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Angry Northern Rock shareholders will begin a high court fight for compensation this afternoon, challenging the government's handling of the bank nationalisation a year ago.
They claim the Treasury's valuation of the company at the time it was taken over was incorrect, and that as a result their investments have been effectively rendered worthless.
The government stepped in to help Northern Rock in September 2007 after a run on the bank led to its near collapse. It was eventually nationalised last Spring. When shares were suspended last February they were valued at 90p each.
The shareholders are not challenging the government takeover, but the valuation of their holdings at the time of the nationalisation.
Over the three-and-a-half-day court hearing in London, judges will hear arguments drawing a contrast between the government's conduct in the Northern Rock rescue and its subsequent acquisition of stakes in other banks.
Shareholders say the Treasury's share valuation criteria assumed the bank was in administration, that is was no longer a going concern and was no longer receiving financial assistance from the Bank of England or the Treasury when it was nationalised. They argue this was false: Northern Rock was a going concern and was not in administration, and that the terms under which the valuation took place were in breach of the Human Rights Act.
An expert appointed by the shareholders claims that applying the false assumption that Northern Rock was in administration led to the shares being valued as worthless, when they were actually worth at least £3 each.
The case is being brought by the bank's biggest former investor SRM Global (represented by Lord Pannick QC), RAB Capital (represented by Michael Beloff QC), and around 150,000 private shareholders who held as much as 25% of the company's shares.
The private shareholders, including former and existing Northern Rock employees, are backed by the UK Shareholders Association. Spokesman Roger Lawson told BBC Radio 4's Today programme that the terms set by the government were "a fix" designed to make sure it did not have to pay compensation.
"We take many risks as shareholders, but we do not accept the risk normally that the government will confiscate one's property without fair compensation."
He added: "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."
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