Iceland may avoid damages claims as high as 335 billion kronur ($2.6 billion) after a European court said it didn’t break the law by refusing to compensate U.K. and Dutch depositors that held money in Landsbanki Islands hf high- yielding Icesave accounts after the bank collapsed.
The European Free Trade Association’s court today rejected the lawsuit by the EFTA surveillance authority, the agency in charge of supervising Iceland’s compliance with European rules. A defeat for Iceland may have allowed the Netherlands and the U.K. to seek damages of much as 335 billion kronur, according to International Monetary Fund estimates.
The EFTA surveillance authority sued the island in 2011 over its failings, arguing that Iceland has a duty under EU law to guarantee a minimum compensation within a time limit and how this is achieved is up to the government. The U.K. and the Netherlands ended up compensating their citizens and were demanding that Iceland repay the full amount, with interest.
Landsbanki, which had sought to attract foreign depositors through high-yielding internet accounts that saved it the trouble of opening subsidiaries abroad, collapsed in October 2008 with the rest of Iceland’s debt-laden banking industry.
The Icelandic authorities maintained that Iceland was obliged under European rules to guarantee minimum compensation of 20,000 euros ($26,900) to Dutch and British holders of Landsbanki’s high-yielding Icesave accounts.
“It is a considerable satisfaction that Iceland´s defense has won the day in the Icesave case,” Iceland’s Foreign Ministry said in an e-mailed statement. “The EFTA Court ruling brings to a close an important stage in a long saga.”
The agency checks that Iceland, Norway and Liechtenstein comply with European rules governing the European Economic Area, which consists of the three countries plus the 27-nation EU.
Ben Feiertag, a The Hague-based spokesman of the Finance Ministry, wasn’t immediately available to comment when contacted over the phone today.
Today’s ruling is binding and can’t be appealed.
The case is: E-16/11, EFTA Surveillance Authority v. Iceland.
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