Palestine Solidarity Campaign Ltd & Anor , R (On the Application Of) v Secretary of State for Communities And Local Government

A statutory power to issue pension-scheme guidance must be exercised for the purposes of the pension legislation. Although non-financial investment factors may be relevant, guidance cannot prohibit consideration of foreign-policy or defence-policy factors merely to advance wider governmental objectives unrelated to pension administration.

Ministerial guidance is not unlawful merely because it lacks detail or requires judgment in application. It must be read practically and as a whole. The high threshold for intervention is met where guidance is positively misleading or legally erroneous. Statutory guidance is subject to the same principle, adjusted for its legal effect.

A general framework governing investment-policy statements is not prior approval of individual investment decisions under article 18(4) of the IORP Directive.

The claimants sought judicial review of guidance issued by the Secretary of State concerning investment strategy statements under the local government pension scheme. The guidance stated that administering authorities should not use pension policies to pursue boycotts, divestment or sanctions against foreign nations or UK defence industries, except where formal governmental sanctions applied, and should not pursue policies contrary to UK foreign or defence policy.

The claimants argued that the guidance was issued for unauthorised foreign-affairs and defence purposes, was materially uncertain, and imposed prior governmental approval contrary to article 18(4) of Directive 2003/41/EC. The court considered the statutory framework, the legal standard applicable to ministerial guidance, and the meaning of prior approval.

1. First ground allowed. The Secretary of State had power under regulation 7 of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 to issue guidance. The separate question was whether that power had been exercised for an authorised purpose. The purposes of the Public Service Pensions Act 2013 and the 2016 Regulations were pension purposes. That limited the guidance-making power accordingly.
2. Non-financial factors could be relevant to pension investment decisions, provided that their consideration did not involve a significant risk of financial detriment and there was good reason to think scheme members supported the decision. That aspect of the guidance was lawful.
3. The challenged prohibition singled out foreign-policy and defence-policy considerations while permitting comparable non-financial considerations concerning public health, the environment or workforce treatment. The Secretary of State’s evidence showed that the restriction was adopted to advance wider political objectives, including foreign policy, defence policy, protection of defence industries and community cohesion. Those were not pension purposes. The restriction was therefore issued for an unauthorised purpose and was unlawful.
4. The uncertainty ground failed. Guidance must be read practically, sensibly and as a whole. It is not unlawful merely because it could be expressed more precisely, contains borderline cases or requires judgment in particular applications. It must be positively misleading or erroneous in law before judicial intervention is justified. The guidance was capable of being understood by reference to governmental announcements and ordinary meaning.
5. The article 18(4) ground failed. “Prior approval” concerned external oversight of individual investment decisions before investments were made, linked with notification requirements. The guidance established a general framework for investment-policy statements and did not require approval of particular investments or mandate investment in any asset category. It therefore did not contravene article 18(4) of the IORP Directive.
6. Judicial review was granted on the first ground.