The Communities Secretary acted for an unauthorised purpose and therefore unlawfully when he issued statutory guidance on the investment strategy for the local government pension scheme (LGPS) that sought to prevent boycotts, divestment and sanctions against foreign nations and UK defence industries.
The case of Palestine Solidarity Campaign Ltd & Anor, R (On the Application Of) v Secretary of State for Communities And Local Government  EWHC 1502 centred on guidance issued by the Communities Secretary in September 2016, Guidance on preparing and maintaining an investment strategy statement.
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.";
"pursue policies that are contrary to UK foreign policy or UK defence policy".
This restriction operated even if an investment strategy with an element of boycott, divestment and sanction would not involve significant financial risk to the scheme and irrespective of member support.
The claimants – the Palestinian Solidarity Campaign and Jacqueline Lewis, one of its members – advanced three grounds of challenge:
- The guidance in this respect fell outside the proper scope of the minister’s statutory powers because it was issued for non-pensions purposes;
- The guidance was unlawfully lacking in certainty; and
- It was contrary to Article 18(4) of Directive 2003/41/EC on the Activities and Supervision of Institutions for Occupational Pension Provision.
Mr Justice Coulson upheld the first ground of challenge only. He said: “The flaw in the Secretary of State's approach is that the guidance has singled out certain types of non-financial factors, concerned with foreign/defence and the other matters to which reference has been made, and stated that administering authorities cannot base investment decisions upon them.
“In doing this I cannot see how the Secretary of State has acted for a pensions' purpose. Under the guidance, these factors cannot be taken into account even if there is no significant risk of causing financial detriment to the scheme and there is no good reason to think that scheme members would object. Yet the same decision would be permissible if the non-financial factors taken into account concerned other matters, for example, public health, the environment, or treatment of the workforce.”
He added: “In my judgment the Secretary of State has not justified the distinction drawn between these and other non-financial cases by reference to a pensions' purpose. In issuing the challenged part of the guidance he has acted for an unauthorised purpose and therefore unlawfully.”
War on Want, Campaign Against Arms Trade and the Quakers supported the legal challenge with witness statements.
PSC was represented in the proceedings by Bindmans, who instructed Nigel Giffin QC and Zac Sammour of 11KBW.
Jamie Potter, partner in the Public Law and Human Rights team at Bindmans, said: “This outcome is a reminder to the Government that it cannot improperly interfere in the exercise of freedom of conscience and protest in order to pursue its own agenda.”
Hugh Lanning, Chair of the PSC, said: “[This] is a victory for Palestine, for local democracy, and for the rule of law. Absolutely everyone has a right to peacefully protest Israel’s violation of Palestinian human rights. This ruling upholds the right of local councils and their pension funds to invest ethically without political interference from the government of the day.”