Landsbanki Islands hf, an Icelandic bank that collapsed in 2008, is shielded from lawsuits by investors in the European Union after the bloc’s highest court said a national law blocking such cases against lenders under reconstruction is also valid outside Iceland.
“The moratorium granted to LBI” is allowed outside the country under EU law, the EU Court of Justice in Luxembourg said today.
Landsbanki, Kaupthing Bank hf and Glitnir Bank hf defaulted on a combined $85 billion in October 2008 after running out of cash to sustain their debt-funded expansions. The collapse plunged Iceland’s economy into its worst recession in six decades, forcing the government to seek an International Monetary Fund bailout to stay afloat.
Iceland is a member of the European Economic Area, which allows it to take part in most of the 28-nation EU’s internal market. Finance Minister Bjarni Benediktsson said this month his country hasn’t yet decided whether it can commit to an election pledge to drop its EU accession bid as it awaits the findings of a report.
The EU court case was triggered by questions from the French Cour de Cassation about the scope of the Icelandic law in a case brought by a creditor in France seeking to seize some of Landsbanki’s assets to cover their losses from the default.
The case is: C-85/12, Landsbanki Islands HF v Kepler Capital Markets SA, Frederic Giraux.