UK Supreme Court upholds challenge of Palestinian campaigners to pensions scheme policy
The UK Supreme Court has ruled that the Secretary of State for Housing, Communities and Local Government exceeded his powers by prohibiting local authority investment schemes from pursuing policies that are contrary to UK foreign policy.
The Public Service Pensions Act 2013 allows the Secretary of State to make regulations and issue of guidance to local authority investment scheme administrators on the scheme’s administration and management. The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 made pursuant to these provisions require an authority to formulate an investment strategy in accordance with the guidance. This strategy must include the authority’s policy on ‘how social, environmental and corporate governance considerations are taken into account’ in its investment decisions”.
The appellants in this case, Palestine Solidarity Campaign, issued judicial review proceedings alleging that certain parts of the government advice on investment strategy was unlawful. The guidance advised that authorities “should not pursue policies that are contrary to UK foreign policy or UK defence policy” and that “using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government”.
The High Court upheld the applicant’s claim and ruled two passages of the guidance unlawful as the Secretary of State had exceeded his powers. The Court of Appeal allowed the government’s appeal. The appellants lodged an appeal to the Supreme Court.
In delivering the judgment of the majority, Lord Wilson stated that the purpose of the Public Service Pensions Act is to “identify procedures and the strategy which administrators should adopt in the discharge of their functions”. However, in his guidance, the Secretary of State “has attempted to enforce the government’s foreign and defence policies by prohibiting the administrator from taking an investment decision if it goes against those policies.” Lord Wilson went on to add that the Secretary’s guidance exceeded the powers conferred to him under the Public Service Pensions Act. The power to direct how administrators should approach the making of investment decisions by reference to non-financial considerations does not include power to direct what investments they should not make.
Lord Carnwath added that the guidance looks like an attempt to preclude authorities from taking into account considerations in policy areas reserved for the UK government when making investment decisions. He concluded that the Secretary is not entitled “to make authorities give effect to his own policies in preference to those which they themselves thought it right to adopt in fulfilment of their fiduciary duties.”
The majority of the Supreme Court allowed the appeal and restored the order of the High Court.
Click here for the full judgment