Rock shareholders to take legal action
Apr 24 2008 by William Green, The Journal
ANGRY Northern Rock shareholders will go to court to demand “fair” compensation from the Government after the bank was nationalised.
The UK Shareholders Association (UKSA), which has set up a Rock action group, yesterday confirmed it would apply for a judicial review of the Government’s actions over Northern Rock. Around 150,000 private shareholders – many in the North East – are estimated to have lost money and in some cases tens of thousands of pounds following nationalisation of Northern Rock earlier this year.
But there may not be any early resolution to the legal action because the High Court may not hear the claims for another nine months, leaving already embattled Treasury ministers to face a dragged-out affair.
Under the Government’s plans, a yet-to-be appointed independent valuer would be appointed to determine compensation for shareholders who lost out following nationalisation of Northern Rock. But the row focuses on assumptions within the plans that Northern Rock was in administration and was not a going concern. Critics say this was not the case and will leave shareholders with little or no compensation. Roger Lawson, from the UKSA, said: “We don’t think the Government’s compensation offer will be reasonable and it is being concluded on an unfair basis. The Government has rigged the terms of reference for the independent valuer.”
The group said it was moving forward with legal action after the Government rejected a letter setting out its complaint.
Two of the largest institutional shareholders in the Rock, SRM Global and RAB Capital, also submitted similar letters. All three organisations claimed the compensation system was contrary to established law and fair compensation should be payable when assets were “confiscated” by Governments.
The Treasury confirmed its solicitors had replied to letters sent on behalf of former Rock shareholders.
“Our reply stated the Treasury’s firm view that the statutory framework for the assessments of compensation, which has been agreed by Parliament, represents a fair and reasonable basis for determining any compensation payable to former shareholders,” said a spokesman.
Speaking to MPs last month, Treasury Minister Angela Eagle also said: “Any compensation must be fair, it must not overvalue Northern Rock on the basis of public support and without that support Northern Rock would not be able to continue as a going concern – it would be in administration.”
