https://www.telegraph.co.uk/business/20 ... investors/
Jeremy Corbyn will face expensive and unwinnable legal battles with investors if he presses ahead with plans to nationalise swathes of British industry, one of the world’s top law firms has warned.
Amid rising City fear of a hard Left Labour government, a new analysis by the Magic Circle firm Clifford Chance has found that attempts to take control of top companies at bargain prices would face strong resistance in the courts as a violation of human rights and international treaties.
Labour wants to renationalise rail, energy and water companies as well as the Royal Mail, which was privatised in 2014. John McDonnell, the Shadow Chancellor, has said the price would be set by parliament, suggesting shareholders would not get the full market value for their assets.
Clifford Chance said: “Nationalisation for less than full market value will, almost inevitably, trigger compensation claims by investors.
“The investors likely to have the best chance of launching a successful claim are those based in a jurisdiction that is party to an investment treaty with the UK, including, for example, China, Hong Kong and Singapore.”
These treaties are set up to reassure investors that they will not lose out in any nationalisations, and the international arbitration rulings cannot be overruled by Parliament, it said.
“Investors who do not benefit from investment treaty protection, including UK investors, would have a potential claim under the Human Rights Act 1998 and/or the European Convention on Human Rights, but these claims are likely to face greater challenges,” it said. Yet if foreign investors win their case for a full market value payout the Government would probably have to pay UK pension funds and other investors the same amount, according to Clifford Chance’s analysis.
It warned it would also be very difficult to work out a fair market value for assets as shares in the affected companies would tumble as nationalisation becomes more likely. This could lead to further legal action by affected investors, including UK pension funds.
Estimates by the think tank the Centre for Policy Studies suggested the nationalisations could cost the Government £176bn. The figure could be an underestimate, however, as it only includes the cost of buying the companies’ shares.
Clifford Chance believes bonds and other debts may have to be bought too under provisions for the change of ownership of the company, adding to the bill for taxpayers. Even if this did not happen, the Government may want to pay off the bonds anyway as firms typically pay more to borrow than the state because of the higher risk of lending to the private sector.
Buying out Royal Mail’s debt as well as its equity would take its nationalisation alone from £4.5bn to £5.2bn, the lawyers estimate.
Labour said Clifford Chance “has very close links to the Conservative Party and clients with a vested interest in opposing our public ownership programme. Legal precedent is clear that Parliament can decide the level of compensation for shareholders, and have regard for the public interest in doing so,” a spokesman said.
“With returns significantly higher than bond yields the taxpayer will be better off from taking into public ownership these privatised services.”