Today the EFTA Court in Luxembourg heard oral arguments in the so-called Icesave case. The case was brought before the Court by the EFTA Surveillance Authority, claiming that Iceland had breached its obligations according to the EEA Deposit Guarantee Directive, as Iceland‘s gurantee scheme had not paid depositors in the London and Amsterdam branches of the Icelandic bank Landsbanki in the wake of the banking crash that occured in October 2008.
Iceland‘s lead counsel in the case was Tim Ward QC, a UK Barrister. He argued that the case brought by the Authority was without merits:
“The Authority's argument imposes huge financial obligations upon the Contracting States – obligations that may be triggered at times of economic crisis when the States can least afford it, and which serve to link the liabilities of banks to the liability of the State itself. There is nothing to suggest that the Contracting Parties intended to assume any such burden.”
At the hearing the EU Commission and the Authority were supported by the British and Dutch governments, arguing that the State was obliged to ensure the Deposit Guarantee Scheme paid out, no matter how severe the financial crisis. Norway and Liecthenstein (the other EFTA states) sided with Iceland on the subject.
Iceland also argued that its measures during the 2008 crash actually made sure that all depositors in the Icelandic banks will receive all their deposits. This was made possible by changing the ranking of such claims in case of winding up of the banks, securing distributions ahead of general unsecured creditors. This has proven to be a necessary and succesful measure.
The EFTA Court case is an infringement case, where the Authority seeks a general declaration from the Court. No claims are made against Iceland for immidiate payment of any deposits or funding of its deposit insurance scheme.
It is expected that the EFTA Court will deliver its ruling before the end of the year.
For further information, see http://www.mfa.is/tasks/icesave