Edwin Coe and White & Case are gearing up to take legal action against the Government over the compensation packages former Northern Rock shareholders are likely to be offered now the bank has been nationalised.
Edwin Coe partner David Greene and White & Case partner John Reynolds have separately written to the Treasury asking that the compensation provisions outlined in the Banking (Special Provisions) Bill, which was rushed through Parliament to allow Northern Rock to be nationalised, be revised.
Greene is representing a group of around 8,000 people who held individual shares in the bank and Reynolds is counsel for hedge fund SRM, which had a significant position in the bank when it passed into public ownership. RAB Capital, which was also a major Northern Rock shareholder, is expected to write to the Government through its legal representative, Ian Binnie at Nabarro.
The shareholders have given the Government 21 days to reconsider terms in the banking bill that will allow any compensation to be calculated on the basis that Northern Rock was in administration, effectively meaning that any payment will be negligible. If the Government refuses to revise the bill the shareholders will take action on the grounds that their human rights have been breached because their property has been misappropriated.
Greene said: “We are seeking a change to the legislation relating to the calculation of the value of compensation. We have written to the Government to ask it to do that within 21 days, failing which judicial review proceedings will commence.
“We believe we are putting forward a strong case to change the legislation because we believe it’s a breach of the Human Rights Act and the European Convention on Human Rights. We hope it will settle without having to go to court.”
Although Greene represents around 8,000 of the 150,000 private individuals who held shares in Northern Rock, he said if court action is taken it is likely there will only be six claimants.
“If an application is made then it will be made by a small group of shareholders on behalf of a larger group,” Greene said. “We are trying to get representation of shareholders who live in the EU, people who live outside the EU, people who bought shares on demutualisation, people who bought shares up to August last year, people who bought between August and September when there was a false market and those who bought after that.”
At the moment Greene has representatives of three of these groups ready to take action.