In R (on the application of Palestine Solidarity Campaign Ltd) v Secretary of State for Housing, Communities and Local Government [2020] UKSC 16 the Supreme Court considered whether guidance issued by the Secretary of State for Housing, Communities and Local Government as to the type of ethical investments permitted to be held within the LGPS was unlawful.
Under the Pensions Act 2013 (the 2013 Act) the Secretary of State has a power to make such regulations as considered appropriate for, among other things, “the administration and management of the scheme, including (a) the giving of guidance or directions by the responsible authority to the scheme manager …“.
The Secretary of State sought to argue that this power extended to guidance made under such regulations requiring that the administrator of a scheme “Should not pursue policies that are contrary to UK foreign policy or UK defence policy” and further that “… the Government has made clear that using pension policies to pursue boycotts, divestment and sanctions 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.”
Following Padfield v Minister of Agriculture, Fisheries and Food [1968] AC 997, the Supreme Court sought to analyse the words used to confer the power in context in order to determine Parliament’s purpose in providing the power and thus the scope in which it fell to be used. This was particularly important in circumstances where the power to make regulations as considered appropriate was very broad.
In a 3-2 decision of the Supreme Court, the guidance was ruled to be ultra vires the Secretary of State’s statutory powers.
Lord Wilson, with whom Lady Hale, agreed held that the policy of the 2013 Act, recognised in the case of the scheme by the regulations and indeed by most of the guidance, identified the procedures and strategy that administrators of schemes should adopt in the discharge of their functions. However, the two sections of the guidance under challenge attempted to do something very different in that they tried to enforce the Government’s foreign and defence policies. A ‘power to direct HOW administrators should approach the making of investment decisions by reference to non-financial considerations did not include power to direct (in this case for entirely extraneous reasons) WHAT investments they should not make’.
In their joint dissenting judgment, Lady Arden and Lord Sales considered that the 2013 Act allowed for guidance requiring that wider considerations of public interest should be considered in administrators’ investment strategies. As the LGPS is liable to being identified with the British State, there was a risk that a decision by it to boycott certain investments could be seen as a decision taken by the Government. The guidance could be seen as based on a legitimate Government concern, which was allowed for by the broad terms of the 2013 Act, especially since other ethical investment decisions do not carry general risk to UK trade, security or communities. It was also considered relevant that the guidance did not interfere with the administering authorities’ performance of their legal investment duties, nor did it promote or affect the LGPS financially.
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Ravi Randhawa assists clients to act within the parameters set by their governing statutory and regulatory frameworks, and where applicable the broader requirements of public administrative law, and to make decisions which are fully informed by and compliant with the legal framework within which they operate.
