This is an idiom issue. The construction ON THE GROUND(S) is an idiomatic expression that essentially means "because." This expression will always take THAT.

In other contexts (outside of this particular expression), the word GROUND or GROUNDS could be followed by OF: The grounds of this estate are lovely.

Here, we can narrow the choices down to C, D, or E. C uses the past tense THAT ALLOWED, which doesn't make sense - the law still allows in the present, so we can eliminate C. Between D and E, D is active and E is passive, so pick the active answer.

The answer is D.