The Icelandic government needs to submit a new Icesave bill by the beginning of next week in order to prevent the UK and the Netherlands bringing a lawsuit over the imposition of emergency laws in Iceland. Such a lawsuit could result in Iceland’s international investment ratings being reduced to junk status, according to Visir.is
The freezing order on the deposit insurance fund which is supposed to cover Icesave runs out on 23 October.
Visir.is reports that it is not possible to extent the freezing order and if the Icesave issue is not concluded to the satisfaction of all three countries by the 23 October, it is clear that the fund will not be able to cover its obligation. The insurance fund reportedly contains ISK 17 billion; but the amount it would theoretically have to pay out is closer to ISK 800 billion.
According to a joint report by the Central Bank of Iceland and the Ministry of Economic Affairs created for the Prime Minister’s office, the insurance fund’s potential bankruptcy would have serious implications. The fund could expect lawsuits to be filed against it and also against the Icelandic state for having discriminated against depositors based on their geographical location.
The British and Dutch could, in other words, effectively subpoena the Icelandic state over its emergency finance laws. Such a lawsuit could, according to the report’s authors, result in Iceland’s investment rating being reduced to junk.
According to the report, the government now has 12 days in which to conclude the Icesave deal and head off potential lawsuits. It will take Althingi (the national parliament) at least three to five days to pass the bill, which means the bill would have to be prepared and submitted no later than next Monday.
The Prime Minister reportedly wishes to close the matter before the freezing order expires, although some other MPs still want to take the whole Icesave issue to court to establish what Iceland’s legal obligations are toward the Netherlands and the UK.
(IceNews note: although this story appears to be quite significant, at the time of writing Visir.is was the only major news website covering it.)