The Lemon Fool

If there was a majority Labour Government within the next few months and RBS was still then 62% owned by the Government at that time, do people think that this situation would have any kind of specific expropriation type risk for RBS shares ? And if so, how likely are these risks ?

Labour has made it clear that it wants to nationalise Water, Energy, Rail and Mail, but there was little talk at the recent Labour conference about taking back control of any of the banks.

The obvious concern for investors is that Labour offer below market compensation for any shares that they nationalise, and Labour have said that Parliament will decide what price is paid for the shares.

But what does this mean exactly ? Are there any rules for compensation or can a Labour Government just decide on any price ?

For example, if Labour have a majority of MPs in the next Parliament is there anything to actually stop Labour from nationalising all of the main banks such as Lloyds, Barclays, and RBS, for zero compensation to shareholders ?

One of the reasons Corbyn and co want to get out of the EU is because EU law prevents expropriation of ownership rights and also ensures the free movement of Capital. This would tie their hands considerably.

However it would not be difficult for them to make life so difficult for banks and utilities that their share prices fall because their profitability falls.
There is then no problem in paying minimal compensation for nationalisation because the market price of their shares will have collapsed.

This is one of the reasons I have steered clear of Utility shares for years.

Tara wrote:If there was a majority Labour Government within the next few months and RBS was still then 62% owned by the Government at that time, do people think that this situation would have any kind of specific expropriation type risk for RBS shares ? And if so, how likely are these risks ?

Labour has made it clear that it wants to nationalise Water, Energy, Rail and Mail, but there was little talk at the recent Labour conference about taking back control of any of the banks.

The obvious concern for investors is that Labour offer below market compensation for any shares that they nationalise, and Labour have said that Parliament will decide what price is paid for the shares.

But what does this mean exactly ? Are there any rules for compensation or can a Labour Government just decide on any price ?

For example, if Labour have a majority of MPs in the next Parliament is there anything to actually stop Labour from nationalising all of the main banks such as Lloyds, Barclays, and RBS, for zero compensation to shareholders ?

Yep only a Labour government can do all this stuff, and they'll do it because they are a bit bonkers. No need to think about any underlying economic conditions that might force this on any government of any hue. Just pretend only one party is hopeless and trust your investments to the others.

Oh and do it not just on one discussion board but two (or three).


GS
P.S. Just to be clear we try to avoid party politics on the investing boards...

scrumpyjack wrote:One of the reasons Corbyn and co want to get out of the EU is because EU law prevents expropriation of ownership rights and also ensures the free movement of Capital. This would tie their hands considerably.

However it would not be difficult for them to make life so difficult for banks and utilities that their share prices fall because their profitability falls.
There is then no problem in paying minimal compensation for nationalisation because the market price of their shares will have collapsed.

This is one of the reasons I have steered clear of Utility shares for years.

Actually the protection of property rights is part of the European Convention of Human Rights and although this is incorporated in the EU charter of fundamental rights it is a separate convention outside of the EU. The ECHR is looked after by the Council of Europe which is a separate institution outside the EU with 47 member states and with its own supreme court the European Court of Human rights (ECtHR).
It is the Conservative party especially May who has been raising the prospect of the UK leaving the European Convention of Human rights the Labour party opposes any such move.

https://www.coe.int/en/web/portal/home/

https://www.echr.coe.int/LibraryDocs/DG2/HRFILES/DG2-EN-HRFILES-11(1998).pdf

Article 1 of Protocol No. 1 states: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties

Note the Article does allow a state to deprive the owner of his property in certain circumstances however case law from the ECtHR requires compensation to be paid.

The Court has established that the proportionality principle implies a right to reasonable compensation (James judgment, para. 54). In fact, it considers that “the taking of property without payment of an amount reasonably related to its value would normally constitute a disproportionate interference which could not be considered justifiable under Article 1” (Lithgow judgment, para. 121). The right to compensation is now assured, although it has, in a very limited way, been contested within the Court itself.117


https://www.telegraph.co.uk/news/politics/conservative/11139943/Conservatives-set-out-plans-to-allow-judges-to-ignore-European-Court-of-Human-Rights.html

Britain could withdraw from the European Convention on Human Rights under plans for a new Bill of Rights to give UK judges the ultimate authority over laws in this country, the Justice Secretary has said.

Article 1 of Protocol No. 1 states: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties


The bits I have emboldened give plenty wriggle room for confiscation without compensation.

absolutezero wrote:Article 1 of Protocol No. 1 states: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties


The bits I have emboldened give plenty wriggle room for confiscation without compensation.

No it just allows for deprivation in the public interest. Reasonable compensation must be paid in those circumstances as established by ECtHR case law

https://www.echr.coe.int/LibraryDocs/DG2/HRFILES/DG2-EN-HRFILES-11(1998).pdf

The Court has established that the proportionality principle implies a right to reasonable compensation (James judgment, para. 54). In fact, it considers that “the taking of property without payment of an amount reasonably related to its value would normally constitute a disproportionate interference which could not be considered justifiable under Article 1” (Lithgow judgment, para. 121). The right to compensation is now assured, although it has, in a very limited way, been contested within the Court itself

You think these crazies would respect the decision of the courts?!

