Who on earth would want their pension being dependent on the judgement of Boris Johnson?
Well done to Palestine Solidarity for funding this judicial review. This case also supports the view of UNISON that the existing EU law already requires Council pension funds should be invested in interests of beneficiaries and legally separate from employers and the government.
Professional Pensions The government has suffered a major defeat in the High Court after its rules on Local Government Pension Scheme (LGPS) investments were deemed unlawful.
The investment guidance, issued last September, requires LGPS
funds to have policies on environmental, social and governance (ESG) issues but
also added they could not pursue policies contrary to central government
foreign and defence policy.
The guidance said "pension policies to pursue boycotts,
divestment and sanctions [BDS] 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" and
funds could not "pursue policies that are contrary to UK foreign policy or
UK defence policy".
The policy was particularly contentious as LGPS funds and
campaigners said this limited their ability to take up ethical investment,
particularly BDS action against companies operating in Israeli settlements in
Palestine.
A bid was launched in the courts by the Palestine Solidarity
Campaign (PSC) to overturn the regulations via a judicial review, where it
argued the government had acted outside of its powers, and it was "lacking
in certainty".
It also cited Article 18.4 of the EU's
directive on the Activities and Supervision of Institutions for Occupational
Pension Provision (IORP), which states "member states shall not subject
the investment decisions of an institution… to any kind of prior approval or
systematic notification requirements".
However, in his judgment, issued today, the judge Sir Ross
Cranston only agreed with the first argument, stating the minister for the
Department for Communities and Local Government (DCLG) Sajid Javid had
"acted for an unauthorised purpose and therefore unlawfully".
His reasoning was the "guidance has singled out certain types
of non-financial factors, concerned with foreign/defence… 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".
He stated specifically that this guidance could preclude LGPS
funds taking ESG factors into account even if there no "significant
risk" of financial detriment or "no good reason" to believe
members would object.
Cranston therefore granted a judicial review, meaning the
government may have to rethink its approach to the rules if it wishes them to
take effect.
PSC chair Hugh Lanning welcomed the ruling, and said local
councils would be happy to be able to invest funds as they see fit.
"Today is a victory for Palestine, for local democracy, and
for the rule of law," he said.
He added: "This ruling upholds the right
of local councils and their pension funds to invest ethically without political
interference from the government of the day."
A spokesperson for DCLG said the government would consider whether
to appeal: "It is an important principle that foreign policy matters are
for the UK Government to decide. We will consider the judgement and next
steps."
Unison national officer for capital stewardship Colin Meech also
welcomed the judgment, and called on the government to replace the guidance
with the IORP directive.
"It was always preposterous to us that the LGPS funds had to
invest in the best interests of UK foreign and defence policy," he
said.
"We have been telling various governments since 2007 that
they must implement the EU IORP directive into the LGPS. The judge did not say
that the directive did not apply to the LGPS and therefore we now hope that the
current government dismantles the 2016 regulations and replaces it with article
18 of the directive.
"This will mean that the LGPS funds must invest in the best
interests of scheme members, as all other pension schemes in the UK must do.
The best interests of scheme members are aligned with all sponsoring employers
in seeing that their pensions are delivered in the most efficient manner. For
10 years LGPS scheme members have been denied their statutory rights, this must
be rectified."
