New legal action over latest RBS bail out

Last November's £25 billion cash injection deemed 'unlawful' by WDM and the Treasury's intervention in bankers' bonuses strengthens our case.

WDM, together with PLATFORM and People and Planet today served the Treasury with an application to the High Court, challenging last November's decision to provide a further £25 billion of public money to the Royal Bank of Scotland.

According to the Treasury's guidance, when determining if and how public money is spent, an assessment of the likely impact the proposed spending will have on human rights and the environment has to be completed before the money can be provided. We believe that no proper assessment was undertaken and that the Treasury has failed to adequately calculate the negative impact of allowing RBS to invest taxpayers' money into harmful projects.

Rosa Curling from our solicitors Leigh Day & Co Solicitors commented: “The assessment completed by the Treasury fails completely to comply with the mandatory requirements of its own guidance and its failure to apply a consistent policy by insisting on control over the payment of bonuses but not over the lending to climate change and human rights damaging projects is unlawful.”

Legal action last year

We also took the Treasury to the High Court last year. One of the reasons given then for not ensuring public money invested in RBS was spent in a way consistent with the Treasury's own commitments on human rights and climate change was that such a restriction would be harmful to the “financial stability” of the bank. The Treasury also argued that to use RBS’ need for capital as a mechanism by which the Treasury could impose wider Government policy objectives would be inappropriate.  We argue this is clearly inconsistent with the Treasury’s position and subsequent intervention over the bonuses awarded by RBS to its staff. 

RBS should stop investing in harmful projects

A condition of RBS receiving the November cash injection under the Asset Protection Scheme was that it would increase lending to businesses and home owners and not pay cash bonuses to staff earning over £39,000. A similar condition could and should have been imposed on RBS in relation to their investments in projects and companies which are harmful to the environment and human rights. The Treasury's 'hypocrisy' is particularly irresponsible given that RBS is notorious for providing money to projects and companies which are harmful to climate change and associated with appalling breaches in human rights.

Deborah Doane, director of the World Development Movement said: "It is difficult to understand why the Treasury can order RBS to increase its lending to small businesses and home owners or curb bonuses but believe it would be unlawful for it to tell RBS to phase out its lending in hugely controversial tar sands, and investing in low carbon projects instead.  This is hypocrisy on a grand scale. The Treasury has shown that is has the power, if not the will, to intervene in RBS’ lending for the public good."

Where is our money going?

In January 2009, RBS helped raise £400 million for the Irish company Tullow Oil, and in March 2009 RBS was part of a consortium of 14 banks that lent £1.4 billion to Tullow Oil. Tullow Oil is involved in the exploration and extraction of oil on the border between Uganda and the Democratic Republic of Congo (DRC). This area has seen some of the fiercest fighting in an extractive resource-driven civil war as rival armies and militias have struggled for control of the land.

Tullow has been the subject of recent controversy in Uganda over the oil contracts it has signed with the Ugandan government. Tullow Oil had consistently claimed that its contracts with Kampala were "the best deals in the world" for the government, but a review of Uganda's contracts commissioned by the Norwegian Agency for International Cooperation (NORAD) in 2008 concluded that the profit-share model adopted "cannot be regarded as being in accordance with the interests of the host country".

The 20-year contracts, consistently weak or completely silent on human rights protection, also include a sweeping "stabilisation clause" - article 19 requires the Ugandan government to compensate the companies for any future change in the law that affects their profits - designed to militate against improvements in environmental standards.

We first launched legal action in June last year over the initial bail out, after an initial set back when the High Court blocked permission for Judicial Review, we lodged an appeal at the Court of Appeal, which will be heard on February 18th.