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On 19 June 2023, the Department for Levelling Up, Housing and Communities introduced The Economic Activity of Public Bodies (Overseas Matters) Bill 2022-23 (HC Bill 325) into the House of Commons.  The Bill was carried over into the 2023-24 session, as HC Bill 005.

The Bill’s second reading was held on 3 July 2023 and Public Bill Committee sessions from 5 to 14 September 2023. Report stage was held on 25 October 2023. The Bill’s third reading will be held on 10 January 2024.

This briefing explains the main clauses of the Bill and international and UK background to the legislation. It also summarises the second reading debates, committee debates on the Bill, the report stage and plans for legislative consent motions.

What does the Bill aim to do?

As introduced, the Bill (PDF) intends to prevent “public bodies when making decisions about procurement and investment from considering a country or territory of origin or other territorial considerations in a way that indicates political or moral disapproval of a foreign state.”

Such boycotts or divestments (reduction of existing investments) by public bodies would potentially be liable to investigation and fines under the legislation.

The Government states the Bill aims to stop councils and other publicly funded bodies from “pursuing their own foreign policy agendas.” In particular, it cites concerns that campaigns in universities (PDF) and local authorities on investment decisions relating to certain countries “lead to community tensions, and, in the case of Israel, a rise in antisemitism.” Much of the debate on this issue has focused on suggested boycotts of Israel and Israeli settlements in the Occupied Palestinian Territories.

The Bill does not prevent public bodies from complying with formal UK sanctions, embargoes, and restrictions. Clause 3 of the Bill (PDF) also gives the Government the power to make regulations to exempt certain countries or territories from the restrictions. The Government intends for Russia and Belarus to be exempted immediately upon commencement (PDF).

However, the Bill does not allow for these regulations to exempt Israel, the Occupied Palestinian Territories and the Occupied Golan Heights.

The Bill’s clauses

Clauses 1 to 4 contain the key provisions of the Bill. Clauses 1 and 2 would forbid public authorities to make procurement or investment decisions based on their own moral or political disapproval of policies or conduct by foreign authorities. Clause 3 would provide for exemptions to this ban. Clause 4 would forbid public authorities to make statements about boycott and divestment campaigns and their decisions in this respect.

Clauses 5 to 11 set out how the ban introduced by the Bill would be enforced. It would generally be subject to judicial review by the High Courts or the Court of Session in Scotland, when applicable to decisions taken by public authorities. For decisions and statements which cannot be challenged by judicial review, a specific enforcement regime would be introduced.

Clauses 7 to 9 would give the Government or another designated enforcement authority tools to investigate potential breaches, request public authorities to comply with its decisions and finally to issue a fine. The Government believes this enforcement regime would “act as a strong deterrent” to public bodies engaging in boycott and divestment campaigns.

Clauses 12 and 13 would apply the restrictions on procurement and investment decisions in Clauses 1 and 4 of the Bill to local Government pension schemes.

Clause 14 sets out how this Bill relates to procurement legislation. Clause 15 would amend Section 17 of the 1988 Local Government Act, which prohibits local authorities from taking into account non-commercial considerations in procurement decisions.

The Bill contains nine delegated powers. Regulations made using these powers would be passed following the draft affirmative procedure, except sometimes for in urgent circumstances, where regulations could be passed by the made affirmative procedure.

Current guidance and legislation

The Local Government Act 1988 restricts the ability of UK local authorities from considering the territory or country of origin when issuing contracts. The Government argues it is necessary to go further (PDF) in order to meet the Conservative manifesto commitment (PDF) to “ban public bodies from imposing their own […] boycotts, disinvestment or sanctions campaigns.”

The Bill as introduced follows issuances of several guidance documents in recent years, including advice issued by the Cabinet Office on procurement. 2016 guidance for the local Government pension scheme, however, was removed in response to legal proceedings and court judgments that the Government had exceeded its powers by prohibiting a pensions administrator from taking a decision if it was counter to UK defence or foreign policy.

The Boycott, Divestment and Sanctions movement

The Government has said that the Bill aims to stop “businesses and organisations–including those affiliated with Israel-being targeted through ongoing boycotts by public bodies.”  One of the most prominent campaigns for a boycott against Israeli-linked goods, services and companies has been the Boycott, Divestment and Sanctions (BDS) movement.

The Government acknowledges that the “number of actual or attempted boycotts or divestments inconsistent with UK foreign policy is relatively low, albeit with a high potential impact for each case” (PDF).

