Islington Council Pensions Committee has been advised against proceeding with plans to divest from companies operating in the areas of the West Bank (Judea & Samaria) under Israeli administration.
This follows a letter from UK Lawyers for Israel (UKLFI) drawing attention to various matters that had not previously been addressed and warning that proceeding with the plans without addressing them correctly would be irrational and unlawful.
A report by the Council’s Corporate Director of Resources for the Pension Committee’s meeting on 3 December 2024 now states:
“Divestment Considerations
3.3.1 Counsel has provided advice on divestment of companies on the UN list involved in activities in the Occupied Palestinian Territory deemed complicit in human rights abuses.
3.3.2 Further to previous advice, Counsel advised that a decision taken not for financial/investment reasons would potentially be contrary to the Law Commission advice on trustee duties, particularly where the decision was taken for reasons which may be controversial amongst the Fund’s members. As such, the Council would be highly likely to face a judicial review challenge. This poses a considerable financial and reputational risk to the Pension Fund and the Council.
3.3.3 Prior to taking such a decision, the Pension Fund would also need to undertake considerable expense to consult the Pension Fund membership for their views, with the membership likely to have strong views on both sides.
3.3.4 Furthermore, the Government has proposed significant changes to local government pension funds and, through consultation released on November 17th, has indicated that all equity assets should be pooled by March 31st 2025, (and all other assets pooled by March 31st 2026) which would remove the Fund’s ability to set up a new pooled vehicle just for Islington’s investments.”
UKLFI’s letter of 25 September 2024 had drawn attention to the conclusion of the Law Commission in its authoritative report on Fiduciary Duties of Investment Intermediaries 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” (para 6.67).
UKLFI also drew attention to the need to consult stakeholders on various issues.
Jonathan Turner, UKLFI Chief Executive, commented, “We are pleased that Islington Council officers are rightly advising that this divisive, expensive and unlawful proposal should be shelved. This should serve as an important precedent for other Councils”.