The Charity Commission has agreed it cannot permanently “fetter charities' exercise of discretion” following a High Court case over charity funding of advocacy group Cage, which has faced a backlash for appearing to side with terrorists.

The Charity Commission intervened early in the year with the Joseph Rowntree Charitable Trust, which had previously funded Cage, after Cage held a press conference in which it made statements in support of the Islamic State terrorist known as Jihadi John.

JRCT was asked by the Commission to issue a statement saying that it would not fund Cage at any point in the future, and did so, but objected to the “intense regulatory pressure” it was put under to do so.

As a result Cage brought a judicial review saying the Commission had acted beyond its powers in demanding these assurances. JRCT became involved as an interested party.

The judicial review was withdrawn yesterday after all three parties agreed a statement agreeing that the Charity Commission “has no power to require trustees to fetter the future exercise of their fiduciary duties under its general power to give advice and guidance”.

Cage hailed the decision as a victory, saying that the Charity Commission “has today been forced to climb down from its attempt to prohibit charities from funding Cage”.

However the Charity Commission has continued to assert that it acted properly, that it has simply “clarified the legal position that it adopted throughout”, and that Cage itself chose to withdraw its judicial review.

The Commission position was questioned by some charity sector leaders, who said the Commission had gone beyond its powers, and said the judgment created questions about the Charities (Protection and Social Investment) Bill currently making its way through Parliament, which will add to the regulator’s powers.

‘Commission does not seek to fetter discretion’

The statement agreed by the Commission, Cage and JRCT says: “Trustees must be free to exercise their fiduciary powers and duties in the light of the circumstances that exist at the time, if acting properly within their objects and powers and in the best interests of the charity.

“The Charity Commission does not seek to fetter charities' exercise of discretion whether to fund the charitable activities of Cage for all time, regardless of future changing circumstances.

“The Commission recognises that it has no power to require trustees to fetter the future exercise of their fiduciary duties under its general power to give advice and guidance.

“In consequence, there is no obligation on the trustees of JRCT to fetter the proper and lawful exercise of their discretion in future.”

Cage claims victory

Cage said in its statement: “The Charity Commission took a ‘high-handed’ approach, as confirmed by the most senior judge in the country, Lord Chief Justice Thomas. Cage’s position is that the Commission as an important regulator has been hijacked by apologists for the War on Terror who view all who dissent from their narrative with suspicion.

“Cage has achieved its objective. The Charity Commission was forced to accept that it was wrong to require charities to give indefinite assurances to never fund Cage.”

A Charity Commission spokeswoman said: “We welcome Cage’s decision to withdraw their application for judicial review.

“For the Charity Commission this case was always about defending our responsibility for protecting the public trust and confidence in charity. It was on that basis we sought assurances from trustees about the funding of Cage.

“It has always been clear that trustees have the right to exercise their discretion when acting exclusively in the best interests of their charity and within the objects and powers, subject to the appropriate supervision by the commission as the charity regulator.

“The Commission continues to assert that it acted properly, proportionately and fully within is general powers in its engagement in the face of a serious risk to public trust and confidence which had arisen given the involvement of those charities who had formerly funded Cage.

“We regret that this judicial process has dragged out, consuming charitable and public funds.”

JRCT said in a statement: “We welcome the clarification that the Commission does not seek to direct charities outside the scope of a formal statutory inquiry, and that it does not ask funding bodies to bind their future discretion.

“These are important principles that underpin the ability of charities to make their own decisions within the law to work on difficult issues and respond to changing need.”

Acevo questions Commission role

Sir Stephen Bubb, chief executive of Acevo, said: “For the Charity Commission to have assumed as general principle that it had omnipotence over the future was quite extraordinary. It over-reached itself and now needs to reflect.

“This case was critical for the protection of the rights of charities to exercise their proper judgement now and in the future. It means charities may continue to operate without fearfully looking over their shoulder to see if they are crossing a line arbitrarily drawn by the Commission.

“The outcome of this case sends a cautionary message to all those reflecting on the future regulation of charities.

“Finally, for the Commission to bewail the costs involved with this case is ungracious. It could have revised its position at any time before the implementation and during prosecution of proceedings. It chose not to. That is why the money was spent. No regulator can assume a doctrine of Papal infalliblity and must be subject to challenge when it gets things wrong.”

Implications for the Charities Bill

Ben Jackson, chief executive of Bond, the network of international development organisations said: "Today’s settlement between Cage and the Charity Commission has far-reaching implications for the effective regulation of charities way beyond the specific issues and organisations in this case. At a time when the Charity Commission is seeking yet more powers from Parliament, today’s ruling should give lawmakers strong pause for thought.

“As they consider new legislation in the coming period, MPs now need to ensure that any new proposed powers are really justified and proportionate, and that the proper checks and balances are in place to ensure the Charity Commission is accountable, objective and transparent in exercising its powers.”

Dan Corry, chief executive of charity think tank NPC, added: "While we have learned some things from the case heard yesterday, the stopping of the judicial review means that things will remain rather foggy on when and why charities might come under scrutiny and that is a shame."