Not quite sure which particular crazies you are talking about, but I'd see the likes of Rees-Mogg and the ERG, who are quite happy to renege on Britain's obligations under the Good Friday agreement, and Gove who keeps telling the EU that they shouldn't assume that the UK will keep to any Brexit agreement made as probably less likely to respect the decision of courts than most of those on the left of the Labour party should they ever find themselves in power and having to deal with the realities of that.

PeterGray wrote:Not quite sure which particular crazies you are talking about, but I'd see the likes of Rees-Mogg and the ERG, who are quite happy to renege on Britain's obligations under the Good Friday agreement, and Gove who keeps telling the EU that they shouldn't assume that the UK will keep to any Brexit agreement made as probably less likely to respect the decision of courts than most of those on the left of the Labour party should they ever find themselves in power and having to deal with the realities of that.

****** DELETED DSPP *****

How does that apply to anything going on in current UK politics?

And the same could be said for plenty of the right - so it's not a statement that moves anyone forward any distance.

Peter

PeterGray wrote:How does that apply to anything going on in current UK politics?

Have you seen Her Majesty's Opposition in recent days?

Yes, of course I have. ***** DELETED DSPP *****. And, just like all other parties seeking power they say things that they think will be popular but once the realities of government take over most of them are either modified or just don't happen.

Peter

scrumpyjack wrote:One of the reasons Corbyn and co want to get out of the EU is because EU law prevents expropriation of ownership rights and also ensures the free movement of Capital. This would tie their hands considerably.

However it would not be difficult for them to make life so difficult for banks and utilities that their share prices fall because their profitability falls.
There is then no problem in paying minimal compensation for nationalisation because the market price of their shares will have collapsed.

This is one of the reasons I have steered clear of Utility shares for years.

There are precedents for that. Northern Rock and Bradford&Bingley were appropriated by the government of the day rather than going into administration (which might have returned something to shareholders - we simply can't know) or potentially being taken over at nonzero price (after all, Santander did take B&B, but from the government rather than from shareholders).

And if you regard those as mere technicalities, look at Railtrack!

I don't *think* the EU is actually central to this. The UK courts might take the side of someone putting a Human Rights argument to them. The European Court of Human Rights - which may be the most relevant international forum - is entirely separate from the EU. And I should imagine there are foreign investors in RBS who might lobby their governments to take up the matter in an international forum like the WTO, or the International Court of Justice.

Corbyn, like brexit, is an unknown risk. Some investments will fare better/worse than others, but there are sure to be surprises.

Good morning,

Concentrating entirely on RBS rather than other potential targets for nationalization I can see no reason for any flavour of government to want to nationalize it.

I can easily see a government wanting a state owned bank, something similar to the old Giro Bank. This would allow the government to ensure that everyone can get a bank account and insist that payments from the state go into it.

A few years back we had the Basic Bank Account something that was supposed to achieve this. RBS says of their version "You can’t apply directly for the Foundation current account. We’ll offer it to you if we think it might be more suitable after you’ve applied for one of our other accounts."

In other words that don't want to offer it.

With the share holding that the government currently has, it would be hard to see how any one could stop the share holders, the government, voting to appoint a board that is committed to a Socialist/Communist/Green/Right Wing/Save the blue bottle agenda.

It would be likely that such a move would send the market price tumbling and at that point the shares in the private hands could either be bought by the government at the open market price, which may by virtually nothing or the share would be effectively untradeable.

Some share holders may decide to hold, or even possible buy at very low prices and wait for a change of government and direction for the bank.

But what the minority share holders think doesn't matter, so there is no need to get into the mess that nationalizing RBS would undoubtedly be?

The government would still be able to say RBS; "Owned by the people not the bankers".

I haven't checked the RBS Articles, but there is possibly a right to forcibly purchase shares at market price when there is one share holder with a large majority holding, often this is in the 70%-90% range. Yes this would be nationalization, but it would be via normal UK company law.

Bye

Ian

With the share holding that the government currently has, it would be hard to see how any one could stop the share holders, the government, voting to appoint a board that is committed to a Socialist/Communist/Green/Right Wing/Save the blue bottle agenda.

It would be likely that such a move would send the market price tumbling and at that point the shares in the private hands could either be bought by the government at the open market price, which may by virtually nothing or the share would be effectively untradeable.

A very unlikely scenario. You are talking about Corbyn sacking the whole RBS Board of Directors and basically replacing them with Communists and Marxists. It is not going to happen. The very worst that is likely to happen to RBS under a Labour Government is that they would seek to encourage RBS lending more to small and medium sized businesses, and perhaps also seek to appoint one or two employee representatives to the RBS Board.

It is very important though for RBS to be returned to private control as soon as possible. If there is a Labour Government owning 62% of RBS shares, this is an unacceptable risk for the present private shareholders holding the other 38%. Philip Hammond needs to sell off the remaining 62% of RBS as soon as possible. The share price is not going to recover while this uncertainty of a Labour Government owning 62% of RBS shares is there.

RBS should be returned to 100% private control as soon as possible.

PeterGray wrote:Yes, of course I have. ***** DELETED DSPP *****. And, just like all other parties seeking power they say things that they think will be popular but once the realities of government take over most of them are either modified or just don't happen.

Peter

As the Lib Dems found out when they went in to coalition.