerned about the motivations behind this proposed law
and its ramifications for Israeli democracy and the robust civil society that is its strength.
Burdening the activities of social change organizations, erroneously labeling them as
"political" groups, subjecting them to criminal penalties for vibrant advocacy, and taxing
their donations are inappropriate measures that fail to uphold the rights of freedom of
expression and association.

                                                             

3 This includes foreign governments and foreign NGOs/foundations which receive funding from
their governments.
4 Amutot (Nonprofit Societies) Law, 5740–1980, 34 LSI 239 (1979–80) (Isr.).

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 5. Frequently Asked Questions (FAQs)
1. Why is it problematic to take away NGOs' tax exempt status?
A potential consequence of removing NGOs' tax exempt status is that their
donations would be taxed via Israeli income tax law and perhaps the Israeli Value
Added Tax law. The specific ramifications are uncertain, as it would depend on how
the income is treated. There is no precedent for this situation because, until now,
income received by NGOs in Israel has been exempt from taxation.

First, such a revocation could impose significant additional costs on the work of
NGOs by subjecting them to heavy taxes reserved for profit-making entities. The
revocation would not only prevent the possibility of Israeli donors to NGOs
receiving a tax benefit (a status held by some, but not all NGOs), but it may actually
force all NGOs affected by the law to pay taxes on income received. By law and by
the provisions of our articles of association, NGOs are obligated to use all funds and
assets for the activities and expenses of the NGO and may not distribute them, so it
is not clear what "profits" could be taxed. Further, "good governance" requirements
already imposed by the Registrar of Associations (Nonprofits) require transparency
and regulation of salaries and expenditures, to ensure the proper handling of NGO
funds.

Second, many donors, including foreign governments and private foundations, have
contractual regulations regarding their ability to donate to organizations without tax-
exempt status.

Third, many foreign governments have restrictions on their ability to pay taxes and
essentially fund foreign governments. Their funding of programs, research, and other
direct assistance are regulated through various foreign aid programs, but if money
were paid via taxes it would be essentially unrestricted. Each country maintains its
own laws in this regard, but it is not uncommon for foreign governments to disallow
use of their donations to NGOs to pay taxes.

2. Do other kinds of registration exist for NGOs?

All the major human rights organizations operating in Israel are registered as
"associations" (amutot) and are bound by the Associations Law of 1980. Other kinds
of registration do exist, with similar requirements and regulations regarding
transparency of funding sources. If the goal of the legislation was to regulate the
status of organizations not operating under the Associations Law, certainly there are
alternative ways of doing so, without undermining and threatening the ability of all
organizations to do their work.

3. What kind of information must you make public as part of your NGO status?
Organizations are required by the Law of Associations to register with the Registrar
of Associations and to submit annual, audited financial reports divulging all sources
of income above 20,000 shekels and all sources of income coming from a foreign
government donor, no matter the sum. In addition, as of 2008, organizations are
required to post this information to their websites. Many donors are also required to
regularly publish information about the programs that they support. We note that the
law would provide no additional transparency regarding funds received from private
foreign sources, even though the activities of some of the groups advocating for

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 greater "transparency", including the NGO Monitor and Im Tirzu, receive funding
from private foreign sources5.

4. Is the law likely to pass?

There was strong support for the legislation in the preliminary Knesset plenum vote,
and the bill has the backing of the government. As noted above, an atmosphere of
hostility and mistrust of human rights organizations especially, has made populist
attempts to restrict our activities frequent. We are concerned that without strong
intervention, the legislation will indeed pass.

5. Where does the legislation stand?

A month-long hold period on the bill ends March 17, 2010. Until then, the
supporters of the bill are purportedly in negotiations with Minister Isaac Herzog and
other opponents of the bill, as well as the Justice Minister, in order to bring an
agreed-upon, revised version for a second vote in the Ministerial Committee on
Legislation. Once it passes the Ministerial Committee, it will go to the Knesset's
Constitution, Law and Justice Committee for preparation for the first of three
readings (votes). Four of the seven MKs who proposed the legislation sit on the
committee (which has a total of 12 members).

