Whitehall favourite Slaughter and May advised the Government on its rebuttal of former Northern Rock investors’ demands, making a judicial review almost certain.
After twice extending the 21-day period shareholders had set for receiving a response, the Government contacted investors via Slaughters dispute resolution partner Elizabeth Barrett refusing to make any changes to the Banking (Special Provisions) Act. The shareholders will launch a judicial review against the Government by 22 May, the three-month cut off point from the date the act was passed.
Edwin Coe partner David Greene, who is representing a group of small shareholders, said: “Effectively we said what you’ve done is unlawful and they said no it isn’t. They say it’s been passed by Parliament and the Government is entitled to do it. Therefore we are pressing ahead with our application for a judicial review.”
Last month Greene, White & Case partner John Reynolds and Nabarro partner Ian Binnie gave the Treasury 21 days to revise the compensation provisions outlined in the banking act, which was rushed through Parliament to allow Northern Rock to be nationalised (www.thelawyer.com, 20 March 2008).
Greene represents a group that held individual shares in the bank, Reynolds is counsel for hedge fund SRM and Binnie represents RAB Capital. Both hedge funds had significant positions in the bank when it passed into public ownership.
The shareholders took issue with the part of the legislation that states that any compensation they receive will be calculated on the basis that Northern Rock was in administration, effectively meaning that any payment will be negligible at best. The judicial review will be based on the shareholders’ claim that their human rights have been breached because their property has been misappropriated.
Greene, who represents around six per cent of the 150,000 private individuals who held shares in Northern Rock, said around six claimants will be named in the court action.
“We are looking for general representation of a class of shareholders to be representative,” he said. “At the end of the day the individual shareholders are not determinative of the issues because the broad question is, is this lawful or is it not?”
The intention is to have representatives of shareholders who live in the EU, those who live outside the EU, those who received shares on demutualisation and people who bought shares before, during and after August last year.
It is expected that SRM and RAB Capital will also launch proceedings.
Barrett at Slaughters was unavailable for comment.