British, Dutch announce litigation after Icesave 'no' vote

10th April 2011, Comments 0 comments

Britain and The Netherlands said Sunday they would return to the courts to get Iceland to refund them billions of euros after voters there said "no" in a referendum to the reimbursement plan.

Iceland's government insisted it could pay back more than 90 percent of the money lost, despite most voters having rejected a deal to refund 3.9 billion euros ($5.6 billion) to the two countries, according to partial results.

"The Icelandic state has absolutely no problem in repaying its debts" resulting from the collapse of the Icesave bank, Finance Minister Steingrimur Sigfusson told reporters.

"Iceland's reserves are more than enough to cover all the payments in the coming years," he added.

A government statement released later Sunday said the referendum result did not effect plans for Landsbanki Islands, the company that operated Icesave, to begin paying refunds to its creditors -- including London and The Hague.

The first payments were expected to begin later this year and would cover nearly a third of the priority claims, the statement added.

"Moreover, latest figures on its assets indicate that the estate will be able to pay over 90 percent of claims for deposits," it said.

Earlier Sunday, Britain and The Netherlands expressed disappointment at the referendum result and said litigation was the only avenue left.

"It now looks like this process will end up in the courts," Chief Secretary to the Treasury Danny Alexander told BBC television.

"The matter is now in the hands of justice," Dutch Finance Minister Jan Kees de Jager said.

With 70 percent of ballots counted, the "no" vote led with 57.7 percent against 42.3 percent for "yes", a result that has embarrassed Reykjavik after its parliament had approved the plan with a 70 percent majority.

Around 230,000 voters were asked to decide whether to approve repaying Britain and The Netherlands the money they spent on compensating 340,000 of their citizens who lost money on Icesave. The online bank went under at the height of the global financial crisis in 2008.

This deal, the fruit of more than two years of labourious negotiations among the three nations, was considered more favourable to Iceland than a previous accord rejected with a 93 percent majority in a referendum in early 2010.

It would have allowed Iceland to repay the debt gradually until 2046, at a 3.0 percent interest rate for the 1.3 billion euros it owes The Netherlands; and at a 3.3 percent rate for the remainder owed to Britain.

But that would have come to some 12,000 euros per citizen of the 320,000-strong island nation -- before interest.

Faced with the resounding "no" vote, Britain and The Netherlands said the time for talking was over.

The matter would have to be resolved before the European Free Trade Association (EFTA) Court, they said. It plays the role of the European Court of Justice for European Economic Area (EEA) members, which include Iceland.

A negotiated outcome would have been preferable, Alexander said in London.

But he added: "We had an obligation to people in this country who'd saved with those banks. We have an obligation now to get that money back, and we will continue to pursue that until we do."

Dutch finance ministry spokesman Niels Redeker added: "The procedure (before the EFTA court) will resume its course."

Sigfusson said Iceland wanted a "rapid solution", and would cooperate in the procedure, which could last "a year to 18 months".

The referendum result also had domestic political repercussions, with the conservative opposition demanding new elections.

"The government has received a slap in the face," said opposition leader Bjarni Benediktsson.

Iceland's Prime Minister Johanna Sigurdardottir said the referendum result was a "shock" for parliament, after its endorsement of the deal, which was regarded as crucial for a country negotiating to join the European Union.

But President Olafur Ragnar Grimsson said Sunday the two referendums on the issue had given the country the confidence it had lost after the collapse of the Icelandic economy in 2008.

Giving Icelanders a chance to approve or reject both rescue plans had "strengthened democracy even more" in the country, he said.


© 2011 AFP

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