Shareholders kick off Northern Rock legal battle

City boutique Edwin Coe and US giant White & Case are leading the way as shareholders of Northern Rock gear up to battle the Government's controversial plan to nationalise the troubled bank.

Both firms have sent 'letters before action' to the Treasury on behalf of their clients - the UK Shareholders Association (UKSA) and hedge fund SRM Global respectively - and will claim that the Government's decision to nationalise Northern Rock violated their clients' human rights under the terms of the European Convention.

City outfit Edwin Coe is advising a group of around 8,000 Northern Rock shareholders on behalf of the UKSA, with litigation partner David Greene leading the team.

White & Case is representing activist hedge fund SRM - which in November increased its stake in Northern Rock to around 9% to become the bank's largest shareholder - through commercial litigation partner John Reynolds.

The UKSA expects Northern Rock shareholders to be handed around 5p per share in compensation by the Government but believes they are entitled to £4-£5 a share.

The Government has 21 days to respond and is likely to face calls for a judicial review if it does not withdraw its plans to nationalise the bank.

Reynolds told Legal Week: "The Government has openly said that the company is a going concern and that it's likely to become profitable again soon. The shareholders simply shouldn't have to suffer."

Greene added: "If the Government wants to have a valuation then it can't manacle it by setting the price. By doing that they've contravened human rights laws."

The controversial nationalisation of the stricken lender was confirmed last month, with elite City firm Slaughter and May bagging the high-profile lead advisory role.