Railtrack Shareholders’ Brutal Defeat

Railtrack's small shareholders were widely expected to lose their court case against the Government - and they did, said Martin Dickson in the FT. The shareholders were demanding £157m in compensation, accusing former transport secretary Stephen Byers of deliberately engineering Railtrack's demise in 2001. It was always going to be hard to prove that Byers specifically intended to harm investors - but the defeat was "brutal" as the judge "lined up strongly on the side of the Government".

"Hard as it is to accept", the judge was right to highlight the role of Railtrack's directors, said the FT. They bungled track repairs and when the Government pulled the plug on Railtrack, "meekly" accepted this without demanding an emergency review from the regulator. Still, the Government has hardly been vindicated by the verdict: the case exposed the "overarching, darkly conspiratorial Treasury regime" that may soon move into No. 10, said Patience Wheatcroft in The Times. Shareholders may not have been "targeted for abuse", but they were treated with contempt.

Clearly, the Government's prime concern was keeping Railtrack's debt off the Government's books upon renationalisation. By exposing the workings of a Government willing to "tear up the regulatory process" to suit itself, the case has given other firms doing business with the Government in politically sensitive sectors a reason to be worried, said Simon Nixon on Breakingviews.com. They'll need more than a judge's reassurances that the "word of this Government can be trusted".

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