Icesave Could Prove Expensive For Iceland

11.1.2013
Words by Paul Fontaine
The worst case scenario for Iceland, currently in EFTA court over Icesave, could end up costing the country around 400 billion ISK.

For those not already familiar with the story, Icesave was an electronic branch of Landsbanki that promised depositors very lucrative interest rates on their savings accounts. After the economic collapse of October 2008, however, depositors from the Netherlands and Great Britain found themselves unable to withdraw their funds. The matter resulted in a protracted legal battle between the three countries.

A statement from the ESA makes it clear, in no uncertain terms, that Iceland "is obliged to ensure payment of the minimum compensation to Icesave depositors in the United Kingdom and the Netherlands, according to the Deposit Guarantee Directive." By not allowing foreign depositors to withdraw from Icelandic banks, ESA alleges, Iceland may have violated the terms of its own treaty with EFTA.

DV now reports that things could turn very sour for Iceland, should EFTA court rule that Iceland violated international law in not immediately allowing foreign depositors to withdraw their money.

EFTA court will only rule whether or not Iceland violated the law. If it does rule in this way, it is likely that the UK and Holland while in turn file a suit against Iceland. DV reports that if that happens, damages up to 400 billion ISK (2.3 billion euros) could be awarded to the two countries.

A final ruling on the matter is expected some time this year.

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