Palestine's legal system is a fine mess.
On the West Bank, the laws are a mixture of Jordanian, British, and a few statutes going all the way back to Ottoman times. Over in Gaza, it's similar, but some of the laws are different (because Gaza was never under Jordanian administration).
There are huge holes in the legal system. To give one example, Palestine completely lacks a bankruptcy law. A company goes bankrupt: who gets its assets? Owners, managers, employees? The bank it owes money to? Creditors? The tax authorities? Nobody knows. And this is no small thing; banks, for instance, hate lending money when they suspect the owner might be able to repudiate the debt through bankruptcy, even if the bank has taken the precaution of securing a mortgage or other collateral.
Then there are laws that combine with other laws to give ludicrous results. There's a provision in the labor code that gives severance pay: one month for every year you've worked for that employer. But then there's another law that defines "severance" so broadly that it even includes firing for incompetence or theft. Caught your accountant stealing? You can fire him, but you still have to give him that severance pay. (Employers get around this by hiring people for eleven months, firing them, and then hiring them again.)
There's all sorts of stuff like this. It doesn't contribute to an attractive investment environment.
Palestine had exactly one decade to sort this out: from 1996, when the Palestinian Legislative Council (PLC) first convened, to 2006, when the PLC shattered under the Hamas-Fatah conflict. Unfortunately, fixing the legal system was not a high priority. They did get some stuff done -- passed a decent company law, amended the civil code -- but they were just coming to grips with the problem in the early years of this decade. Then they had elections and, boom.
-- The election thing deserves a little expansion. See, in 2006 there hadn't been legislative elections for years, and they were overdue. By this time Hamas -- the Islamist party that's more hardline against Israel -- had become pretty powerful, especially over in Gaza. Fatah -- the very corrupt ruling party that had dominated Palestinian politics since forever -- had put off holding elections because it was afraid Hamas would do well, but by 2006 the pressure was becoming irresistable, not only from inside Palestine but from without. The United States, in particular, was still dreaming of an "Arab Spring" in which democracy would sweep across the Middle East. So the Bush administration was pushing pretty hard for elections.
Shortly before the elections -- N.B., I am simplifying the hell out of a complicated story; bear with me -- shortly before the elections, Israel announced that it wouldn't allow voting in East Jerusalem, because it considered Hamas a terrorist organization and didn't accept its legitimacy. Fatah seized on this as an excuse for cancelling the whole election. In a beautiful moment of perfect harmony, Israel and the Palestinian government (still run by Fatah) mutually agreed that, alas, there could be no elections just now...
...and the Bush administration stepped in and insisted, no, there had to be elections. The Palestinians needed a legitimate government to negotiate peace with Israel! So the US twisted arms, and the elections went forward...
...and Hamas won, with a clear plurality of votes and a thumping majority in the Palestinian Legislative Council.
And it lacks a functioning legislature. The PLC has not convened since June 2006. The Hamas members are in jail or have departed for Gaza, and there aren't enough non-Hamas members to seat a quorum.
So: how do you fix a broken legal system in a place that has no legislature, and so cannot pass laws?
Well, there's good news and bad news. First, the good news: Article 43 of Palestine's Basic Law (their don't-call-it-a-constitution) says that while the Legislature isn't sitting, then the President can make law by "emergency decree". Presumably this was intended to allow the President to deal with unexpected situations while the PLC was out of session, but it's mighty handy in the current situation. Palestine lacks a functioning bankruptcy law? Hey, we can pass it by Presidential decree!
Now the bad news. First, the President's legitimacy is rather dubious, and becoming ever more so with each passing day. President Abbas was elected in early 2005 for a four-year term; it expired almost two years ago. The PLO (which is, more or less, Fatah) unilaterally declared him "President of Palestine" a while back, but nobody takes that too seriously. Hamas has announced they don't recognize him as President any more, and won't accept any actions taken after the end of his term as binding.
But his writ runs in the West Bank, where most people are resigned -- better to have a President serving years past his term than no President at all. So there's that.
(An interesting question is, what happens when Abbas -- who is not a young man -- leaves the building. The Basic Law says that the Speaker of the PLC takes over as temporary President for up to 60 days, and then there must be new elections. Hm.)
Problem #2 is that the Basic Law says, any Presidential decrees must be reviewed by the PLC as soon as it enters into session again. And if the Council doesn't approve the decrees, poof -- they disappear.
As a practical matter, the PLC probably won't be meeting any time soon. There would have to be new elections, and given that Hamas and Fatah are still not on speaking terms, that's very unlikely to happen. There's no international pressure for it -- the international community, after some dithering, has decided to accept Abbas and his West Bank government as representing "Palestine", and ignore Hamas in Gaza as much as possible. So, I would be quite surprised to see a new PLC seated within the next, say, five years.
That said, if a new PLC ever does sit, it's anyone's guess what it will do about Presidential decrees. Regional experience suggests they'll spend the first few months arguing about seating arrangements. In which case the decrees will lapse, and Palestine's laws will revert to what they were in 2006.
President Abbas is aware of this, and so he's reluctant to pass too many laws by decree.
But that leaves us back at square one: a legal system that's a scrambled botch, and missing several crucial pieces.
More in a bit, perhaps.