Northern Rock shareholders to appeal court decision

Former Northern Rock shareholders are to appeal today’s High Court decision that the Government does not have to compensate them.

Northern Rock shareholders to appeal court decisionFormer shareholders in nationalised bank Northern Rock will appeal today’s High Court decision, which found that the Government has no obligation to compensate them.

A group of shareholders led by hedge fund SRM Capital, a White & Case client and Northern Rock’s largest investor at the time of nationalisation, last month told a hearing in the Administrative Court that they were deprived of their property when the Government seized control of the bank (13 January).

Using human rights legislation, the shareholders had hoped to convince judges Lord Justice Burnton and Mr Justice Silber that the Government’s compensation package, which effectively valued Northern Rock’s shares at zero at the time of nationalisation, was flawed.

In their judgment Burnton LJ and Silber J said: “If, on 13 September 2007, the tripartite authorities had decided not to provide financial support, Northern Rock would have had to go into administration, if not insolvent liquidation.

“If nationalisation had been decided upon at that date, the fair value of the shares of the company would have been assessed on the basis that it wasn’t a going concern: it would have been unrealistic to expect a price to be paid on the basis that it was a going concern.

“Should it have made a difference to the assessment of fair value in February 2008 that the Bank of England did in fact provide financial support? In our judgment, the answer is no.”

The claimants, who have been granted leave to appeal, said they will now take their case to the Court of Appeal.

SRM was one of three claimants against the Government, with fellow hedge fund RAB Capital and a group of small shareholders also taking part in the case.

SRM was advised by White & Case partner John Reynolds, who instructed David Pannick QC.

RAB, which turned to Nabarro partner Peter Fitzpatrick, was represented by Michael Beloff QC of Blackstone Chambers and a group of small shareholders, who turned to Edwin Coe partner David Greene, was represented by George Bompass QC of 4 Stone Buildings.

The Government was advised by Slaughter and May partner Elizabeth Barrett, who instructed Lord Anthony Grabiner QC of One Essex Court.

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