You can now read 5 articles in a month for free on Read as much as you want anywhere and anytime for just 99¢.

Iceland cleared of violations in landmark online bank case

Landsbanki, also commonly known as Landsbankinn, was the parent company of the bankrupt online Icesave.

Olivier Morin/AFP/Getty Images

Landsbanki, also commonly known as Landsbankinn, was the parent company of the bankrupt online Icesave.

BRUSSELS — Iceland on Monday won a landmark case at a European court, ending an acrimonious legacy from the collapse of its banking system more than four years ago.

The court upheld the country’s refusal to promptly cover the losses of British and Dutch depositors who had put more than $10 billion in Icesave, the bankrupt online offshoot of a failed Icelandic bank.

Continue reading below

In a judgment issued in Luxembourg, the court of the European Free Trade Association, or EFTA, cleared Iceland of complaints that it violated rules governing the protection of depositors drawn up by the European Union. While Iceland is not a member of the union, it is bound by most of its rules as a member of EFTA.

The case has attracted widespread attention because it touches on issues of cross-border banking that have been at the center of the European Union’s efforts to ensure the future stability of the region’s financial system.

The Iceland banking collapse in 2008 raised issues directly relevant to the 27-nation union.

Monday’s court ruling was a significant victory for Iceland. Unlike Ireland, Iceland declined to use taxpayer money to bail out foreign bondholders and depositors. This caused a bitter dispute with Britain, which used antiterrorism rules to take control of assets held in Britain by Icesave’s parent, Landsbanki.

Iceland’s government, in a statement by its foreign ministry after Monday’s verdict, said that Landsbanki had already paid out some $4.5 billion to Icesave depositors, covering nearly half of all initial claims by individuals, charities, and others in Britain and the Netherlands. The ministry said the bank would eventually reimburse the rest.

The case against Iceland was bought by the Surveillance Authority of the European Free Trade Association and revolved around interpretation of a EU directive requiring that deposits in the European banks be covered equally by deposit guarantee systems. Britain and the Netherlands supported the case.

Loading comments...
Want each day's news headlines delivered fresh to your
inbox every morning? Just connect with us
in one of the following ways:
Please enter a valid email will never post anything without asking.
Privacy Policy
Subscriber Log In

You have reached the limit of 5 free articles in a month

Stay informed with unlimited access to Boston’s trusted news source.

  • High-quality journalism from the region’s largest newsroom
  • Convenient access across all of your devices
  • Today’s Headlines daily newsletter
  • Subscriber-only access to exclusive offers, events, contests, eBooks, and more
  • Less than 25¢ a week
Marketing image of
Marketing image of