Iceland court ruling paves way to end of Icesave dispute
Landsbanki headquarters in Iceland - Photo Christian Bickel
(REYKJAVIK) - The Iceland Supreme Court ruled Friday in favour of emergency laws introduced during the 2008 financial crisis, removing the last uncertainty about whether the country can settle its Icesave debt to Britain and the Netherlands.
The Supreme Court ruled that Iceland's government was right to introduce the laws at the height of the crisis to ensure that depositors had priority over other claims on the assets in the island nation's major banks, which all collapsed.
The emergency laws now make it possible to refund the 3.9 billion euros ($5.5 billion) Britain and The Netherlands spent compensating 340,000 of their citizens who lost money when online Icesave bank failed, using the assets of its failed parent company Landsbanki.
The laws were challenged by a range of bondholders, hedge funds, insurance companies and other banks, casting a shadow of uncertainty over whether the Landsbanki assets could be used for the repayment.
The Icelandic government hailed Friday's ruling, noting that "the Supreme Court is a court of last instance (so) no legal uncertainty remains.
"According to the Winding-up Board of Landsbanki, disbursements are expected to commence within weeks," it added.
Halldor Backman of the Landsbanki Winding-up Board told AFP the timeline for repayment remained unclear.
"We'll start paying out (but) when that will be I can't say. It will be as soon as possible," he said.
A group of more than 70 bondholders in Landsbanki meanwhile said they were considering taking their challenge to the emergency laws to the European Court of Human Rights.
"The legislation granting priority to depositors breaches fundamental rights contained in the Icelandic constitution and the European Convention on Human Rights," a statement said.
Icelandic voters have twice rejected by referendum deals to use tax-payer money to refund the Icesave debt so the Landsbanki assets are the only way Reykjavik can settle the heated row that has seen London use anti-terrorism legislation against the small island nation and has clouded its European Union membership negotiations.
The Dutch Central Bank welcomed the Supreme Court ruling, saying it expected to receive a "substantial amount from Landsbanki's" assets.
It said it paid Dutch account holders some 1.6 billion euros (U$2.2 billion) up to mid-2009 in compensation relating to the execution of Dutch and Icelandic deposit guarantee systems.
"The Icelandic Supreme Court's decision confirms ... that repayment can begin," it said in a statement, adding that a first repayment of around 500 milion euros was expected.