A small Icelandic company has won its case against the finance company Lýsing that its loan contract agreement for the purchase of machinery was illegal. The ruling is a blow to embattled financiers, but will be welcomed by many businesses still struggling with debt.
The company, Smákranar, took Lýsing to the Reykjavík District Court and today won its claim — meaning Lýsing must now reduce its debt by ISK one million (EUR 6,243).
The amount in question is small and will not impact Lýsing; but the decision could lead to finance companies needing to adjust thousands of other loans downwards. Lýsing is appealing the verdict to the Supreme Court of Iceland.
Smákranar means ‘Small Cranes’ and it is a family company renting construction equipment. In 2007 it took a loan with Lýsing to buy a portable building site crane. When foreign currency indexed loans were ruled illegal following the banking crash Lýsing did not adjust the Smákranar contract; classing it as a hire purchase agreement and not as a loan.
The Reykjavík District Court disagreed with that assessment; saying that it is a loan and that it is therefore illegal to calculate its rates in a foreign currency. Lýsing must therefore knock a million krónur off the total loan bill.
Lýsing had already declared early this morning that if the court ruling went against it, the decision would definitely be appealed, RÚV reports.
The owner of Smákranar, Erlingur Snær Erlingsson, was nevertheless in buoyant mood: “I am naturally extremely happy. This is the outcome we saw ahead of us when me and my wife decided to climb this steep hill a year ago. So we are very happy.”
Lýsing has made some 6,500 finance contracts for the purchase of construction equipment/heavy machinery and it is thought today’s verdict will be seen as legal precedent, according to Smákranar’s lawyer, Einar Hugi Bjarnason.
That is why, he believes, the court judgement is directly relevant to hundreds, or even thousands, of other Icelandic companies.