On 1936 Arabs in Palestine went for a 1936 general strike. During the strike, Palestinian Arab leaders formed the Higher National Committee (HNC).
Following the strike the British Government established the Peel Commission, chaired by Lord Peel, to investigate the causes of the general strike, and to make recommendations to the British government, in the light of commitments made in the Balfour Declaration, to the establishment of a Jewish National Home in Palestine. The commission concluded that the only solution was to partition the country into a Jewish State and an Arab State. The two main Jewish leaders, Chaim Weizmann and Ben Gurion had convinced the Zionist Congress to approve equivocally the Peel recommendations as a basis for more negotiation.
The partition idea that was rejected by the Arabs. On 1 October 1937, with a resurgence of violence following the publication of the Peel Commission proposals, the HNC and all nationalist committees were outlawed. Five prominent Palestinians, including Yacoub Al Ghussein and three members of the HNC where deported to the Seychelles. The remaining members of the HNC were either already out of the country or like Haj Amin Husseini went into hiding and then into exile in Cairo, Damascus and Beirut.
Over the summer of 1938, anti-government and inter-communal violence in Palestine reached new heights. Arab militants were in control of large areas of the countryside and controlled several towns including the Old City, Jerusalem. The Jewish underground set off a series of lethal bombs in Arab markets across the country and the Jewish Special Night Squads launched their first operations. In the autumn the British authorities launched a counter-offensive. More British troops were sent and Martial Law was introduced.
In 1938, a second commission was sent to Palestine to report on how to implement the partition proposals. This commission, chaired by Sir John Woodhead, was boycotted by the Palestinian Arabs whose leaders had been deported or were in exile and who had no wish to discuss the partitioning of the country. The Woodhead Commission considered three different plans, one of which was based on the Peel plan. Reporting in 1938, the Commission rejected the Peel plan primarily on the grounds that it could not be implemented without a massive forced transfer of Arabs (an option that the British government had already ruled out). With dissent from some of its members, the Commission instead recommended a plan that would leave the Galilee under British mandate, but emphasised serious problems with it that included a lack of financial self-sufficiency of the proposed Arab State. The British Government accompanied the publication of the Woodhead Report by a statement of policy rejecting partition as impracticable due to "political, administrative and financial difficulties".
Coinciding with the publication of the Woodhead Commission Report on 9 November 1938, the government issued a statement that it wished to end the Mandate, and that Britain would continue to govern Palestine until a new regime was established. To this end the Colonial Secretary, Malcolm MacDonald invited an Arab and a Jewish delegation to London to discuss what form of government should be established. The statement concluded that if agreement was not reached with the two delegations the government would put forward and implement its own proposals. The Arab delegation was to include Palestinian Arabs as well as representatives from five, pro-British, Arab regimes. The Jewish delegation was selected by the Jewish Agency and included Jews from the Diaspora as well as the Yishuv.
By the winter of 1938 British thinking was dominated by the territorial expansion of Nazi Germany. In the event of a European war it was essential that Britain maintained control over Egypt, Iraq and Palestine. It was certain that concessions would be offered to the Arabs and that the Zionists would be disappointed.