Landsbanki: derivatives contract is valid
Yesterday, the Icelandic Supreme Court ruled in a Gift, an investment company, vs Landsbanki. In August 2008 Gift made a three months derivative contract with Landsbanki, related to the bank’s share. Three months later the bank was gone, Gift had lost and refused to pay the ISK900m, now €5,5m.
Landsbanki brought Gift to court. The ruling is that the contract is valid and Gift has to pay. Further, the court points out that Gift, being an investment company, it is a sophisticated player in the market and can’t hide behind ignorance of the realities of the contract.
This ruling will have a huge effect since many similar contracts are nesting in the old banks. Those who might be hit by it are basically all the major holding companies that operated in Iceland before the collapse. The ruling will most likely affect the fortunes of investors like Exista and Olafur Olafsson.
Here is the ruling, in Icelandic.
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