Palestine Solidarity Campaign Ltd v Secretary of State for Communities and Local Government
| Jurisdiction | England & Wales |
| Judge | Lady Arden,Lord Wilson,Lady Hale,Lord Carnwath,Lord Sales |
| Judgment Date | 29 April 2020 |
| Neutral Citation | [2020] UKSC 16 |
| Date | 29 April 2020 |
| Court | Supreme Court |
Lady Hale
Lord Wilson
Lord Carnwath
Lady Arden
Lord Sales
Appellants
Nigel Giffin QC
Zac Sammour
(Instructed by Bindmans LLP (London))
Respondent
Julian Milford
(Instructed by The Government Legal Department)
Heard on 20 November 2019
( with whom Lady Hale agrees)
This appeal concerns the type of investments which those who administer the local government pension scheme are permitted to make or to continue to hold. More particularly, it concerns the breadth of the ethical investments which they are permitted to make or to continue to hold. By an ethical investment, I mean an investment made not, or not entirely, for commercial reasons but in the belief that social, environmental, political or moral considerations make it, or also make it, appropriate. Parliament has conferred on the respondent, the Secretary of State for Housing, Communities and Local Government (“the Secretary of State”), the power to issue guidance in relation to some of the functions of the administrators of the scheme, in accordance with which they are required to act. The issue arises out of two passages in the guidance which he has issued to them in relation to their making or continuing to hold ethical investments. By the second passage, which, as I will show, covers the ground covered by the first and indeed goes further, the Secretary of State provides that they “[s]hould not pursue policies that are contrary to UK foreign policy or UK defence policy”. The claim is that the issue of that guidance was unlawful. It was lawful only if it fell within the power conferred by Parliament on the Secretary of State. The issue therefore requires the court to analyse the scope of the power. Pursuant to the decision of the House of Lords in Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997, the court must analyse the power by construing the words by which it was conferred on him in their context. From the words in their context Parliament's purpose in conferring the power can be identified; and the purpose will illumine its scope.
The claim for judicial review of the two passages in the guidance was launched by, and in this appeal continues to be pursued by, two claimants. The first is Palestine Solidarity Campaign Ltd. This company is dedicated to campaigning both in support of the rights of the Palestinian people, in particular by challenging Israel's occupation of the disputed territories, and in opposition to racism in all its forms, including antisemitism as well as islamophobia. The second is Ms Jacqueline Lewis, who is not only a member of the company's executive committee but also an employee of a local authority and a member of its pension scheme.
The claim raised issues in relation to the guidance other than the issue identified above; they were determined, adversely to the claimants, in the lower courts and can now be ignored. On 22 June 2017 Sir Ross Cranston, sitting as a judge of the Administrative Court of the High Court of England and Wales, upheld the claim by reference to the issue identified above and declared the two passages in the guidance under challenge to be unlawful: [2017] EWHC 1502 (Admin), [2017] 1 WLR 4611. But on 6 June 2018 the Court of Appeal, by a judgment delivered by Sir Stephen Richards with which Davis and Hickinbottom LJJ agreed, upheld the Secretary of State's appeal; set aside the declaration made by Sir Ross; and dismissed the claim: [2018] EWCA Civ 1284, [2019] 1 WLR 376. It is worthwhile to record that, in support of the application of the claimants for permission to appeal to our court, submissions were filed by the Religious Society of Friends in Britain, known as the Quakers, and by the organisation known as Campaign Against Arms Trade.
