UK Lawyers for Israel (UKLFI) have warned Unilever PLC against claiming that it cannot overrule the BDS decision of its Ben & Jerry’s subsidiary.

A Letter  sent by UKLFI to Unilever’s Chief Legal Officer points out that this claim would not comply with Unilever’s Code of Business Conduct, its Governance Report, statements in its Annual Reports, the UK Corporate Governance Code, or its premium listing on the London Stock Exchange (LSE).

According to UKLFI, the provisions of the merger agreement that established Ben & Jerry’s independent board do not require Unilever to accept the BDS decision. On the contrary, the BDS decision is in breach of that agreement since it does not comply with Unilever’s Code of Business Conduct.

This means, on the one hand, that Unilever’s Board can assert control in this situation, if it has the will; but on the other hand, if it fails to do so, investors could lose confidence in the group.

The BDS decision has exposed Unilever to sanctions and legal action under multiple laws, some of which are detailed in UKLFI’s letter. Since the BDS decision, Unilever’s share price has fallen by 11% resulting in a loss of market capitalisation in excess of £12 billion. Over the same period, the share price of its rival, Procter & Gamble, has held steady.

Ben & Jerry’s was acquired by Unilever through its US subsidiary, Conopco, in 2000 under an unusual merger agreement which established an independent Board of the company that “shall be the custodians of the Ben & Jerry’s-brand image and shall have primary responsibility for safeguarding the integrity of the essential elements of the Ben & Jerry’s brand-name”.

Although Ben & Jerry’s is wholly owned by Conopco, the latter appoints only two out of eleven members of its Board. However, the merger agreement also requires all members of the Ben & Jerry’s Board to abide by Unilever’s Code of Business Conduct.

Unilever’s Code of Business Conduct in turn requires Unilever companies to comply with the laws and regulations of countries in which the Unilever group operates.

UKLFI’s letter identifies various US and Israeli laws with which the BDS decision seems to conflict. These include

• counter-boycott laws passed by numerous US States that provide for divestment by public funds and restrict public procurement from companies that engage in BDS

• US Federal counter-boycott legislation

• Conditions imposed by the Decision of the Israeli Competition Commissioner on approving the acquisition of Ben & Jerry’s by the Unilever group

• Israel’s Law Prohibiting Discrimination in Products, Services and Entry to Places of Entertainment and Public Places, as amended in 2017.

UKLFI’s letter also observes that Ben & Jerry’s BDS decision appears to have been based on a fundamental legal error: their statement referred to “an internationally recognised illegal occupation”. This contradicts the prevailing view that Israel’s administration of the West Bank (Judea and Samaria) is in itself lawful pending a resolution of its final status by agreement pursuant to the Oslo Accords.

Unilever has tried to persuade State authorities in Arizona and Illinois that it is not responsible for the conduct of Ben & Jerry’s independent Board. However, this does not appear to have impressed either these authorities or the markets.

Jonathan Turner, chief executive of UKLFI commented: “Instead of trying to disclaim responsibility for the decision of its subsidiary, Unilever should take back control by requiring full compliance with its Code of Business Conduct.”