Supreme Court to hear challenge to government ban on ethical divestment by LGPS
The Supreme Court has granted the Palestine Solidarity Campaign (PSC) permission to appeal the Court of Appeal's decision that a ban on ethical divestment by Local Government Pension Schemes is lawful.
The ban was introduced in the Department for Communities and Local Government's Guidance on Preparing and Maintaining an Investment Strategy Statement, published in September 2016 and brought into effect on 1 November 2016 as a result of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016. In accordance with the Regulations, all LGPS administering authorities had to prepare an investment strategy consistent with the guidance.
The guidance permitted ethical and social objections to a particular investment to be taken into account. However, it also stated that administering authorities must not:
"…. [use] pension policies to pursue boycotts, divestment and sanctions ["BDS"] against foreign nations and UK defence industries…other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government.";
or
"pursue policies that are contrary to UK foreign policy or UK defence policy".
In June 2017, following a judicial review challenge brought by PSC, Mr Justice Coulson found in the Administrative Court that the decision of the Secretary of State for Communities and Local Government to prohibit LGPS funds from disinvesting contrary to UK foreign and defence policy was unlawful.
The Administrative Court judge held that in making the guidance in this manner the Secretary of State unlawfully used powers designed for pensions regulation to achieve purposes completely unrelated to pensions, namely the protection of UK foreign and defence policy.
The Government appealed the decision of the Court of Appeal, which overturned the Administrative Court's decision following a hearing in May 2018.
Sir Stephen Richards, with whom Lord Justice Hickinbottom and Lord Justice Davis agreed, said the Public Service Pensions Act 2013 conferred a broad discretion on the Secretary of State.
PSC has been granted permission to appeal this decision of the Court of Appeal to the Supreme Court. It is likely that a hearing will take place in the second half of 2019.
Jamie Potter, partner in the Public Law and Human Rights team at Bindmans, and solicitor for PSC said: “The Supreme Court's decision to grant permission is welcomed. The potential ramifications of the Court of Appeal decision are significant and worthy of consideration by the highest Court in the UK.
“If the Court of Appeal decision is allowed to stand, it permits the executive carte blanche to impose their own political perspective on the investment of citizens' money. However, if PSC is successful in its appeal, the Government will not be able to interfere in the ethical investment decisions of LGPS and their members.”
PSC is represented by Jamie Potter of Bindmans LLP, along with Nigel Giffin QC and Zac Sammour of 11KBW.