It cites examples of council motions including in Wirral in 2022 for the council to consider its investments in companies linked to Israeli settlements in the Occupied West Bank and a 2014 Leicester City Council motion to, “insofar as the law allows,” not to purchase goods from the Occupied Palestinian Territories (the motion was upheld by the Court of Appeal in 2018).

Devolution and legislative consent

All the Bill’s clauses apply to England and Wales, Scotland and Northern Ireland. The UK Government states legislative consent motions will be sought on clauses 1 and 4 only (PDF), as the remainder fall within the reserved responsibility of the UK for foreign policy.

The Scottish and Welsh Governments have recommended their respective parliaments withhold legislative consent, stating they have acted in line with the UK’s international obligations, and raised concerns on the compatibility of the Bill with freedom of speech and ability to make ethical investments. Committees in the Welsh and Scottish Parliaments have also recommended the respective parliaments withhold legislative consent for the Bill.

The UK Parliament does not require legislative consent motions to be passed by devolved legislatures for royal assent to be sought. While instances where a bill has become law without devolved legislative consent are rare, this has happened several times in recent years.

Second reading debate

The Bill’s second reading was held on 3 July 2023. The Official Opposition moved a reasoned amendment which stated the Commons declined to give a second reading to the Bill. Reasons included the Bill’s incompatibility with international law and restrictions on public bodies from expressing a view on current and proposed policy. Labour, SNP, and Liberal Democrat MPs spoke in favour of the amendment, but it was rejected following a division. After debate, the Bill passed its second reading unamended, 268 votes to 70.

Committee stage

The Public Bill Committee took evidence and examined the Bill line by line in six sittings between 5 and 14 September 2023. The Government did not table any amendments for the committee. Opposition parties tabled 33 amendments and one new clause. The committee rejected 17 amendments and the new clause after a vote. Three amendments were withdrawn after debate and with the remaining amendments not voted on. The Bill was reported unamended.

Opposition MPs expressed their overall support for legislation to address the issues raised by sanctions and divestment campaigns traditionally singling out Israel. However, they disagreed with the approach of this Bill.

The main themes debated in the committee included the Bill’s application in Scotland, Wales and Northern Ireland, Government’s powers to add exceptions to the ban on boycotts and divestment and taking decisions related to Israel and the Occupied Palestinian Territories.

MPs also debated the impact of the Bill’s prohibition for public authorities to make statements indicating an intention or desire to ban certain countries from procurement or to prevent investment on moral or political grounds. Opposition MPs were concerned about the prohibition’s compatibility with the law protecting freedom of expression.

Report stage

Report stage of the Bill was held on 25 October 2023. Four amendments were subject to a division, though none gained sufficient votes to pass. The amendments focused on 1) the Bill’s compatibility with the Human Rights Act 1998, 2) its treatment of Israel and the Occupied Palestinian Territories, 3) the removal of provisions allowing Ministers to amend the Schedule, via regulations, to add or remove a description of decision or consideration, and 4) to allow public bodies to act in line with new centrally issued guidance on human rights to make procurement and investment decisions.

The Secretary of State for Levelling Up, Housing and Communities, Michael Gove, also said the Government would consider whether “specific human rights considerations” need to be added to the Bill when it is in the Lords.

Next parliamentary stages

The Third Reading is due to be held on Wednesday 10 January 2024.

Responses to the Bill (to July 2023)

Opposition to the BDS movement has been expressed by both the Government and Opposition. However, there have been concerns raised both inside and outside Parliament about the potential impact of measures in the Bill.

In June 2023, then Shadow Secretary of State for Levelling Up, Housing and Communities, Lisa Nandy MP (Lab) raised concerns about the Bill and its impact on public bodies wishing to take action in response to China’s treatment of Uyghurs.

The Bill has been supported by several Jewish groups and organisations. Upon publication of the Bill in June 2023, the Board of Deputies of British Jews welcomed the legislation as preventing “divisive local situation[s]” and hindering the “unnecessary and inappropriate targeting of Israel” by councils and others. However, several Jewish youth movements have expressed opposition to the Bill, stating that while they oppose the BDS movement, the Bill restricts freedom of speech and non-violent protest.

Some civil society groups, such as Human Rights Watch, and groups including some Uyghur exiles from China, have echoed concerns about the impact of the Bill on public bodies wishing to make ethical choice on investments and procurement. In a joint statement, more than 70 organisations, including Friends of the Earth, Green Peace, and Liberty argued that the legislation would threaten a range of campaigns and attempts to invest and trade ethically.

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