EFTA Iceland Icesave court decision: analysis and reactions

The EFTA surveillance authority’s decision to take Iceland to court over its unwillingness to accept a state guarantee for Icesave customers in the UK and the Netherlands was greeted in Reykjavík with little surprise.

Prime Minister Jóhanna Sigurðardóttir and Minister of Finance Steingrímur J. Sigfússon both told RÚV they were unsurprised by the decision and that now all efforts must be applied to putting together the strongest case possible for the Icelandic side, which hopes to persuade the EFTA court that it has not acted to break European rules. Iceland will argue that there was no legal requirement for a state guarantee of Icesave deposits and Jóhanna said she believes a victory in court is perfectly possible with a good defence case.

Meanwhile Iceland’s economics and business minister Árni Páll Árnason declared that the danger posed by the court case is “limited” — reasoning that by far the biggest debt, somewhere close to ISK 200 billion, will be paid by the estate of Landsbanki in either event. The danger lies in the application of fines and interest in the event of an Icelandic court defeat; and the possibility that the country’s emergency finance laws will be brought into question.

All leaders of Iceland’s political parties were quick to call for parliamentary unity in the authorities’ approach to the court case. They all committed themselves to work together and avoid the bickering and political points scoring that surrounded the Icesave dispute over much of the last three years.

Lárus Blöndal, a Supreme Court of Iceland judge and member or Iceland’s most recent Icesave trilateral negotiating delegation told Vísir.is that he thinks it is unlikely the British and Dutch would want to renegotiate another new payment contract before the court case starts; saying that both countries feel that the contract route has come to a natural dead end. They will in all likelihood not want to sit down to negotiate with Iceland about Icesave before the EFTA court makes a decision. On the other hand, he also believes it unlikely that the British or Dutch sides will pursue damages against Iceland.

He feels that if Iceland loses in court its membership of the EEA would be in jeopardy until the matter is satisfactorily resolved. The other two countries would, he believes, use political pressure instead of taking legal action in Reykjavík courts.