Rock: legal fight launched on shares
Jan 13 2009 by Adrian Pearson, The Journal
NORTHERN Rock shareholders will today tell a High Court judicial review that the Government broke human rights laws by nationalising it.
The legal battle will be watched by thousands of shareholders desperate to see some of their money returned by Whitehall.
And ministers will also be waiting to see if they will have to pay out more than £1.5bn to former shareholders.
The action is based on property rights enshrined in the Human Rights Act, but has been described by some legal experts as an uphill struggle.
Amid the claimants are SRM Global and RAB Capital, two hedge funds that between them held a 20% share in the bank before it was nationalised.
They are to argue that the terms of the Government-commissioned valuation of shares is in breach of the European Convention on Human Rights.
Lawyers for the shareholders will tell the court that the Treasury’s criteria for valuing the shares falsely assumed the bank was in administration, was no longer a going concern and was no longer receiving financial assistance.
And they will contrast the Government’s conduct in the Northern Rock rescue with its later acquisition of stakes in other banks, such as Bradford & Bingley, whose shareholders were not wiped out.
Around 130,000 shareholders who owned almost 23% of the bank’s shares have also joined the legal fight. Dennis Grainger, 62, from Cramlington in Northumberland, is the lead claimant for the small shareholders and fronts the North East Action Group. He said the small people were being sacrificed by the Government.
He said: “They are not speculators and they are not playing the markets, but they are older people who are using their dividend income to supplement their meagre pensions.”
Mr Grainger, who worked for Northern Rock for 10 years, estimates he will lose £114,000 under the Government scheme.
Last night a spokesman for SRM Global said: “There is an important point which goes beyond the unfairness of the way Northern Rock’s shareholders have been treated by the Government’s compensation scheme.
“If the Government wins this court case, the loud and clear message is that any UK bank in receipt of Government assistance can be nationalised for free.”
Protesters yesterday staged demonstrations ahead of the judicial review and called for fair compensation from the Government.
On Monday, the protesters, mostly from the North East, formed queues outside central London branches of the bank in a reminder of the long lines of people who queued to withdraw their money from the troubled bank in September 2007.
Doreen Shannon, 53, from Fulwell in Sunderland, said her husband worked for Northern Rock for 20 years, adding: “We think the Government is treating Northern Rock totally differently from the way it’s treating the other banks.”
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