LONDON (Reuters UK) - Britain's government "deliberately rigged" compensation terms for shareholders in nationalised bank Northern Rock, a group of investors said on Thursday as they started legal action for a review of the terms.
The UK Shareholders Association (UKSA) said lawyers were set to file an application on Thursday for a judicial review of the compensation terms offered by the government to thousands of former shareholders of Northern Rock, which was nationalised in February after a five-month financial crisis.
The UKSA said hedge fund SRM, which was Northern Rock's biggest shareholder with a 12 percent stake, will file a similar application.
The terms for compensation should be set by an independent expert, the UKSA said. "The government seems to have determined that it wishes to pay nothing and has set totally artificial terms of reference," it said in a statement.
Britain's government has said compensation for about 180,000 shareholders will be set by an independent valuer named by the Treasury, who "must assume that the company is unable to continue as a going concern".
That is expected to mean little or nothing is paid for the shares.
"In essence our legal advice is that the Government's actions are disproportionate and basically unfair. Hence they are a breach of both established UK legal precedents and European law on human rights," the UKSA said.
Northern Rock, Britain's fifth biggest mortgage lender, was forced to seek emergency loans from the Bank of England in September after a funding crisis, prompting the first run on the deposits of a major UK bank for 140 years and its near collapse.
(Reporting by Steve Slater; editing by Rory Channing)
