Supreme Court of Iceland preparing for most important case in years

The case being brought by the resolution committee of Old Landsbanki against the bankrupt estate of Motormax ehf. will take place at the Supreme Court of Iceland on 6th June in front of seven judges. No case has been heard in front of as many judges since 2004.

The case had originally been scheduled for five judges; but it was later decided to add two. Cases are heard by the Supreme Court of Iceland by three, five or seven judges; depending on the relative importance of the case. Cases only go to the supreme court if they have already been through one of the district courts. District court judges can refer a case up, or the losing side can appeal to the supreme court.

The case revolves around a ISK 150 million loan in a basket of five currencies which Old Landsbanki granted Motormax in 2007. At today’s rate that is only EUR 911,200 and not a large amount of money in the grand scale. The case is considered important, however, for the precedent it will set.

Motormax was put into bankruptcy in May 2009 and in July of that year administrators gathering assets on behalf of Old Landsbanki (itself bankrupt) put in a claim on the company for ISK 276 million for the loan plus interest, taking into account the massive increase in krona cost following the depreciation of the currency against the five other currencies used in the loan.

In October Motormax administrators told Landsbanki that they were rejecting the claim based on a Supreme Court of Iceland ruling that foreign currency loans paid out in kronur had been illegal. The court ruling was, however, specifically about car loans.

Motormax instead put Landsbanki down for a ISK 168 million claim, which would cover the original sum and interest under the new rules set out by the supreme court on foreign currency car loans. Landsbanki took the case to the Reykjavik District Court, which sided with Motormax and so Landsbanki decided to appeal to the supreme court.

The massively important supreme court decision last June that foreign currency car loans paid out in kronur had been illegal, was taken by five judges. In October the court also ruled on what interest should be charged on those loans.

This case tests the ruling further and will be a precedent for business loans.