Palestine Solidarity Campaign Ltd and Another v Secretary of State for Communities and Local Government
| Jurisdiction | England & Wales |
| Judge | Sir Ross Cranston |
| Judgment Date | 22 June 2017 |
| Neutral Citation | [2017] EWHC 1502 (Admin) |
| Docket Number | Case No: CO/22/2017 |
| Court | Queen's Bench Division (Administrative Court) |
| Date | 22 June 2017 |
[2017] EWHC 1502 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Ross Cranston
(Sitting as a Judge of the High Court)
Case No: CO/22/2017
The Queen (on the application of
Mr Nigel Giffin QC and Mr Zac Sammour (instructed by Bindmans LLP) for the Claimants
Mr Julian Milford (instructed by GLD) for the Defendant
Hearing dates: 14 June 2017
Approved Judgment
INTRODUCTION
This is a challenge to statutory guidance, Guidance on preparing and maintaining an investment strategy statement ("the guidance"), which the defendant Secretary of State for Communities and Local Government ("the Secretary of State") published on 15 September 2016. It governs the investment strategy for the local government pension scheme. The guidance permits ethical and social objections to a particular investment to be taken into account. However, the present challenge is to that part of the guidance which states 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".
This restriction operates 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' case is that the Secretary of State acted unlawfully in issuing this part of the guidance. They advance their case on three grounds: first, the guidance in this respect falls outside the proper scope of his statutory powers because it was issued for non-pensions purposes; secondly, it is unlawfully lacking in certainty; and thirdly, it is contrary to Article 18(4) of Directive 2003/41/EC on the Activities and Supervision of Institutions for Occupational Pension Provision.
The grounds raise for decision the proper (or authorised) purposes in relation to the exercise of statutory power in this context; the scope in public law for attacking ministerial policy, guidance, instructions and the like; and the reach of article 18(4) of Directive 2003/41/EC.
At the outset it is perhaps helpful to underline a rather obvious point: this case is about whether this part of the Secretary of State's guidance has a basis in law. The claimants and their supporters, including War on Want, the Campaign Against Arms Trade and the Quakers, object to the limiting effect of the guidance on their ability to campaign around the investment of local government pension funds affecting the Palestinian people and the Occupied Territories. In particular the second claimant, Jacqueline Lewis, wishes, as a matter of conscience, to influence how the pension monies she has earned are invested. On the other hand the government is concerned that local government pension funds should not be involved in such political issues because of the mixed messages it might give abroad; because it might undermine community cohesion at home by legitimising anti-Semitic or racist attitudes and attacks (although it accepts that anti-Israel and pro-Palestinian campaigning is not in itself anti-Semitic); and because it could impact adversely on the financial success of UK defence industries.
None of these matters are at issue in this judicial review. The conclusion reached in the judgment has nothing to do with the political merits of the claimants' or the Secretary of State's position on these matters. In this court the challenges the claimants raise are soluble through legal analysis, not political argument. The political merits of the respective arguments have no relevance.
BACKGROUND
The Palestine Solidarity Campaign, the first claimant, is a company limited by guarantee which operates as a pressure group campaigning for, amongst other things, an end to Israel's occupation of the West Bank and Gaza Strip and the Israeli settlements in the Occupied Territories. It advocates boycott, divestment and sanctions against Israel and any company, whether Israeli or otherwise, which supports the occupation. It lobbies both local and central government to persuade them to support those policies. One focus of this is upon the settlements and upon companies with a presence in the UK which facilitate their construction, administration or maintenance.
The second claimant, Jacqueline Lewis, is a member of the first claimant. She has also been employed by a local authority for nearly forty years, during which time she has made financial contributions to the local government pension scheme. She is an elected official of the trade union Unison, which represents many local government employees who contribute to the local government pension scheme. Unison has also campaigned around the issue of the Occupied Territories.
The local government pension scheme provides pensions for some five million employees (or former employees) of local authorities and others providing local services in England and Wales. It is a defined benefit scheme, operated by eighty-nine administering authorities, each of which operates an individual fund. Benefits received by scheme members are guaranteed by statute and are not affected by the investment decisions or the investment performance of individual funds. Scheme members receive the same level of benefits, based on their salary and length of scheme membership, irrespective of their particular local fund or the asset allocation and investment strategy it pursues. However, administering authorities must set contributions for participating employers at a level appropriate to ensure a fund's solvency and long term cost-efficiency. If there were to be a funding gap that would need to be met through employer contributions, ultimately by increasing the level of council tax or reducing local authority services.
Government policy, as evidenced by the Localism Act 2011, has been to be less prescriptive about the ways in which local government manages its responsibilities. In line with that approach the government appointed an Investment Regulation Review Group to examine the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009. It recommended that administering authorities of the local government pension scheme should set out their policies in an investment strategy in line with good practice in the private sector and should improve their accountability and transparency.
In late November 2015 the government published draft regulations to replace the 2009 Regulations and issued a consultation paper. That inquired in relation to the proposal in the draft regulations for the introduction of statutory guidance regarding the statements of investment strategy. In particular the consultation asked for views about how non-financial factors should be taken into account when making investment decisions and its proposal to preclude administering authorities from using pensions and procurement policies to pursue boycotts, divestments and sanctions against foreign nations and the UK defence industry.
A Procurement Policy Note issued by the Cabinet Office in February 2016 restated the existing policy on procurement, that authorities should comply with international law and that boycotts are inappropriate, except where sanctions, embargoes and restrictions have been put in place by the UK Government.
In September 2016 the Secretary of State published the government's response to the consultation. The guidance was published on 15 September 2016. Its foreword stated that it was to come into force on the same date as the new regulations. The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016, replacing the 2009 Regulations, were made on 21 September 2016, laid before Parliament on 23 September 2016, and came into force on 1 November 2016.
LEGISLATIVE FRAMEWORK AND GUIDANCE
Section 1 of the Public Service Pensions Act 2013 ("the 2013 Act") contains an enabling power for public pension schemes to be constituted by regulations. Section 2 identifies who can make the regulations for particular schemes. Under paragraph 3 of Schedule 2 to the Act, scheme regulations for local government employees are made for England and Wales by the Secretary of State. His regulation-making power under section 3(1) is wide,
"to make such provision in relation to a scheme…as [he] considers appropriate",
although that includes the specific pension purposes in Schedule 3.
Paragraphs 11 and 12 of Schedule 3 provide that the regulations may cover the administration and management of pension funds, and the administration and management of a scheme, including the giving of guidance or directions to the scheme manager. Paragraph 12 states:
"12 The administration and management of the scheme, including
(a) The giving of guidance or directions by the responsible authority to the scheme manager (where those persons are different);
(b) The person by whom benefits under the scheme are to be provided;
(c) The provision or publication of information about the scheme."
The main instrument governing the local government pension scheme is the Local Government Pension Scheme Regulations 2013 ("the 2013 Regulations"), made under the Superannuation Act 1972. The 2013 Regulations deal with matters including eligibility for membership, contributions, benefits, and the organisation of the scheme. Section 106 obliges administering authorities to appoint local pension boards to assist...
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