The Icelandic High Court: deposits are priority claims
The Icelandic High Court has just ruled on whether deposits are priority claims. The ruling implies that the Icelandic Emergency Act, passed on Oct. 6 2008, do not go against the constitution. A ruling that some have called ‘the ruling of the century.’
The ruling comes after several cases where creditors sought to challenge the emergency measures, passed on Oct. 6 2008, which severely diminished the recovery that creditors to to Icelandic banks can expect. These cases had already been through the Reykjavik County Court. The Icelandic High Court has now ruled, as did the County Court, confirming the legality of the emergency laws.
This is the last legal hindrance to pay-outs to creditors from the Landsbanki estate. It is expected that pay-outs can soon start, which means that the Icesave money to the British and the Dutch authorities can now be paid out.
This, however, will not solve the Icesave dispute, since the two countries claim interests since they took loans to cover the payments to their respective Icesave depositors. The UK authorities paid depositors in full, the Dutch up to €100.000. The Icesave dispute is about only the European minimum, €20.000, meaning that the two countries only stand to recover the first €20.000 on each Icesave account.
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This ruling is a heavy blow for the depositors of Kaupthing Singer & Friedlander (Isle of man) who, three years into their bank’s liquidation, have recovered 73.6% of their funds (with a further dividend expected before the end of the year) and were hoping that the guarantee given to KSFIOM by its Icelandic parent and recently upheld as valid by the Icelandic Supreme Court (after having been challenged by the Kaupthing Winding-up Committee) would kick in to enable them to recover all or most of the eventual shortfall in their liquidation. As the guarantee is currently considered as an unsecured claim, it seems that this ruling will push them further back in the queue, along with the bank bondholders and hedge funds, and reduce the value of their claim, perhaps to the point of making it once more worthless. It seems, to these particular victims of the Iceland bank disaster, that the Icelandic Court gives with one hand and takes away with the other?
anrigaut
31 Oct 11 at 7:54 pm
Sigrun,
You may also wish to read the reactions of the Landsbanki Guernsey depositors, reported in some detail, along with those of KSFIOM DAG, here: http://www.international-adviser.com/news/uk/icelandic-depositors-in-guernsey-iom-disappointed
anrigaut
1 Nov 11 at 9:31 am
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