Banking News Former Northern Rock Shareholders Lose Compensation Case 2918
Former Northern Rock shareholders lose compensation case
13 February 2009 / by Rachel Mason
Last month in the High Court, former shareholders of the nationalised bank argued that the Government had deliberately undervalued Northern Rock shares in the run up to its nationalisation and demanded compensation for infringement of their human rights.
But today the former shareholders lost their case, the BBC reports.
“We have come to the conclusion that the provisions made for the compensation of the shareholders of Northern Rock do not infringe their rights,” said Lord Justice Stanley Burnton, as reported by the BBC.
Lord Justice Stanley Burnton is one of the two judges hearing the judicial review which was brought by two substantial shareholders in Northern Rock – the hedge funds RAB Capital and SRM Global.
Northern Rock collapsed in September 2007 at the start of the sub prime mortgage crisis in the US and subsequent credit crunch, and had to be bailed out by the Government – it became fully nationalised in February 2008.
When Alistair Darling decided to take control of the failing bank, shares were worth around 90p. An independent auditor has been appointed to assess how much the shares were actually worth at the time, based on the assumption that Northern Rock would have gone into administration without Government intervention.
But RAB Capital and SRM Global argue that the Government could have sold the business to a private investor – at the time, Virgin boss Sir Richard Branson had made a bid – and claim that Northern Rock shares were worth at least 300p each.
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