UK Lawyers for Israel (UKLFI) has written to Wirral Council’s Pensions Committee, explaining in detail why the Merseyside Pension Fund should not divest from certain businesses which operate in the West Bank and which appear on a list prepared by the UN Human Rights Council (UNHRC).  The Committee is due to consider a report on this issue in an upcoming meeting on 23 February 2022.

The Merseyside Pension Fund is administered by Wirral Council and provides pensions for retired employees of public authorities in Merseyside, which has a population of about 1.4 million.

The push for divestment in Wirral is led by Jo Bird, a Councillor who was expelled by Labour Party for her involvement with the group “Labour Against the Witch Hunt”.

The Merseyside Pension Fund had direct and indirect investments of around £3.9 million in nine companies that appear on the UNHRC list.

UKLFI’s letter reminds members of the Pensions Committee that the primary obligation of those responsible for investing pension funds is to generate financial returns. Non-financial factors may only be taken into account where (a) this would not involve a risk of significant financial detriment to the scheme and (b) there is good reason to think that beneficiaries as a whole would support the decision.

Jonathan Turner, chief executive of UKLFI commented:  “Since strong feelings are held on both sides of the Israeli-Palestinian conflict, it cannot be said that there is a consensus in favour of divestment targeting Israel or areas under Israeli administration.”

UKLFI further point out that, as a public authority, Wirral Council is also bound by the Public Sector Equality Duty (“PSED”) in section 149 of the Equality Act 2010, which requires it to have due regard to the need to eliminate discrimination and to foster good relations between people of different nationalities, ethnicities and religions.

Research at US universities has shown a substantial link between the promotion of boycott, divestment and sanctions (“BDS”) targeting Israel and antisemitic attacks. Adoption of a discriminatory policy in relation to Israel by comparison with other countries would be liable to exacerbate the already high level of tension between Jewish and other communities.

UKLFI’s letter goes on to address widespread misinformation about Israel and its administration of the West Bank.

The letter points out that it is not unlawful for a business to operate in an occupied territory, as noted by the Supreme Court in Richardson v DPP. Indeed, many major companies operate in occupied territories around the world, as demonstrated by reports of the Kohelet Policy Forum in June 2017 and November 2018.

A policy that targets companies operating in territories administered by Israel without targeting companies operating in territories occupied by other countries or in countries where more serious violations of human rights are taking place would be discriminatory.

Around 30,000 Palestinians are employed by businesses in or in the vicinity of Israeli communities in the West Bank and East Jerusalem, at average salaries that are more than three times average salaries at Palestinian businesses, and with benefits such as health insurance and pension contributions not usually provided by Palestinian employers.

Taking into account the families of these workers as well as other Palestinians who provide goods and services to them, this employment provides the livelihoods of probably hundreds of thousands of Palestinians. In addition, productive employment of Palestinians working together with Israelis contributes to reducing conflict and promoting peace.

More generally, Israeli administration achieved an enormous improvement in the standard of living and welfare of Palestinians in the West Bank over the dire conditions prior to 1967, despite the adverse impact of maladministration by the Palestinian Authority since the mid-1990s.

Cllr Bird asserted that selling  “around £2m of investment in 7 companies” would be unlikely to cause significant financial detriment to Merseyside Pension Fund members.   However, UKLFI’s letter points out that the financial detriment to the fund from disposing of these investments would be far higher for the following reasons:

1. At least some of these investments are in externally managed funds. To dispose of these holdings, it would probably be necessary to dispose of the entire holdings in the relevant funds.

2. If a policy of not investing in stocks such as these is adopted, this would preclude the Fund investing in a larger range of companies in a similar position, thereby limiting the Fund’s options for investment.

3. If the Fund divests from companies operating in the West Bank, it should also divest from companies operating in other occupied territories. These include a large number of major international companies. If discrimination is to be avoided, the divestment required is likely to be very substantial.

4. A policy of divesting from and not investing in companies operating in occupied territories would give rise to significant management and administration costs.

UKLFI’s letter also explains that the UNHRC’s list of companies involved in certain activities in the West Bank has been discredited, since it is not based on any proper legal or factual analysis.

Since writing to Wirral Pensions Committee, UKLFI has learned that the UNHRC’s “Special Rapporteur”, Michael Lynk, wrote a letter in November 2021 to the Chairs of the UK’s Local Government Pension Scheme Committees. That letter is seriously misleading and UKFLI intends to address it further .