When it rains, it pours. I should probably be dragging these posts out over the course of this week, but this is Big Iceland News and deserves at least copious amounts of linking.
By “this” I mean that today, the European Free Trade Association (EFTA) delivered its ruling in the Icesave dispute, and ruled in Iceland’s favor. Icesave, you say?
In the event that you have not been paying attention to Icelandic/British/Dutch/Global Recession news in the last four-ish years, here’s the (real, real, super-) skinny, per this Reykjavík Grapevine article, “Understanding the Icesave Ruling“:
When Landsbanki – and with it, Icesave – collapsed in late 2008, the bank only allowed Icelandic depositors to withdraw their savings. British and Dutch depositors were denied access, so their respective governments covered the deposits for Landsbanki.
the EFTA’s ruling essentially means that the UK and Holland cannot sue Iceland for up to 400 billion ISK (2.3 billion euros) in damages.
In the meantime, the management of the old Landsbanki will continue to pay the UK and Holland for the deposits the two countries covered over four years previous. Last summer, this debt was half paid.
This is, needless to say, gigantic news. Landsbanki, not the nation of Iceland, is being held responsible for the debts that were initially covered by the British and Dutch governments. No additional damages can be sought against Iceland. And this decision is final–it cannot be appealed.
If you are the type of person who likes to read such things, the full EFTA decision is available via .pdf here.
If, instead, you just want the hightlights, the internet should do us fine. There will be a slew of articles about this in the coming days I am sure, but for now, here are some to take a look at, should you be interested (Many of these shorter summaries are basically the same, but they have different historical details/slants throughout):
- Iceland Wins Court Case Over Dutch, U.K. Icesave Compensation: Bloomberg Businessweek
- Iceland’s resistance on Icesave money backed by court: Reuters
- Iceland Wins Case Over Failed Bank: Wall Street Journal (this one is a bit meatier, so a quote…)
Iceland didn’t force losses on domestic depositors. In the windup of the banks, the authorities put domestic deposits and assets into new “good” banks and left foreign deposits in the old, insolvent banks. The EFTA Surveillance Authority argued that Iceland violated nondiscrimination rules by treating domestic depositors differently.
The court agreed with Iceland that the transfer didn’t break the rules.
The EU’s common-market rules require that every country establish a deposit-guarantee program that provides a minimum level of compensation to savers in case of a bank failure. Iceland’s banking collapse took down all the island’s major banks, and the Icelandic deposit-guarantee fund didn’t have nearly enough money to pay out insurance.
At the core of the Icesave case is exactly what a country must do in such a total failure. Iceland said its obligation was simply to make sure that a reasonable guarantee plan existed. The U.K. said a country is obliged to make sure that insured depositors are actually paid.
The Icelandic government expressed “considerable satisfaction” that the country’s stance had prevailed in the Icesave case. “The EFTA Court ruling brings to a close an important stage in a long saga,” the foreign ministry said in a statement.
By compensating their depositors, the U.K. and the Netherlands received priority claims on the assets of the failed Landsbanki. The ministry said it expects those assets will be enough to pay all the British and Dutch claims.
Since 2008, the UK government has been thwarted in its attempts to force the Icelandic government to repay all of the compensation the UK had paid to its citizens who had money in Icesave.
At first, in 2009, the Icelandic government agreed to repay the compensation given by the UK and Dutch governments.
However most of the Icelandic people were bitterly opposed to the suggested deal, fearing that it would bankrupt their country and was, in any case, fundamentally unfair because the UK and Dutch governments had awarded compensation far in excess of the levels required by European legislation.
A full-scale constitutional and diplomatic crisis ensued when the country’s president refused to ratify the deal and instead called a referendum, which overwhelmingly rejected the deal in March 2010.
A second deal struck between the three governments was followed by a second referendum in April 2011 but this also rejected proposed repayments, though by the much narrower margin of 59% to 41%.
The UK and Dutch governments then threatened to sue for the money – a move which now appears to have hit the buffers.
- Iceland cleared of all claims in Icesave dispute: Ice News
- Iceland wins Icesave case at European court: The Telegraph