A High Court ruling has deemed guidance from the Department for Communities and Local Government for Local Government Pension Schemes “unlawful” and not in the interests of pensions.

The Preparing and Maintaining an Investment Strategy Statement (Guidance) was issued by the DCLG in September 2016. It was brought into effect on 1 November 2016 as a result of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016. The case was brought against the government by the Palestine Solidarity Campaign who campaign for Palestinian human rights.

In accordance with the regulations, all LGPS administering authorities had to prepare an investment strategy consistent with the guidance by 1 April 2017. Those strategies will now need to be revisited in light of the Court's findings that aspects of the guidance are unlawful.

One of the paragraphs that the case centred around read: “‘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.”

The Administrative Court has confirmed that in making the guidance in this manner the Secretary of State unlawfully used powers that are designed for pensions regulation to achieve purposes completely unrelated to pensions, namely the protection of UK foreign and defence policy.

Bindsmans LLP partner in the public law and human rights team Jamie Potter, who represented the Palestine Solidarity Campaign said: “The Court's confirmation that the government cannot use pensions powers to interfere in the rights of local government pension scheme members to seek the ethical investment of their own money is welcome.

"Individuals, and the pension schemes that work for them, should be entitled to take a stand against the role of foreign countries and the arms trade in violations of human rights around the world. This outcome is a reminder to the Government that it cannot improperly interfere in the exercise of freedom of conscience and protest in order to pursue its own agenda."

The Palestine Solidarity Campaign group said that the regulations were specifically to curtail divestment campaigns against Israeli and international firms implicated in Israel’s violations of international law, as well as to protect the UK defence industry.

In 2005 Palestinian civil society called for a campaign of boycott, divestment and sanctions measures until Israel adheres to its obligations under international law. It is modelled on the successful South African anti-apartheid boycott of the 1980s. Various local councils responded to the Palestinian call by passing motions to boycott goods from illegal Israeli settlements.

Commenting on the case, Palestine Solidarity Campaign chair Hugh Lanning said: “Today is a victory for Palestine, for local democracy, and for the rule of law. Absolutely everyone has a right to peacefully protest Israel's violation of Palestinian human rights. This ruling upholds the right of local councils and their pension funds to invest ethically without political interference from the government of the day.”

A Department for Communities and Local government spokesman said: “It is an important principle that foreign policy matters are for the UK government to decide. We will consider the judgement and next steps.”

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