Rock shareholders in court appeal

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They say the scheme will result in their shares being valued at zero in the wake of nationalisation.

Their lawyers will urge the Court of Appeal in London to rule that the scheme infringes the human rights principle that the taking of property by the state must be balanced by compensation reasonably related to its value.

In an earlier unsuccessful High Court action, shareholders alleged that the Government deliberately set out to make a profit from its nationalisation of the bank at their expense.

They claimed that the compensation scheme was based on false criteria which would lead to shares being valued at, if anything, little more than zero so the Government would inevitably make a profit when the bank was eventually sold off.

The High Court said that, but for support from the Bank of England, Northern Rock would have been unable to pay its debts as they fell due and would have had to cease business. It was not unreasonable that shares should be valued on that basis.

The case was brought by two major investors, SRM Global and RAB Capital, and up to 200,000 private shareholders who held as much as 25% of the shares in the Newcastle-based bank.

The private shareholders, including existing and former Northern Rock employees - many at risk of losing their retirement "nest egg" shares - are backed by the UK Shareholders Association.