Britain has fended off the threat of a politically charged London lawsuit over its use of anti-terror powers to freeze billions of an Icelandic bank’s assets.

Reykjavik conceded on Tuesday that a High Court challenge to the freezing order made against Landsbanki in October stood scant success. However, the Icelandic government said it would back a separate legal challenge brought against London related to Kaupthing, one of the country’s three banks nationalised last year to stave off their collapse.