Rock shareholders demand payback

Northern Rock shareholders are seeking compensation in the High Court from the government, challenging the way in which it nationalised the bank.

Shareholders' lawyers said during Tuesday's hearing that the Treasury's valuation of the firm was flawed and made the stock worthless.

The government bailed out the firm after a run on the bank in 2007.

The firm's largest former investor SRM Global has brought the case, with RAB Capital and 150,000 private investors.

It is not the nationalisation itself that shareholders are challenging, but how the bank's finances were assessed.

'Fair compensation'

The group has appointed a valuation specialist to assess the true value of the firm's shares when it was nationalised.

Lord Pannick, who is acting for SRM Global, said that if the government really believed its own valuation of the firm, it should justify it to the valuation expert.

"Let the valuer decide to what extent these assumptions are appropriate in the circumstances of this case," he said.

Shareholders say the government's assessment of the bank's finances treated the mortgage lender as if it was already in administration, thereby making the shares in effect worthless.

Roger Lawson of the UK Shareholders Association, which is supporting the shareholders, told the BBC: "We take many risks as shareholders, but we don't accept the risk normally that the government will confiscate one's property without fair compensation."

"We are saying that [Northern Rock] wasn't worthless, that it was actually a significantly valuable property and we should get fair compensation, judged by a proper, independent, normal, commercial valuation."

The hearing is expected to last more than three days.

RELATED INTERNET LINKS
Northern Rock
The BBC is not responsible for the content of external internet sites