Chapter 23 Guidance on answering the exam questions

1. In the context of a global economic recession affecting the housing market, the Treasury is considering the taking into public ownership of a major bank that will otherwise go bankrupt. The intended compensation is to be based on the bank’s very low share price at the time of this nationalisation and most shareholders will receive little if any return.

Advise the Chancellor of the Exchequer on the main issues that a court in the United Kingdom would have to consider if shareholders or the bank bring actions on the basis that their rights under Article 1 of the First Protocol have been violated?

• This answer requires knowledge and understanding of Article 1 of the First Protocol.

• Begin with a general introduction to Article 1 – it involves the protection of possessions subject to seemingly wide discretion to interfere with property in the public or general interest.

• Article 1 protects “possessions”. The term is defined in general terms but will include intangible things of value such as shares.

• Nationalisation involves the “deprivation” of property and, therefore, is governed by “rule 2” – the second sentence of Article 1. Despite its text, however, any deprivation will be assessed in the light of rule 1 – the general right to peaceful enjoyment of possessions. So despite the reference to “public interest” (implying a wide margin of appreciation) a court will assess the issue on the basis of considering the state’s justification for the interference in terms of proportionality.

• Rule 2 also makes reference to international law and this includes the principle of compensation which, in the case of nationalisation should be substantial if not full. However, in the context of the economic recession it is likely that a court would find the valuation reasonable.

• In conclusion you could suggest that a low valuation may be compatible with the Convention (see R (SRM Global Master Fund) v Treasury Commissioners).

2. There should not be a human right to property—it only serves the interests of well-off people and great corporate power.

Discuss this statement in respect of both general principle and also the case law and jurisprudence of the ECtHR in relation to Article 1.

• The right to property was controversial (and so left until the First Protocol).

• On the one hand it can be an expression of individuality, and so worthy of human rights protection; on the other hand it is an expression of economic and corporate power and privilege.

• These arguments are reflected in the text of Article 1, with its references to the public and the general interest and the assumption that these would be given a wide margin of appreciation. The ECtHR, however, seems to have imposed a proportionality judgment on all aspects of Article 1.

• However, there is no evidence that Article 1 prevents expropriation of property or interference when the purpose is social policy (such as housing reform). There needs to be a proper evidence-based argument for the need of the policy and that the interference with possessions is a legitimate way of achieving the goals of the policy (see, for the seminal case, James v United Kingdom.)

• Normally proper compensation would have to be paid but the level may, again, depend upon proportionality and circumstances.