Northern Rock passed into public ownership last Friday (22 February) following what was ultimately a very simple legal process.
Nationalisations do not come along often – the last occurred more than three decades ago – and only the longest-serving City lawyers will have been touched by one.
Yet despite the frenzy surrounding the Government’s decision to nationalise Northern Rock, legally the actual process is straightforward, as one partner at a leading City firm explained.
Effectively, once the Banking (Special Provisions) Bill had been approved by Commons ministers and Lords peers, Northern Rock’s shares transferred to the Treasury and nationalisation was complete.
“Once the bill is passed into law an order is made to pass the shares into the Treasury – and that’s the essence of nationalisation,” the partner said.
A partner at a magic circle firm added: “It’s remarkably straightforward. The complexity lies in working out what to do with the company once it’s done.”
The last time anything close to nationalisation was seen in the UK was when Railtrack plc was sold by Railtrack Group to Network Rail in 2002. That process was very different to the one seen with Northern Rock, however.
As with Northern Rock, the Government tried to find a buyer for Railtrack, but with none forthcoming the company was placed into administration. Then the Government assisted in the creation of Network Rail, which bought Railtrack plc from Railtrack Group.
Charles Randell: the man who nationalised northern rock
Charles Randell, the Slaughter and May partner responsible for nationalising Northern Rock, boasts a long and illustrious career as a lawyer, although he has no actual experience of nationalisation.
That is hardly surprising, given that he joined the firm in 1980 and made partner in 1989, whereas the last proper UK nationalisations, those of British Aerospace and British Shipbuilders, took place in 1977.
Network Rail’s 2002 takeover of Railtrack, which was underwritten by the state, can arguably be seen as a pseudo-nationalisation, but Randell had no involvement in that process, with Ashurst, Linklaters and
Simmons & Simmons representing the key players on the deal. Slaughters partner Jonathan Rushworth did, however, advise on the preceding administration of Railtrack.
But that is not to say Randell was not eminently qualified for the job. His track record speaks for itself and he already has experience of privatising a number of publicly owned companies.
He advised the Government on the 1986 privatisation of British Gas and later on the privatisation of British Energy in 1996. He was also instructed by the state when the electricity industry in England and Wales passed out of public and into private hands.
Nationalisation of Northern Rock is the simple part. It is working out what to do with the bank afterwards that will pose the real challenge.