On October 29, 2021, Dr Neil Davies, Dr Ewan McGaughey and others issued proceedings in the UK High Court against the directors of the University Superannuation Scheme Limited (USSL), a corporate trustee of the private pension scheme for academic staff University Superannuation Scheme (USS). The claimants are academics and contributors to the USS pension fund, which is considered the largest private pension scheme in the UK. The USSL does not have shareholders, which had an effect on the claimants legal standing within the case. The case is a derivative claim against the USSL directors based on the directors’ duty to act in the beneficiaries’ best interest. The case is grounded on the Companies Act 2006 and fiduciary duties. Alongside several other issues relating to the administration of the scheme, the claimants argue that fossil fuels have been the worst performing asset class since 2017 and that the failure of the current and former directors to create a credible plan for disinvestment from fossil fuel investments has prejudiced and will continue to prejudice the success of the company. The scheme's level of investment in fossil fuels is assumed for the purposes of the claim to be in excess of £1 billion.
On May 4th, 2021, the USS announced an ambition to become “net zero” by 2050. However, according to the claimants the company has no credible plan for achieving this goal. Additionally, no credible assessment of the financial risk to the company posed by climate change has been provided. They also argue that the directors’’ duties should be interpreted in line with Articles 2 and 8 of the European Convention on Human Rights, respectively the right to life and the right to a private and family life. As such, the claimants assert that the only rational way for the Directors to discharge their duties in light of the Paris Agreement, as well as the wishes of the beneficiaries, and the long-term interests of the company, is to devise and implement an immediate plan for fossil fuel divestment. It was also argued that the benefit changes indirectly discriminated against women, younger and black and ethnic minority members.
On the 28th February 2022, a decision granting permission to proceed to full hearing was handed down from the UK High Court. A new hearing date was decided for the 28th of March 2022, 4 days before the scheduled pension cuts.
On 24 May 2022, the High Court refused permission to bring a derivative action against USSL, holding:
- To bring a claim on a derivative basis, sufficient interest and evidence of a loss suffered by the company and subsequently by the claimants must be shown. The claimants could not demonstrate this.
- The established exception needed to bring this claim against the USSL was not met. Specifically, it could not be shown that the directors had acted in a way that was a deliberate breach of duty and pursued their own interests at the expense of USS.
- In regards to indirect discrimination in relation to USS benefits, the Court found that there was no evidence to support this under section 19 of the Equality Act 2010 and that it would be better to pursue claims related to discrimination directly.
- There was no prima facie evidence that the USSL had failed their statutory duty on a merits argument as they had complied with regulatory requirements. Furthermore, the Court added that if there was a merits claim, a direct claim for breach of trust law claim would have been more appropriate.
Currently, it is not known whether the claimants will pursue an appeal.