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Investors in Northern Rock fail to win stock losses payout

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A Northern Rock bank branch is pictured in London, on January 19, 2009. Photo: Leon Neal, Getty Images

A Northern Rock bank branch is pictured in London, on January 19, 2009. Photo: Leon Neal, Getty Images

A Northern Rock bank branch is pictured in London, on January 19, 2009. Photo: Leon Neal, Getty Images

Shareholders in nationalised UK bank Northern Rock have failed in a court bid to force the British government to compensate them for stock they claim was rendered worthless when it was taken into government ownership last year.

The move comes ahead of the Irish Government's appointment of an assessor to Anglo Irish Bank who will decide what compensation, "if any", would be paid to shareholders.

At the time of the nationalisation, Finance Minister Brian Lenihan said that any compensation will be "fair and reasonable". The assessor will consider a "wide range of factors" before making a recommendation.

A two-judge panel at the High Court in London yesterday dismissed a lawsuit filed by hedge funds SRM Global, RAB Capital and a group of private investors. They had sought a judicial review of the way the shares will be valued by the British government.

The ruling will allow the government-appointed assessor to proceed with the process of determining how much Northern Rock shareholders should receive as a result of the nationalisation.

Northern Rock, nationalised in February 2008, was the first UK casualty of the credit crunch. It almost collapsed in 2007, it had to seek emergency funding from the Bank of England and then suffered a run on its deposits.

Lawyers for the investors said that the UK treasury's method of valuing their stock would result in a negligible or zero payout for them, and enable the government to make a huge profit at their expense when it eventually sells the bank.

Michael Beloff, a lawyer for SRM, said the ruling was the first time judges had awarded "nul points" in this type of case.

David Pannick, a lawyer for RAB, told the court that the case was an issue of "compelling public importance" and was granted permission to appeal.

SRM, based in Monaco, said the ruling meant the government was entitled to "nationalise any institution in receipt of any financial assistance where it is solvent but temporarily illiquid but for no, or virtually no compensation".

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RAB spokeswoman Charlotte Kirkham, in London, said the company was disappointed with the judgment.


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