Saturday

4th Feb 2023

Iceland not liable for Icesave compensation after landmark ruling

Icelandic taxpayers are not liable to finance compensation of an estimated 350,000 British and Dutch citizens who lost their savings in the wake of the collapse of the country's banking sector in 2008, following a landmark court ruling.

The Court of the European Free Trade Association (EFTA), of which Iceland is a member, ruled on Monday (28 January) that Iceland had not broken the terms of the EU's deposit guarantee scheme legislation.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • 350,000 British and Dutch savers lost money when Icesave collapsed. (Photo: mydogminton)

By ruling that deposit guarantee legislation does not require governments to act as a guarantor of last resort, the court has also posed a difficult question for EU law-makers in advance of legislation to harmonise national deposit guarantee schemes as part of a proposed banking union.

In a statement, the EFTA court said that "the Directive did not envisage the alleged obligation of result to ensure payment to depositors in the Landsbanki branches in the Netherlands and the United Kingdom in a systemic crisis of the magnitude experienced in Iceland."

"How to proceed in a case where the guarantee scheme was unable to cope with its payment obligations remained largely unanswered by the Directive," it concluded.

For their part, the Icelandic government expressed "satisfaction" at the ruling, which it said "brings to a close an important stage in a long saga."

A ruling that Iceland had breached the terms of legislation on deposit guarantees could have paved the way for the UK and Dutch authorities to seek damages estimated by the International Monetary Fund to be around €2 billion.

The EFTA surveillance authority brought forward the case against Iceland in December 2011, with the support of the European Commission. It claimed that the Icelandic government was liable to pay out the €20,000 minimum compensation payments set out in the directive to the British and Dutch depositors, and that by reimbursing Icelandic nationals who lost money Reykjavik had breached the principle of non-discrimination.

Iceland's defence had maintained that although the directive requires countries to set up a scheme to protect the deposits of savers, it did not force national governments to guarantee payments.

However, although Iceland is not obliged to repay foreign depositors, the 'winding up committee' of Landsbanki is continuing to reimburse the British and Dutch depositors. A government spokesperson told EUobserver that the estate of Landsbanki had "already reimbursed 50% of the total claim to the UK and the Netherlands…over 90% of the maximum required by the deposit guarantee scheme directive."

"The winding up committee expects to pay all deposit claims with 2-3 years," she added.

Iceland's banking sector collapsed in 2008 at the height of the financial crisis, owing an estimated €4 billion. The liabilities of the three main Icelandic banks, Kaupthing, Landsbanki and Glitnir Bank was over ten times the size of the Icelandic economy prior to their collapse.

The case also provoked a diplomatic row after the UK government, which compensated its citizens who had lost money, imposed financial sanctions on Iceland.

Iceland's President Olafur Ragnar Grimsson, last week launched a bitter attack on the actions taken by the British government during the crisis. In an interview with Sky News he said his country would "never forget" its treatment by former Prime Minister Gordon Brown.

"The Brown government decided to put the Icelandic government on a list of terrorist states and terrorist phenomena. We were there together with al Qaeda and the Taliban on that list. We have not forgotten that in Iceland," he said.

Iceland voters reject Icesave deal for a second time

Iceland's bitter row with the Netherlands and the UK over the loss of billions of depositors' money in a collapsed online bank has reached a new stage after Icelandic voters on Saturday rejected for the second time a deal to resolve the issue.

Latest News

  1. Greece faces possible court over 'prison-like' EU-funded migration centres
  2. How the centre-right can take on hard-right and win big in 2024
  3. Top EU officials show Ukraine solidarity on risky trip
  4. MEPs launch anonymous drop-box for shady lobbying secrets
  5. Hawkish ECB rate-rise 'puts energy transition at risk'
  6. MEPs push for greater powers for workers' councils
  7. How Pavel won big as new Czech president — and why it matters
  8. French official to take on Islamophobia in EU

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  4. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  5. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  6. European Committee of the RegionsRe-Watch EURegions Week 2022

Join EUobserver

Support quality EU news

Join us