British lawyers disagree over Icesave

icesave1-03923941UPDATED 21 December: Although European laws on sovereign responsibility for banking failures are to be changed, it will have no effect on the Icesave contract, which is unconnected to such changes. This is according to British law firm Ashurst, which the Icelandic parliament’s Finance Committee commissioned to answer legal questions surrounding Icesave in the UK. Another British law firm has advised that the rate of interest on the loans is too high.

Ashurst returned its report to Althingi last week and it was made public over the weekend and Michon de Reya answered later with details now released.

The Ashurst report says that the Icesave deal reached in October between Iceland and the UK and Netherlands is mostly fairly standard and comparable to other international loan agreements, RUV reports. The main points that make the contract unusual are the fact that payments can continue after 2024 if the loan is not yet paid, the review clause and other smaller details which are to Iceland’s advantage, the report states. It is still also possible for the Icelandic government to take this contentious issue before the British courts for clarification and possible changes.

The legal company was asked to help answer whether or not the changes to European law could change the Icesave deal to Iceland’s advantage. The answer, though, was no.

The legal team was also asked what effects it would have should Althingi not accept sovereign responsibility for Icesave. The answer was that political pressure on the Icelanders would increase dramatically and that the British and Dutch would almost certainly go to court to attempt to force Iceland into a binding contract. Should they succeed, the conditions of the loan would be less favourable and repayments could be called for immediately with no payment break during the first years.

Michon de Reya, on the other hand, say in their report that there is much to complain about in the Icesave contract, which is neither clear nor fair. The continue that the British and Dutch are asking for far-too-high an interest rate, RUV reports. The firm’s lawyers discussed the issue with British government advisers who implied that the British are more interested in providing a solution which is fair and workable for Iceland than some in Iceland seem to believe.

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