Iceland wins case over failure of Landsbanki

PUBLISHED : Tuesday, 29 January, 2013, 12:00am
UPDATED : Tuesday, 29 January, 2013, 4:00am

Iceland didn't break the law by refusing to compensate UK and Dutch customers of Landsbanki Islands after the lender collapsed, a European court ruled.

The ruling means Iceland won't have to pay damages claims of as much as 335 billion krona (HK$20.3 billion) for customers who had money in the bank's Icesave high-yield savings accounts.

The court for the European Free Trade Association (EFTA) yesterday rejected all arguments against Iceland, saying the country "has not failed to comply with the obligations" under European Economic Area law by failing to pay the minimum amount of compensation to Icesave depositors in the Netherlands and Britain. The court ruling is binding.

In 2008, Iceland refused to cover US$5.4 billion in guarantees to 350,000 UK and Dutch citizens who opened savings accounts at Landsbanki, one of three major banks to fail during the country's financial meltdown.

The EFTA surveillance authority, the agency in charge of supervising Iceland's compliance with European rules, sued the nation in 2011 over its failings after the UK and Dutch governments covered the guarantees.

Landsbanki collapsed in October 2008 with the rest of Iceland's debt-laden banking industry.

The EFTA authority argued Iceland was obliged under European rules to guarantee minimum compensation of €20,000 (HK$208,000) to Dutch and British citizens with Icesave accounts.

Even though Iceland rejected the argument, the administrators of Landsbanki last year began repaying priority UK and Dutch claims. They have now covered half of all such obligations.