A BDS motion by Bristol City Council and demands for divestment by the Avon Pension Fund Committee have been robustly challenged by UK Lawyers for Israel (UKLFI).

According to UKLFI, the Bristol motion was based on false information and unlawful, and its implementation would breach fiduciary duties, the Local Government Act 1988 and the Equality Act 2010. Divestment by the Avon Pension Fund Committee as demanded by Palestine Solidarity Campaign (PSC) would also breach fiduciary duties.

Council officers have now advised the Avon Pension Fund Committee against divestment targeting Israel. They propose either divestment from all aerospace and defence (A&D) companies or a continuation of the current policy on responsible investment.

The Avon Pension Fund is the Local Government Pension Scheme (LGPS) for Bristol City Council (Bristol CC) and a number of other local authorities nearby. Bath & North East Somerset (B&NES) Council is its administering authority.

Deputations and motions

The Avon Pension Fund Committee received a deputation from the PSC on 13 December 2024, urging divestment from aerospace and defence companies that supply Israel and from companies that allegedly facilitate or profit from Israel’s actions in the “Occupied Palestinian Territories”.

The Avon Pension Fund Committee now intends to review its aerospace and defence investments at a meeting on 28 March 2025.

In the meanwhile, Bristol CC passed a motion at its Full Council meeting on 14 January 2025 expressing its belief that

“Stemming from the obligations laid out by the ICJ, councils must avoid procuring from or investing the funds they manage, including Local Government Pension Scheme funds, in companies that facilitate Israel’s breaches of international law. This includes arms companies producing weapons and military technology used by Israel in its relentless attacks on Palestinians, and financial institutions which finance these arms companies”

The motion went on to request officers to look at “legally compliant options in relation to this policy, and implementing it around our procurements contracts” and to “call on our representatives … to develop an ethical investment policy that specifically seeks to divest … from … companies engaged in arms manufacture or the trading of armaments, as well as from companies on the UN’s list of businesses involved in activities in the illegal-settlements in the Occupied Palestinian Territory and deemed complicit in human rights abuses”.

North Somerset Council also passed a somewhat similar motion at its meeting on 18 February 2025.

Correspondence with Bristol CC

UKLFI wrote to the Chief Executive of Bristol CC on 1 February 2025.

UKLFI’s letter first pointed out that the policy on procurement in the motion would contravene section 17 of the Local Government 1988. This prohibits exclusion of contractors because of business activities or interests either in irrelevant fields of government policy or in a particular country or territory. This section was not repealed by the Procurement Act 2023 and remains in force.

UKLFI further contended that the procurement policy would discriminate against Israelis, in breach of  section 29(6) of the Equality Act 2010, by excluding companies with business activities in Israeli communities in Judea and Samaria, while not excluding companies operating in territories such as Western Sahara and Northern Cyprus. Those territories are occupied by States which have encouraged many of their civilian population to settle in them. Numerous major companies operate in those territories as shown by reports of the Kohelet Policy Forum.

UKLFI’s letter pointed out that there has been no determination that companies on the list produced by the Office of the UN’s High Commissioner for Human Rights (OHCHR) have engaged in violations of human rights: see para 19 of document AHRC/43/71.

On the contrary companies operating in parts of Judea and Samaria under Israeli administration employ tens of thousands of Palestinian staff at salaries much higher than they can get from Palestinian employers. These salaries support many extended Palestinian families and make a significant contribution to the Palestinian economy: see Diker (ed) Defeating Denormalization: Shared Palestinian Perspectives on a New Path to Peace.

The OHCHR’s list merely identifies companies which it believes to be engaged in activities in the West Bank that the UN Human Rights Council (UNHRC) thought might result in violations of human rights. However, these include transport, utilities and use of water or land. Indeed, most of the companies have been listed solely on the basis of these categories, which cover, for example, using water to provide sanitary services for Palestinian staff.

UKLFI’s letter went on to address divestment. It drew attention to the fiduciary duties of pension fund trustees, including the conditions identified in the Law Commission’s Report which must be satisfied for a non-financial factor to be taken into account. These are (1) good reason to think that the scheme members share the concern and (2) the decision should not involve a risk of significant financial detriment.

UKLFI drew particular attention to para 6.67 of this Report, which states that “in cases where the issue is clearly controversial, the courts may well expect trustees to focus on financial factors rather than becoming embroiled in disagreements between the members.” UKLFI noted that particular attention was drawn to this point in recent advice by Counsel to Islington’s Pension Committee.

UKLFI observed that divestment from companies that make particularly objectionable weapons (such as land mines, nuclear weapons or chemical weapons) may satisfy the criteria. On the other hand, divestment from all arms companies is unlikely to do so. As well as being more liable to have a material impact on financial performance, it would be highly controversial, especially as it could affect investment in the production of arms needed by countries such as Ukraine to resist invasion by Russia.