The existing local government pension scheme (“the scheme”) is a statutory occupational pension scheme established by regulations made under section 7 of the Superannuation Act 1972 (“the 1972 Act”) and having effect as if made under the Public Service Pensions Act 2013 (“the 2013 Act”). Pursuant to the scheme, authorities in England and Wales, which can conveniently (albeit not entirely accurately) be taken to be local authorities, administer some 89 distinct funds, which are kept separate from other local authority resources. In its capacity as an employer, a local authority makes contributions into the pension fund referable to its employees, as do its employees themselves. The scheme provides statutorily defined pension benefits for about 5m past and present employees, referable in particular to their age, their pensionable earnings and their years of service. Therefore their benefits do not vary in accordance with the changing value of the fund in relation to them. A local authority is required to set contributions at a level appropriate to ensure its fund's solvency; and, were the fund to prove insufficient to meet its obligations to pay pensions to its employees, a local authority might be required to make increased contributions into it. The scheme is thus structurally different from other public sector pension schemes under which payment is unfunded, in other words made not out of ring-fenced funds but out of the overall resources of central government.
If we consider first the 2013 Act and then the regulations relevant to this appeal which were made under it, we will be able to drill down into the guidance issued pursuant to them which is under challenge.
The 2013 Act, which came mainly into force on 1 April 2014, provides by section 1(1) that regulations may establish schemes for the payment of pensions and other benefits to persons specified in subsection (2), which at (c) identifies local government workers for England, Wales and Scotland. By section 2(1) and paragraph (3)(a) of Schedule 2, these so-called scheme regulations may, insofar as they relate to local government workers in England and Wales, be made by the Secretary of State as the so-called responsible authority. It follows that this appeal does not relate to such regulations as establish the scheme referable to local government workers in Scotland, nor for that matter to those in Northern Ireland, in relation to whom nothing akin to the guidance under challenge seems to apply.
Section 3 of the 2013 Act provides as follows:
“(1) Scheme regulations may, subject to this Act, make such provision in relation to a scheme under section 1 as the responsible authority considers appropriate.
(2) That includes in particular —
(a) provision as to any of the matters specified in Schedule 3;
(b) consequential, supplementary, incidental or transitional provision in relation to the scheme …”
Section 3(2)(a) therefore sends us to the matters specified in Schedule 3, in which there is reference in paragraph 1 to eligibility and admission to membership; in paragraph 2 to the benefits which must or may be paid under the scheme; in paragraph 3 to the persons to whom benefits under the scheme are payable; in paragraph 9 to contributions; in paragraph 11 to funds; and in paragraph 12 to the following:
“The administration and management of the scheme, including —
(a) the giving of guidance or directions by the responsible authority to the scheme manager …”
On 1 April 2014, when the 2013 Act came mainly into force, the regulations also came into force which established the existing scheme and which, as already explained, had effect as if made under that Act. They were entitled the Local Government Pension Scheme Regulations 2013 (SI 2013/2356). They made provision for the functioning of the scheme in numerous respects. Prior to 1 November 2016, however, the management and investment of funds within the scheme continued to be subject to regulations which had been made in 2009. It was only on that day that the latter were replaced by the regulations relevant to this appeal, namely the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 (SI 2016/946) (“the 2016 Regulations”), which were duly made pursuant to sections 1 and 3 of, and to Schedule 3 to, the 2013 Act, as set out above. The guidance partly under challenge, to which I will later turn, took effect on that same day, 1 November 2016. I refer to the guidance at this stage only in order to quote from part 1 of it an interesting passage as follows, which illumines one of the aims of the 2016 Regulations themselves:
“One of the main aims of the [2016] regulations is to transfer investment decisions and their consideration more fully to administering authorities within a new prudential framework. Administering authorities will therefore be responsible for setting their policy on asset allocation, risk and diversity, amongst other things. In relaxing the regulatory framework for scheme investments, administering authorities will be expected to make their investment decisions within a prudential framework with less central prescription.”
Regulation 7 of the 2016 Regulations, entitled “Investment strategy statement”, provides:
“(1) An authority must, after taking proper advice, formulate an investment strategy which must be in accordance with guidance issued from time to time by the Secretary of State.
(2) The authority's investment strategy must include —
(a) a requirement to invest fund money in a wide variety of investments;
(b) the authority's assessment of the suitability of particular investments and types of investments;
(c) the authority's approach to risk, including the ways in which risks are to be assessed and managed;
(d) the authority's approach to pooling investments...
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