The Supreme Court has overturned the government’s ban on allowing the local government pension scheme (LGPS) to invest in areas that go against UK foreign or defence policy.

The LGPS is now able to pursue investments in places that do not support the UK’s foreign or defence policy and divest from those that do.

The campaign by the Palestine Solidarity Campaign started in 2016, when it won a judicial review at the High Court against the government on LGPS investments.

However, this decision was overturned on appeal by the Court of Appeal in 2018, before being overturned once more in the Supreme Court.

The government’s overturned ban had also meant that LGPS funds were unable to divest from or boycott companies that support the UK’s foreign or defence policy.

The five Supreme Court judges were split on the decision, with three finding in favour of the Palestine Solidarity Campaign and two siding with the government.

Within the Supreme Court’s decision, one of the judges, Lord Wilson, stated: “In my view there has been a misconception on the part of the Secretary of State which probably emboldened him to exceed his powers in issuing guidance which included the two passages under challenge.

“The misconception relates both to the functions of scheme administrators in relation to investment decisions and, linked to their functions, to the identity of those to whom the funds should properly be regarded as belonging.

“As the Law Commission observed, administrators of local government schemes have duties which, at a practical level, are similar to those of trustees and they consider themselves to be quasi-trustees who should act in the best interests of their members.

“The view, superficial at best, that the administrators are part of the machinery of the state, and are discharging conventional local government functions, fails to recognise that crucial dimension of their role. And it is equally misleading to claim that pension contributions to the scheme are ultimately funded by the taxpayer.”

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