Rock shareholders will receive nothing

By staff

Ex-Northern Rock investors have lost their case against the government and with it any hope of receiving a return on their investments in the failed bank.

The government’s actions between the bank’s collapse in September 2007 and its nationalisation last year did not infringe on the shareholder’s human rights, Lord Justice Stanley Burnton of the high court ruled today.

Roger Lawson, director of the UK Shareholders’ Association, one of the groups representing the investors, said he was “disappointed” by today’s ruling but admitted the decision “was not a complete surprise”, after warnings judicial reviews rarely succeeded.

A spokesperson for the UK Shareholder’s Association told the investors will “almost certainly” take their fight to the court of appeal.

“We accept many risks when we invest in shares. but we don’t accept that the state can confiscate one’s property without compensation,” Mr Lawson told the BBC.

But government barristers argued that without the massive £54 billion investment from taxpayers the bank would have gone bust, leaving the shares totally valueless.

The judges agreed, saying they were sympathetic to the losses of the shareholders, but reminded them that they had taken a commercial risk with their investment.

“They entrusted their investment to the hands of the management of the company. As it turned out, their business plan was flawed and could not survive the unprecedented circumstances of the latter part of 2007,” said Lord Justice Burton.

Lib Dem economic spokesperson, Vince Cable welcomed the judgement, echoing the points made by the High Court judge.

“The purpose of nationalising Northern Rock was not to bail out shareholders,” Mr Cable said, arguing that using taxpayers’ money to pay off shareholders “would be entirely untenable”.

Mr Cable said he had “some” sympathy for the small shareholders who had lost money over the Northern Rock crisis, but emphasised the dire state of the bank when it was nationalised, and the inherent risks of holding shares.

He said he had no sympathy for the hedge funds that helped bring the case to the High Court.

“The two hedge funds.deserve to lose their shirts. They bought Northern Rock shares on the cheap soon after the run on the bank in the hope of making a quick buck. We should not reward such cynical and reckless speculation.”

Last month the former shareholders made their case that the government had deliberately marked down the value of Northern Rock prior to its publicly funded bail out.

They claimed the government failed to valued the lender as a going concern, in receipt of public funds but not bust, in a bid to make a profit out of the bank sale.