April 2025 – A U.S. appeals court has sided with the American Foundation for Basic Research in Israel, Inc. (AFBRI) in a legal fight with the Israel Academy of Sciences and Humanities, deciding that the Academy has no right to claim control over AFBRI’s donations.
The Israel Academy, a top research institution established by the Israeli government, had filed a lawsuit against AFBRI – its longtime U.S. fundraising partner – accusing the foundation of refusing to release more than $17 million intended to support science in Israel. According to the Academy, it also wasn’t allowed to see AFBRI’s financial records.
The situation sparked controversy when two Jewish Nobel Prize winners, Mike Brown and Roger Kornberg, resigned from AFBRI’s board in protest over its actions.
The Academy claimed that AFBRI was created specifically to collect donations for it, and argued that by not transferring the funds, AFBRI was going against donor expectations. The lawsuit, filed in New York federal court in 2022, asked the court to give the Academy control of the money and to remove a key AFBRI board member, Meir Zadok, who helped found the foundation but stayed on the board even after leaving his leadership role at the Academy in 2016.
But the court dismissed the case, and now the Second Circuit Court of Appeals has upheld that decision. The reason? Under New York law, only the state Attorney General, with few exceptions, can sue a nonprofit like AFBRI. The Academy didn’t qualify for an exception because it wasn’t named in AFBRI’s founding documents, wasn’t a donor, and wasn’t a trustee.
Therefore, AFBRI won the case.
AFBRI’s lawyers, from the firm ZEK, said this was an important win for nonprofit organisations in general. “The court confirmed that charities have the right to operate independently and can’t be taken to court by groups that don’t have a direct legal role,” said ZEK partner Stuart Krause.
This case also raises bigger questions about how “Friends of” organisations – U.S. charities that raise money for groups overseas – should be structured. According to experts, American law requires that these charities remain fully independent from the foreign groups they support, or they risk losing their legal status.
In this case, AFBRI had always chosen to send money to the Academy in the past, but it wasn’t legally required to. “They were set up to be able to say no if they wanted,” said Cliff Perlman, a nonprofit law expert. “That’s what makes them a legitimate independent organisation under U.S. law.”
The Academy’s lawyer, Christopher J. Sullivan, said it was too early to say what steps the Academy might take next but confirmed that the case involved complex tax and nonprofit issues.
For now, the ruling means that AFBRI keeps control of the funds, and nonprofit groups across the U.S. may take note of the outcome when managing their own ties to foreign partners.
How does this connect to charitable institutions in Australia?
In Australia, charitable organisations are also subject to legal structures that ensure they act independently and in the public interest. Registered charities must comply with the Australian Charities and Not-for-profits Commission (ACNC) rules and governance standards, and decisions about how funds are used are generally made by the charity’s board, not by external stakeholders.
Like in the U.S., donor intent is important, but it doesn’t give a donor or a related organisation the right to control a charity’s assets unless there’s a formal legal agreement in place. Australian charities must also be cautious when partnering with overseas organisations. If they act simply as a “pass-through” for international entities, they may breach rules on proper governance or lose their charitable status.
This U.S. case serves as a reminder – both in America and Australia – that charitable independence is a legal and regulatory necessity, even when strong relationships exist between fundraising bodies and the causes they support. Boards must balance their mission with their obligations to donors, regulators, and the public, and ensure they retain full oversight of how their funds are managed.
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