QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
(Sitting as a Judge of the High Court)
| The Queen (on the application of
(1) PALESTINE SOLIDARITY CAMPAIGN LIMITED
(2) JACQUELINE LEWIS)
- and –
|SECRETARY OF STATE FOR COMMUNITIES AND LOCAL GOVERNMENT
Mr Julian Milford (instructed by GLD) for the Defendant
Hearing dates: 14 June 2017
Crown Copyright ©
Sir Ross Cranston :
"…. [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 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.
LEGISLATIVE FRAMEWORK AND GUIDANCE
"to make such provision in relation to a scheme…as [he] considers appropriate",
although that includes the specific pension purposes in Schedule 3.
"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."
"7(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."
Regulation 7(2) sets out the matters that an investment strategy has to contain.
"7(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, including the use of collective investment vehicles and shared services;
(e) The authority's policy on how social, environmental and corporate governance considerations are taken into account in the selection, non-selection, retention and realisation of investments; and
(f) The authority's policy on the exercise of the rights (including voting rights) attached to investments."
"specific requirements under each heading are shown at the end of each sub section in a text box and in bold type."
"Regulation 7(2)(e) – How social, environmental or corporate governance considerations are taken into account in the selection, non-selection, retention and realisation of investments.
The law is generally clear that schemes should consider any factors that are financially material to the performance of their investments, including social, environmental and corporate governance factors . . .
However, the Government has made clear that using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are [sic] inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government.
Although schemes should make the pursuit of a financial return their predominant concern, they may also take purely non-financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision…"
"In formulating and maintaining their policy on social, environmental and corporate governance factors, an administering authority…
• Should not pursue policies that are contrary to UK foreign policy or UK defence policy."
FIRST GROUND: PROPER/ AUTHORISED PURPOSE
SECOND GROUND: LACK OF CLARITY AND CERTAINTY
THIRD GROUND: EU IORP DIRECTIVE, ARTICLE 18(4)
"(1) Member States shall require institutions located in their territories to invest in accordance with the `prudent person' rule and in particular in accordance with the following rules:
(a) the assets shall be invested in the best interests of members and beneficiaries…
(b) the assets shall be invested in such a manner as to ensure the security, quality, liquidity and profitability of the portfolio as a whole…
(c) the assets shall be predominantly invested on regulated markets…
(d) investment in derivative instruments shall be possible [subject to specified conditions]
(e) the assets shall be properly diversified…
(f) investment in the sponsoring undertaking shall be no more than 5% of the portfolio as a whole…
(2) The home Member State shall prohibit the institution from borrowing or acting as a guarantor on behalf of third parties…
(3) Member States shall not require institutions located in their territory to invest in particular categories of assets.
(4) Without prejudice to Article 12, Member States shall not subject the investment decisions of an institution located in their territory or its investment manager to any kind of prior approval or systematic notification requirements.
(5) In accordance with the provisions of paragraphs 1 to 4, Member States may . . . lay down more detailed rules, including quantitative rules, provided they are prudentially justified, to reflect the total range of pension schemes operated by those institutions…
(6) Paragraph 5 shall not preclude the right for Member States to require the application to institutions…of more stringent investment rules also on an individual basis provided they are prudentially justified, in particular in the light of the liabilities entered into by the institution…"
"[R]emoval of any requirements on pension funds to invest in or refrain from investing in particular categories of assets . . . otherwise than on justified prudential grounds. Any restrictions imposed on prudential grounds must be proportional to the objectives they may legitimately pursue."