Northern Rock shareholders are to argue that what the Government labels the “temporary public ownership” of Northern Rock is effectively theft.

Stakeholders believe that the bank’s shares are worth at least £4 and will look to European case law to argue that the Government’s system of compensation is illegal, citing privileges granted to shareholders under human rights legislation.

The Treasury believes that Northern Rock’s shares are worthless.

One legal source said: “What the Government has done is what banana republics do all over the world — take assets without paying the proper price.”

Lawyers will rely on a back catalogue of European cases that have already been heard in Strasbourg, including the nationalisation of shipbuilders and steelmakers, to argue that the system for valuing Northern Rock is not fair and balanced.

Government documents that emerged after the collapse of Railtrack, when it was decided not to nationalise the rail operator amid worries over costs to the taxpayer, are also being examined, according to sources. This material will be used to challenge the decision to nationalise Northern Rock.

“Back then, the Government was told nationalisation was too expensive — now with Rock they are looking at getting away with paying nothing,” one source said.

The Treasury wants Northern Rock to be valued as if it did not have support from the Bank of England, effectively making the shares almost worthless.

A legal source said: “All this fundamentally misunderstands the role of a central bank. It cannot act as the Government’s piggy bank allowing the Government to decide when to pull the plug . . . This was not an insolvent bank. It is solvent, with a quality mortgage book. It simply had liquidity issues.”

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