Mr al-Falouji's sin, it seems, was to carry a small news item on his paper's back page which claimed to quote a report in the Independent that Mr Arafat had sold to a French company the right to use the name of his 13-day-old daughter, Zahwa, on its products. The Independent carried no such report.
"Hamas only printed this article to hurt the credibility of President Arafat," Mr Kanafani, brother of the militant (and murdered) poet Ghassan Kanafani, said with contempt. "Nobody believes it. President Arafat is a very generous man - he'd never do such a stupid thing. This has only been done to discredit the President. His response was more in sorrow than in anger."
Outside Mr Kanafani's office, armed members of Mr Arafat's security services wandered through the Palestinian Authority's headquarters; upsetting the President is obviously a risky business for journalists in the new "Palestine".
"I hope the suspension will be temporary," Mr Kanafani added, perhaps sensing that the closure of newspapers is not the sort of thing democracies are supposed to do. "I hope the writers of that paper understand that this kind of news has got nothing to do with what is called 'the people's right to know'. Writers on magazines like this, they are hurting the basis of the development and freedom of the press in this country."
A television crew from the Palestinian Broadcasting Company were sitting outside the office, waiting to interview Mr Kanafani about the Israelis' latest "violation" of the peace accord in allowing Jews to demonstrate on the Haram as-Sharif in Jerusalem, known to Jews as Temple Mount. They were very definitely not going to report Mr al-Falouji's arrest any more than they were going to remind viewers of the secret special courts which Mr Arafat has instituted in Gaza City for people like Mr al-Falouji. But there seemed no reason why Mr Kanafani should not explain to me the purpose of such courts.
"Yes, these state security courts, do you know whom they embarrass most, who complains most? The Palestinians. And me. I don't like them. Yes, they have passed a lot of sentences, some of them harsh." Mr Kanafani did not mention that some sentences are for 25 years.
"Yes, there are rules that the public are not allowed to attend ... under current conditions here, we may have certain rules that may not be democratic. But didn't Britain have special courts when it was at war? We're almost in a state of war against those who don't want us to implement peace here. It's a very critical situation. When 1.2 million Palestinians are punished for what one or two (militants) have done, then we are in a state that calls for extraordinary measures. We are trying to punish justly those who are jeopardising the security, property, lives and human rights of the Palestinian people."
Were things really this critical? Mr Kanafani replied: "The fact is ... I don't think the Israelis want peace in the way we want peace. We signed a peace treaty as partners with the Israelis and we are together with them in facing the obstacles on the path to peace, to co-operate to reach a settlement. But the Israelis are still dealing with us as enemies. They are trying to reach a ceasefire, not a peace. They don't seem to trust us or have the will to trust us."
Mr Kanafani's point seemed obvious: the PLO was arresting Hamas and Islamic Jihad militants at great cost to its own popularity, yet still the Israelis would not agree to abandon settlements and allow the Palestinians a state on the West Bank and Gaza.
"The Declaration of Principles signed in Washington was based on three words: land for peace. We will do anything humanly possible to satisfy Israel's security needs. But they must do everything possible to satisfy our need for land. President Arafat knew when he signed this agreement that there were big holes in it. And the Israelis got praise for making peace. [Prime Minister Yitzhak] Rabin shared the Nobel Prize with President Arafat. But now when we come down to the nitty-gritty, the Israelis want both peace and land. And if they want to keep their soldiers in the West Bank to protect settlements and keep most of our land under different pretexts, then we're not going to have peace."
Mr Kanafani sets off today for a further meeting between Mr Arafat and Mr Rabin at Taba, but he made no secret of Mr Arafat's impatience. "Yasser Arafat took a lot of chances for this. He took personally all the decisions that were necessary, including arrests and unpopular decisions, as well as raising the hopes of our people . . . He did this because he believes in peace. Heads of state don't take these chances, but leaders do - and he is a leader. He wants it to work, but he is exhausted. He is worried. He is not satisfied that the peace process is moving."
Which is clearly what Mr al-Falouji also thinks.