Iceland Seeks Political Retribution Law as Haarde Tried

Iceland is using a criminal trial examining former Prime Minister Geir H. Haarde’s role in the island’s 2008 banking crisis as a platform to seek laws that will make it easier to prosecute politicians.

“There’s a need to review the whole legal framework,” Justice Minister Ogmundur Jonasson said yesterday in an interview in Reykjavik. “People must review the laws on ministerial responsibility in light of the experience and the discussions that have taken place in this particular case.”

Haarde stepped down in 2009 amid street protests blaming his government for the island’s financial meltdown. He is the world’s first political leader since the global credit crisis started to face criminal prosecution for his economic policies. Jonasson, who has blogged his opposition to the case against Haarde, says any changes to the law wouldn’t affect the former prime minister’s trial.

“I originally supported that Haarde be indicted but changed my position,” Jonasson said. His change of heart followed parliament’s decision to drop charges against other Cabinet members, he said.

While several former executives at the failed banks are being investigated, with some receiving jail terms, Haarde is the only politician to face trial. His successor, Prime Minister Johanna Sigurdardottir, has questioned the premise of the case. If found guilty, Haarde faces as long as two years in prison.

‘Grave’ Danger

Haarde’s trial, which is the first of its kind to be conducted at the Landsdomur since the court’s creation in 1905, continued this week after lawmakers voted not to interrupt the proceedings. The case against him follows parliament’s 2010 indictment, which argued the former premier failed to protect Iceland from “grave” financial danger. Haarde is also being tried for failing to prevent the island’s three biggest banks from generating debt 10 times the size of the economy.

Kaupthing Bank hf, Glitnir Bank hf and Landsbanki Islands hf failed at the end of 2008, defaulting on $85 billion in debts and plunging Iceland into a recession that lasted through the first half of 2010 and sent unemployment surging nine-fold. The broad nature of the charges against Haarde has raised questions as to whether they can withstand the rigors of a legal trial.

The case against Haarde “is problematic,” Sigurdur Lindal, a law professor at the University of Iceland who has also sat as a judge at the country’s Supreme Court, said in an interview. “Not only because of it being questionable whether there was anything that he could indeed have done to prevent a collapse, but also because the penal codes in the law on ministerial responsibility aren’t extremely clear.”

Haarde Aquitted?

Iceland’s special prosecutor investigating the role of policy makers in the crisis, Bjorn L. Bergsson, decided not to press charges against former central bank Governor David Oddsson or the former head of the Financial Supervisory Authority, Jonas Fr. Jonsson. Parliament also voted against including former Finance Minister Arni M. Mathiesen and two other ministers in the trial. A parliamentary committee had originally recommended all five be indicted.

“The indictment is phrased in a very general way, making it impossible to hold a single person liable for what took place in Iceland,” Lindal said. “It’s my opinion that Haarde will be acquitted.”

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net

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