UKLFI also argued that the divestment policy would discriminate against Israelis contrary to section 29(6) of the Equality Act if a similar policy is not also applied to companies operating in Western Sahara and Northern Cyprus.

Finally, UKLFI’s letter drew attention to serious inaccuracies in the motion. These showed it was adopted without due regard to the need to eliminate discrimination and to foster good relations between persons of different ethnicity, nationality, religion or philosophical belief, and therefore in breach of section 149 of the Equality Act (the Public Sector Equality Duty).

The inaccuracies include

• The false claim that almost half of Palestinians killed in the current war have been children. Even the Hamas Health Agency in Gaza has long since given up this pretence, which it had previously maintained by fabrication and manipulation.
• The false claim that the International Court of Justice (ICJ) affirmed there is plausible evidence Israel is committing genocide. The ICJ’s President has long since corrected this misconception, as UKLFI had drawn to the attention of the motion’s proposer, Councillor Jemphrey.
• Misinterpretation of the non-binding, majority opinion of the ICJ of July 2024, including an incorrect suggestion that this prohibits the operation of private businesses in parts of Judea and Samaria administered by Israel and requires States to refuse to deal with or invest in such businesses.
• A claim that the ICJ has ruled that Israel was in breach of the international prohibition of Apartheid. The ICJ did not so advise, let alone rule.
• A claim that Councils are free to take human rights and other ethical considerations on board when making financial decisions.

UKLFI also noted that no advice was given by officers to Councillors regarding the motion and the time allocated for debate was manifestly inadequate to address the issues raised.

Bristol CC’s Legal Director responded on 11 February 2025 that the motion will be subject to further consideration by the relevant policy committee in due course and that a future report to the relevant policy committee will consider all the legal, financial, procurement and equalities implications of the motion.

Based on this assurance, UKLFI accepted in its email of 17 February 2025 that it would be premature to seek judicial review in advance of the further consideration, and proposed to reserve its objections to the motion unless and until a decision is made relying on it.

Correspondence with Avon Pension Fund Committee and Staff Recommendations

UKLFI wrote to the Chair of the Avon Pension Fund Committee on 19 March 2025 enclosing a copy of its letter to Bristol CC and drawing attention to numerous inaccuracies in the statements made to this Committee at its last meeting in December 2024.

Officers have now put forward two options for consideration by the Committee:

1. To exclude all aerospace and defence (A&D) companies from investment by the Pension Fund
2. To continue to apply current policies on responsible investment and exclusions.

The officers’ paper differentiates A&D from energy companies since A&D companies do not face the same long-term risks of obsolescence as energy companies, which import financial considerations.

The paper then sets out the two criteria (mentioned above) which must be satisfied to permit consideration of non-financial factors, and states that if the Committee chooses option A, it will then be necessary (i) to take legal advice, (ii) to seek an independent opinion from its investment adviser, and (iii) to choose whether to consult members to assess their support.

The paper does not recommend (and effectively advises against) divesting specifically from A&D companies that supply Israel. It notes that it could set a precedent, potentially forcing the Committee to consider other conflicts in a similar way. It then refers to legal opinions stating that

(i) Committee members “should not privilege one group of scheme members over another. This creates obvious tension when Committees know that members are likely to hold strong but very different views on a particular subject. Where such disagreements are anticipated, the Committee should try and keep focus on financial factors”.

(ii) It would not be “consistent with the Guidance to take account of a non-financial factor in a way likely to be significantly controversial amongst members, simply because a bare majority support the decision”.

(iii) The limitation can be overcome “if members could be shown to share a virtually unanimous and strongly held view on a particular matter”.

The paper concludes that

“These collective legal tests appear to make it highly problematic to specifically divest from A&D companies supplying Israel – as this singles out Israel and A&D companies supplying Israel. Any such decision based on non-financial factors is likely to be controversial among a material body of the schemes’ membership and open to legal challenge.”

The paper also does not recommend more robust investment criteria covering conflicts in general. It assesses that this would be “very complex to execute”:

• It would be “challenging to define what constitutes a ‘material conflict’”;
• “definition of who the aggressor is – or whether all parties are to blame – could be extremely complex”;
• “reliable information is typically very difficult to source”; and
• “significant time would need to be allocated to examine conflicts … which would need additional resources and budget, or diversions of resources from other Fund activities.”

The paper then sets out various considerations in relation to the two options put forward for consideration. If A&D companies are excluded:

• There would be transition costs and ongoing increased fees
• It would exclude many high growth companies in a sector that has historically delivered higher returns than the overall equity market
• It would prevent the fund investing in the growth of A&D sub-sectors where the UK is a market-leader and supporting a key segment of the UK economy

Moreover, the paper observes that more than 90% of weapons sales by relevant A&D companies are to the UK government and NATO partners. These supplies are core to the defence of western democracies against external threats. The relevant A&D companies also supply weapons and equipment critical to the defence of Ukraine.