Iceland’s prime minister has criticised the UK and Dutch authorities for filing a IKr1,000bn (£5.6bn) lawsuit over the 2008 collapse of online lender Icesave, saying they should “forget” the affair as they were unlikely to win the case.
Sigmundur David Gunnlaugsson, prime minister since May, told the Financial Times the Icesave lawsuit– in which the UK and Netherlands authorities are seeking a sum equivalent to nearly two-thirds of the island’s annual GDP – recalled his country’s previous legal battle against the two countries, which ended in court victory for Iceland last year.
“It reminds us of all this and people ask, why are they doing this?” said Mr Gunnlaugsson. “In the opinion of many Icelanders, they are trying to coerce the taxpayers into paying debts that are not theirs.”
The lawsuit is the latest instalment in the long dispute stemming from money lost by more than 300,000 British and Dutch depositors in high-yielding Icesave accounts marketed by Landsbanki, one of three big Icelandic banks that collapsed in 2008.
A European court ruled last year that the Icelandic government was not liable for repaying the UK and Dutch governments, which had opted to reimburse the depositors after Iceland refused to do so.
Now the UK’s Financial Services Compensation Scheme (FSCS) and the Dutch central bank (DNB) have changed tack and are suing Iceland’s guarantee fund, the Depositors’ and Investors’ Guarantee Fund (TIF), which disclosed the IKr556bn lawsuit on Monday. Additional interest and costs took the claim to IKr1tn, it estimated.
Iceland’s TIF said it had allocated just IKr18bn to meet the claim – less than 2 per cent of the sum sought.
Mr Gunnlaugsson underlined that there was no state backing for Iceland’s guarantee scheme, “so the country is in the clear”. But he added: “Shouldn’t [the UK and Netherlands] just let these things cool down and try to forget them? Should they be trying to stir them up again, particularly as it is very unlikely they will get anything out of the insurance fund?”
Mr Gunnlaugsson, the only leader of a big Icelandic political party to insist that the government should not repay the UK and Netherlands, surfed a wave of popularity in the wake of the Icesave judgment.
Icelanders twice rejected repayment terms to the UK and Netherlands in referendums amid bitter recriminations over the UK’s use of antiterrorist legislation to freeze Icelandic assets during the dispute.
The banks Landsbanki, Kaupthing and Glitnir collapsed in autumn 2008. Their assets were 10 times the size of the economy and propping them up would have bankrupted Iceland. It therefore let the banks collapse, protecting their domestic assets but leaving foreign creditors facing a long wait for repayment.
Landsbanki’s estate has already repaid a large sum to the UK and Dutch governments, which were made priority creditors. The latest lawsuit therefore seems designed to recoup interest and costs incurred by the two governments.
Britain’s FSCS said that although it expected to recover much of the compensation paid to depositors from its claim in the bank’s winding-up, “this claim is for recognition of the obligation to meet depositors’ claims and for money and costs incurred in funding and administering the payout on its behalf in the Icesave failure”.
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