Efforts by the UK to prevent local authorities divesting their pension funds from companies complicit in Israel’s occupation have prompted accusations of a shrinking space for democratic action from public sector employees and a broad cross-section of rights activists.

Last month, the Court of Appeal backed the government in a case brought by the Palestine Solidarity Campaign (PSC) against regulations intended “to stop politically-motivated boycott and divestment campaigns by town halls against UK defence companies and against Israel”.

The new rules prohibited the use of “pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries”, except in cases where the government itself has put in place “formal legal sanctions, embargoes and restrictions”.

Despite opposition at the time from “senior pension officials and local councillors”, as well as the general public, the Department for Housing, Communities and Local Government pressed forward, prompting PSC’s legal challenge. The department failed to respond to a request for comment.

And though the High Court agreed last June that the government had acted improperly, the Court of Appeal has now affirmed that the new regulations fall “within the powers” conferred by legislation.

“The government press release that accompanied the launch of the regulations made clear that the key aim was to protect Israel and the UK defence industry from being held accountable”, Ben Jamal, director of PSC, told Al Jazeera.

But in addition, Jamal, continued, while the government may primarily have the Boycott, Divestment, Sanctions (BDS) campaign in its sights, “the court ruling opens the way for the Government to introduce guidance in the future preventing LGPS (Local Government Pension Schemes) from disinvesting in respect of any industry, for example, fossil fuel extraction.”

Sarah Shoraka of campaigning group Platform, which has worked with Friends of the Earth on fossil fuel divestment, said her organisation has been following the case and shares such concerns.

“We are campaigning for the local government pension scheme to divest from fossil fuels and so it is directly relevant to our work,” Shoraka told Al Jazeera.

“Platform believes that The Court of Appeal’s decision fails to protect the right of pension holders to make ethical decisions regarding the investment of their funds.”

According to Andrew Smith of Campaign Against Arms Trade, an organisation which does not take a formal position on BDS but defends the right of campaigns to call for it, “At heart, this is a question about democracy: Where should decisions like this be made, and who should be making them?

“If the government can ban councils from investment in one area then it’s only a matter of time before similar attacks are made on environmental groups calling for disinvestment from fossil fuels or health charities that call for an end to investment in tobacco,” Smith said.

Jamie Potter, a partner at Bindmans solicitors, who represented PSC in their challenge, told Al Jazeera that the regulations were an attempt by central government to limit local government workers’ choices when it comes to influencing how their pension money is invested.

“Westminster is imposing its own value judgment on local government pension schemes, thereby preventing local government workers from seeking that their money is not invested in companies to which they object.”

While in this instance, “that would include arms dealers and companies working in the Occupied Palestinian Territories,” Potter continued, in the future it could include “companies profiting from fossil fuels or those involved in fracking”, as well as “payday lenders or factory farming or indeed any other issue to which people might object”.

A spokesperson for UNISON, a trade union representing 1.3 million workers across UK public services, told Al Jazeera, “It’s vital that pension funds make investments in the best interests of the scheme members. If people contribute to a pension, then it’s only right that they, rather than the Foreign Secretary, should have a say in where it’s invested.”

The immediate repercussions of the Court of Appeal decision last month are unclear. According to pensions law firm Sackers, “There may be considerable challenges in implementing this Guidance [the new regulations] in practice.”

Jamal told Al Jazeera that while PSC has sought permission to appeal, “whether or not it can proceed to appeal is dependent upon being able to raise the funds and upon further legal advice.”

“We will also, however, continue to build our broader campaigns for justice for the Palestinian people, including taking forward a campaign for boycott, divestment and sanctions as a key way – as with apartheid South Africa – of holding a human rights-abusing regime to account”, he added.

Smith noted the same parallel. “In the 1970s and 80s, councils across the UK worked with the anti-apartheid movement to boycott South African goods,” he said.

“The Conservative Party may have had a dubious and inglorious history when it came to South African apartheid, but surely they wouldn’t argue that those campaigners were on the wrong side of history?”