Sigrún Davíðsdóttir's Icelog

Today, the EFTA Surveillance Authority, ESA, declared that it’s opening a formal investigation into the regional aid to Verne Holdings granted earlier by the Icelandic government. Verne is building a data storage centre at the Keflavik Base, previously a home to the US army force stationed in Iceland.

Verne Holdings is a company owned by the US venture fund General Catalyst, Novator, i.e. Bjorgolfur Thor Bjorgolfsson (major shareholder in Landsbanki, of Icesave fame, and the investmentbank Straumur, now in moratorium) and the UK Wellcome Trust.

The project is controversial in Iceland as many Icelanders feel that investments involving Bjorgolfsson shouldn’t receive any government aid. He is widely seen as one of those who caused the economic demise of the Icelandic banks and Iceland. Companies related to him borrowed heavily from the Icelandic banks, all of them public companies, most noticeably from the two banks where he himself was a major shareholder. His business dealings were scrutinised by the Althing Investigative Commission, giving an intriguing insight into his affairs and his Icelandic contacts.

The regional aid to Verne isn’t the only help that Verne has received from the Icelandic government, a coalition with the Left Green led by the social democrats. Earlier this year, Althingi passed a bill on tax etc for Verne. The given reason was that this had been done earlier regarding major foreign investment in Iceland. However, the Verne investment is nowhere near the scale of projects previously given such treatment. A few weeks later, Althingi passed new law setting out the general framework for foreign investment in Iceland. The new law is meant to put an end to laws on specific companies. The question still remains why Verne got its law when it was clear that there was a general framework in the making.

But now ESA has stepped in. There will be many in Iceland who think that it’s as well there is an independent organisation keeping an eye on Iceland in case the atavistic urge to give a helping hand to a friend gets too strong.

Follow me on Twitter for running updates.