The fallout from large financial collapses often leads to bouts of litigation (amongst other things – resignations, depression etc etc…). As litigators across the Globe can probably confirm since the downturn started in earnest, swollen ranks of property and corporate lawyers are now sidelined in favour of litigators and insolvency specialists.

To many in the UK, the precipitation of the current economic crisis will be encapsulated in the name Northern Rock. The individual episode of its collapse and takeover by the Government contains a neat demonstration of what has unfolded in the wake of the credit crunch. At all levels parallels with participants in the wider economy can be drawn from the savers to the borrowers, the bankers, the Government, the taxpayer and now the inevitable legal challenge following its demise…

The action is being brought by two investment funds and some 150,000 individual shareholders. Some of Britain’s most highly-respected (and highly-paid obviously) Queen’s Counsel are present. David Pannick, QC will represent SRM Global Master Fund and Michal Beloff, QC will represent RAB Special Solutions (Master) Fund Ltd. The 150,000 individual shareholders will be represented by Tom de la Mare. The Treasury, as defendant to the claim, is represented by Lord Grabiner, QC, the Labour peer.

The shareholders in Northern Rock will claim that the Government breached their human rights with a compensation scheme that left them with as little as 5p a share compared with what they maintain is a “fair” value of £3-£4 per share. The argument suggests that the terms used by the Government for compensating shareholders was wrongly based on an assumption that the bank was in administration and no longer a going concern. Keep watching…