Israel is NOT the sovereign power in the West Bank, it is merely the occupying power. Israel's permission is therefore not required for the Palestinians to declare that this territory makes up their state, precisely because this is true: if the territory does NOT belong to the occupier (and it doesn't) then the occupier doesn't have the power to "gift" that territory to anyone.
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Sweden arrests 14 over plan to attack asylum center (AP)
from the article: The prophetic lesson of Stephen Hawking's Israel boycott