The Right to Property and Bank Nationalizations

Table of ContentsI. Introduction 593II. Northern Rock and the Origins of Grainger v. United Kingdom 594III. The Right to Property in International Law 596A. Historical Development 596B. Article 1 of Protocol No. 1 5991. The meaning of "possessions" under ECtHR case-law 6012. State interference with possessions 6023. Determining whether the interference was justified 603C. Margin of Appreciation 607IV. Grainger v. United Kingdom 608A. Domestic Court Cases 608B. Grainger v. United Kingdom Before the European Court of Human Rights 6091. Zero compensation was the inevitable result of the Compensation Scheme Order's required assumptions 6092. The Compensation Scheme Order did not account for the state's financial regulation responsibilities 6093. Given the conditions of the deal, it was "manifesdy disproportionate and inconsistent with any notion of 'fair balance' for the state to deny compensation to the shareholders." 6104. The independent valuer should have been given no assumptions and considered all relevant facts 610V. Party Identity Matters 612A. Survival and Stability As Inherent Values in the ECtHR's "Possessions" Precedent 613B. Moral Hazard 616C. Wealth-Sensitive Legal Rules 617VI. Conclusion 619I. INTRODUCTIONIn the fall of 2007 and the winter of 2008, the United Kingdom government took over the bank Northern Rock pic (Northern Rock). After the nationalization, an independent valuer found that shareholders of Northern Rock were entitled to zero compensation for their shares. In a subsequent suit brought by Northern Rock shareholders, Grainger v. United Kingdom,' the European Court of Human Rights (the ECtHR or the Court) found that under the margin of appreciation doctrine, the national authorities were entitled to such a valuation and that there had been no violation of the right to possessions guaranteed by the European Convention on Human Rights, Article 1 of Protocol No. I.2 In the wake of the global financial crisis, a commonly voiced sentiment has been frustration with the sense that the "haves" emerged relatively unscathed from the financial crisis while the "have-nots" (or "have-lesses") lost their entire lives' savings.3 Whether or not this sentiment has any basis in fact, its existence reflects the need for analysis of how our international legal rules have allocated the losses affected by the global financial crisis. This is a hotly disputed topic, especially as there is little agreement on who or what is at fault for the financial crisis of 2007-2008 and the subsequent global recession. This Comment is an attempt to address one issue in this debate: how the ECtHR should weigh party identity in suits to recover lost shares in a nationalized bank under Article 1 of Protocol No. 1.In suits to recover stock lost in the nationalization of a bank, the ECtHR should take party identity into consideration. In this Comment, "party identity" means whether the party is an individual or a corporate person. Taking party identity into consideration does not mean that all individual shareholders should be fully compensated for their loss. Rather, the fact that a litigant is an individual should help push their case past the margin of appreciation doctrine that shut down the Court's analysis in Grainger and into the balancing of the equities that the ECtHR generally considers in Article 1 of Protocol No. 1 cases.4Analysis of ECtHR precedent on what items are protected "possessions" under Article 1 of Protocol No. 1 of the European Convention on Human Rights (the ECHR) suggests that the ECtHR is concerned with people having a right to their livelihood. Like goodwill in a company, retirement investments are an individual's investment in her future. …