A State Department order closing the Palestine Liberation Organization's office here last year was upheld Friday by a federal appeals court that said the action didn't unlawfully curb free speech.

The three-judge panel of the U.S. Circuit Court of Appeals here rejected claims that the closing of the Palestine Information Office violated the organization's right to free speech, but it acknowledged the case raised serious constitutional issues.However, the court concluded that the order by Secretary of State George Shultz didn't "infringe upon any of those constitutionally protected rights,"

The State Department cited "U.S. concern over terrorism committed and supported by individuals and organizations affiliated with the PLO, and as an expression of our overall policy condemning terrorism" when it ordered the closing last fall.

The order was challenged in court, but last December, U.S. District Judge Charles R. Richey upheld Shultz's decision that the office functioned as a foreign mission of the PLO.

The appeals panel said "the Foreign Missions Act operates in that subtle realm of which foreign policy matters brush up against the rights of free speech and expression."

Judge Abner Mikva wrote that `it is possible to envision truly difficult cases under the act in which the State Department might designate as a foreign mission a domestic organization that arguably did not belong in that category."

"This is not, however, such a case, and the PIO is not such an organization," Mikva wrote. He said the office was founded by the PLO and its head, Hasan Abdel Rahman, met regularly with the PLO to discuss its representation.

The court rejected claims that the closing infringed on the rights of the office's staff, notably its American director, to express political views about the Middle East.

"Appellants are as free today as they were before the order to express whatever ideas they wish and to associate with whichever individuals they wish," the court said.