Icesave deal formally presented in Reykjavik

Iceland, the Netherlands and the UK have completed the latest draft of a deal to settle the ongoing Icesave dispute. Initial reaction to the deal is largely positive, although the Icelandic parliament has yet to vote on it.

The leader of the Icelandic negotiators, the American lawyer Lee Buchheit, began his introduction to the deal by saying that the main question the negotiators faced was how to make a payment contract for a debt if one will not know the final amount for several years.

Buchheit told reporters that the assets from Old Landsbanki will likely cover the whole Icesave debt given time — although that is impossible to say with any certainty at this stage.

Iceland will begin to pay back the loans to the British and Dutch in 2016 and the length of repayment time will depend on how much of the debt is not covered by Landsbanki assets. If the amount payable by the state is lower than ISK 45 billion (USD 389.1 million), the amount will be paid off very quickly – possibly in just one year. If the amount of the loan is higher, the repayment period will lengthen accordingly – theoretically all the way to the year 2045 in the worst case.

The interest payable to the Dutch is 3 percent and 3.3 percent to the British — the difference coming because of the two countries’ differing loan finance ratings and systems.

Further clauses mean that interest would not have become payable until October this year, if the deal is finalised. Another proviso allows for Iceland to pay less if its tax revenues take an unexpected plunge and caps the percentage of GDP that can go to Icesave debt.

Buchheit said that the aim of this final contract is to recognise that at least some blame lies with all three countries; meaning that the contract has to be totally fair and that nobody should make any money from it.

Initial reaction to the contract in Iceland seems to be positive and there is little doubt that the deal is better than the one rejected by voters this March. Credit for the new deal will inevitably be split. Some will laud President Olafur Ragnar Grimsson for vetoing the last contract and forcing the countries back to the negotiating table. Finance Minister Steingrimur J. Sigfusson will have reason to be proud of himself if the deal comes into force, as his position on Icesave has been consistent throughout and the time and patience he has invested in the dispute could well come to symbolise his political career. Finally there is Lee Buchheit, the American lawyer appointed by Sigfusson to lead the Icelandic delegation in the latest round of talks. His rational and hard-headed attitude have likely been seminal in the creation of the latest draft.

Next, all three countries need to approve the deal at the political level before it comes into force. This is not the first time that committees have returned home thinking they have a good Icesave deal in their pockets: the first contract was amended by the Icelandic parliament so that the British and Dutch rejected it and the second was rejected by the Icelandic public after the president sent it to a referendum. Third time lucky…

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