Hun Hean was removed from his post following the January 7 holiday celebrations.
Jan. 7 remains a contentious day for Cambodians, marking both the ouster of the Khmer Rouge and the beginning of Vietnamese occupation.
Critics say the proposed law creates tangles of red tape that could be used to attack groups that don't follow the government line.
Relatives of the defendants, reporters and Thai Embassy officials were barred from the courtroom in Phnom Penh on Thursday.
The seven suspects, including a Thai member of parliament, were detained last week for allegedly crossing the border illegally.
Residents say they will sit at Freedom Park, for a week in search of mediation.
The law will require NGOs to provide financial reports and action plans to the government.
According to reports, the defendants were on a fact-finding mission investigating Thai claims of Cambodian border encroachment.
Residents say they want $1,500 per square meter, or 15 hectares slotted for themselves in the new development.
They were charged with illegally crossing the border and entering a military area.
More than 1,000 of 4,000 families have already been evicted or have moved from Boeung Kak lake area.