6. Doesn't Israel have a right to prevent foreign actors from interfering in its
social policy by funding NGOs?
The Israeli NGO sector is overwhelmingly supported by funds donated from abroad.
Universities, hospitals, and a long list of institutions and organizations depend on
support from the Jewish diaspora community in Western countries, from Christian
groups based in the United States, and, as noted above, from foreign government
sources. In addition, the Israeli government is a recipient of approximately $3 billion
annually in foreign aid from the U.S. government, which also funds civil society
NGOs separately (for example, in the field of environment and education). The
engagement of foreign governments and foreign private actors with Israeli civil
society is significant, and it spans the ideological spectrum, from groups promoting
human rights to groups advocating for the settlement of Jews in the occupied
Palestinian territory. If the goal were to decrease foreign intervention, it is not clear
why social change groups are being targeted, as opposed to other kinds of groups.
The attempt to restrict European government funding of Israeli NGOs is particularly
inappropriate given that the treaty signed by Israel and the European Union
regulating relations between the two recognizes human rights as a shared value to be
promoted by various means, including financial support.

7. How does this proposed law compare with legislation in other countries?
In Western democracies, the regulation of the operation of NGOs is almost entirely
administrative in nature and rarely, if ever, rises to the level of active interference
with organizational activities. By contrast, in less open societies, the wide latitude and
hands-off approach to regulation enjoyed by NGOs in the West is entirely absent.
Instead, a climate of oppressive regulation, monitoring, and control results from the
adoption of broad and vague legislation regulating the activities of domestic and
foreign groups acting in the public sphere.

                                                             
5The amounts and identities of the donors are unknown, because these organizations neglect to
publish them on their web sites.

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 For example, in early 2009, the Ethiopian Parliament adopted the Charities and
Societies Proclamation regulating the operation of civil society organizations within
the country. Among its many provisions, the C.S.P. severely restricted the ability of
any organization that receives more than 10% of its funding from outside the
country to operate within Ethiopia.6 Only organizations entirely comprised of and
managed by Ethiopians, and funded with more than 90% of domestic money, may
participate in “advocacy,” covering a vast range of activity that includes human
rights, gender equality, children’s rights, disabled persons’ rights, conflict resolution,
and strengthening judicial practices and law enforcement.7 The government’s
oversight authority includes the ability to suspend or dissolve organizations that it
determines are operating “for purposes prejudicial to public peace, welfare, or
security.”8 Similar types of restrictions are found in Russia, which in 2006 amended
previous statutes to grant wide discretion to state authorities to oversee and control
NGOs.

Additionally, Egypt imposes major burdens on the operation of NGOs within the
country that effectively silence many organizations. First, it requires prior permission
from the government before accepting foreign funding (also the law in Algeria,
Jordan, Syria, and Sudan),9 and second, it prohibits “political activities” by NGOs,
but does so in a way that does not differentiate between political campaigns for office
and public policy initiatives.10

8. Where can I learn more about how laws are passed?

http://www.knesset.gov.il/description/eng/eng_work_mel2.htm

                                                             
6 Debebe Hailegebriel, Ethiopia, INT’L J. OF NOT-FOR-PROFIT L., Feb. 2010, at 9, 10, available at
http://www.icnl.org/knowledge/ijnl/vol12iss2/ijnl_vol12iss2.pdf.
7 Press Release, Human Rights Watch, Ethiopia: Draft Law Threatens Civil Society (Oct. 13,

2008), available at http://www.hrw.org/en/news/2008/10/13/ethiopia-draft-law-threatens-civil-

society.
8 Hailegebriel, supra note 6, at 16.
9 Survey of Arab NGO Laws, GLOBAL TRENDS IN NGO L., March 2010, at 1, 9, available at

http://www.icnl.org/knowledge/globaltrends/GloTrends1-4.pdf.
10 Barred from the Debate: Restrictions on NGO Public Policy Activities, GLOBAL TRENDS IN NGO L.,

Sept. 2009, at 1, 5, available at http://www.icnl.org/knowledge/globaltrends/GloTrends1-3.pdf.