I don’t believe there has been a mention of the decision of the UKSC in R (on the application of Palestine Solidarity Campaign Ltd and another) v Secretary of State for Housing, Communities and Local Government, decided last April.

The question was whether the Minister had acted lawfully in issuing binding guidance, pursuant to the Public Service Pensions Act 2013 and regulations, to those making investment decisions relating to local authority pensions. The guidance in issue was in relation to ethical investments, which was the term used by Lord Wilson (in the majority, with whom Lady Hale agreed) for investments ‘made not, or not entirely, for commercial reasons but in the belief that social, environmental, political or moral considerations make it, or also make it, appropriate.’ ([1]) The Minister essentially forbade those making such decisions (called ‘quasi-trustees’ in the judgments, since they have the investment duties of trustees but do not hold the property as trustees) from pursuing policies that are contrary to the UK’s foreign or defence policy and stated that they might not ‘pursue boycotts, divestment and sanctions against foreign nations’. The dispute was as to whether those parts of the guidance were lawfully issued.

The government seems, in promulgating the relevant regulations, to have accepted a 2014 formulation of the Law Commission in ‘Fiduciary Duties of Investment Intermediaries’ which stated ([12]):

‘In general, non-financial factors may only be taken into account if two tests are met:

(1)       trustees should have good reason to think that scheme members would share the concern; and

(2)       the decision should not involve a risk of significant financial detriment to the fund.’

The regulations require the local authority’s investment policy to address such factors ([9]) and ‘social, environmental and corporate governance factors’ were also mentioned as lawful considerations in the guidance issued by the Minister under the regulations, but that part of the guidance was subject to the disputed aspects mentioned above.

By a 3-2 majority, it was held that the disputed part of the guidance was unlawful as made for an improper purpose, namely to enforce the government’s foreign policy, which was said to be improper since the invested funds were not public funds but held for the pension members. There is a powerful dissent on this public law aspect by Lady Arden and Lord Sales, based on a different reading of the purposes of the legislation.

For private law there are some interesting points. First, according to Lord Carnwath (in the majority) ([43]), the 2014 Law Commission report

may be seen as having settled a long-running debate as to the extent to which pension trustees could take account of non-financial factors, dating back to cases such as Cowan v Scargill [1985] Ch 270 … There appears now to be general acceptance that the criteria proposed by the Law Commission are lawful and appropriate. I agree.

Secondly, Lord Carnwath ([44]) accepts that the duties that govern how those who choose investments for and on behalf of others are fiduciary duties. After Pitt v Holt (2013), Eclairs Group (2015), Lehtimäki (2020) and now this case, it seems increasingly difficult to read the UKSC as taking the view that the only duties properly called ‘fiduciary’ are proscriptive duties; the Court rather seems to take the view, which has also been adopted by a unanimous Full Court of the Federal Court in Australia (Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6, [174]) , that fiduciary duties extend also to duties governing the exercise of fiduciary powers.

Lionel

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