Home > Uncategorized > Judicial review a real risk for LA pension funds?

Judicial review a real risk for LA pension funds?

At a conference last week I was asked if local authorities that maintain their pension fund investments are at risk of judicial review.  My immediate response was to turn the question around, and suggest that local authorities choosing to divest from tobacco would face little risk of judicial review if they have considered all the relevant laws and facts that apply, and formed a reasonable view that tobacco investments are not compatible with their new public health duties.

However, I want to return to that question, because on reflection they clearly are at risk and here’s why.  Many local authority pension committees have considered whether they should divest, with only two concluding that they should. This contrasts with pension funds in many other parts of the world which have similar common law on fiduciary duty, but which have successfully divested, often on the back of very considered and detailed reports exploring the full range of issues

Every English report I have seen has failed completely to:

1) seek the views of the Directors of Public Health for the area;

2) provide any consideration whatsoever of the Framework Convention on Tobacco Control (FCTC); and

3) provide any legal advice on the relative status of the FCTC versus pension law.

In short, therefore, the committees have not been provided with  comprehensive reports detailing all the factors they should take into account in reaching a decision.  To my mind the failure to consider the FCTC is of particular note and concern.  This Treaty is binding on local government, and the Guidelines to the Parties on compliance state explicitly that the Parties should not invest in tobacco companies.  Those guidelines apply to councils and all who serve them, whether councillors, officers or outside advisers.

When the courts consider an application for judicial review they have to decide whether the decision made by the local authority is not only unreasonable, but so unreasonable that no reasonable body could have reached that decision.  I submit that committees taking a decision on this issue that have not received advice on the implications of the FCTC, and arguably the views of the Directors of Public Health, are leaving themselves wide open to judicial review.

It appears that committees at the moment are largely holding to the view that they have to maximise returns and therefore stay invested in tobacco.  They appear to fear legal challenge if they depart from that line.  It appears to me that whatever they decide, if they do not receive briefings on all relevant matters, then they are at risk.

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