UK and Netherlands to sue Iceland over losses
London and The Hague to take Iceland to court after country's voters reject deal to reimburse them over collapsed bank.
Last Modified: 10 Apr 2011 17:35

Iceland has said it has "no problem" repaying its debts as litigation loomed over voters' rejection of a deal to reimburse the Netherlands and Britain for the collapse of Icesave bank.

Around 230,000 voters were asked to decide on the proposal to repay the two countries money they spent on compensating 340,000 of their citizens who lost money when the online bank went under in 2008.

With 70 per cent of ballots counted, the "no" vote led with 57.7 per cent against 42.3 per cent for "yes", a result that has embarrassed Reykjavik.

"The Icelandic state has absolutely no problem in repaying its debts," Steingrimur Sigfusson, Iceland's finance minister, told a news conference on Sunday, a day after voters gave a resounding "no" to a proposed deal for repaying $5.6bn to the two countries.

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

The Netherlands and UK said the time for talking was over, and that the matter would have to be resolved before the European Free Trade Association (EFTA) Court.

"It now looks like this process will end up in the courts," Danny Alexander, Britain's chief secretary to the treasury, told BBC television.

Jan Kees de Jager, the Dutch finance minister, said: "The matter is now in the hands of justice."

'Rapid solution'

The repayment deal, laboriously negotiated among the three nations over more than two years, was considered more favourable to Iceland than a previous accord rejected with a 93 per cent majority in a referendum in early 2010.

It would have allowed Iceland to repay the debt gradually until 2046, at a three per cent interest rate for the $1.87bn euros it owes The Netherlands and at a 3.3 per cent rate for the remainder owed to Britain.

The amount worked out to some $17,280 per citizen of the 320,000-strong island nation, before interest.

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

Niels Redeker, a Dutch finance ministry spokesman, said: "The procedure [before the EFTA court] will resume its course."

Sigfusson said his government wanted a "rapid solution" to the impasse, and would co-operate with the EFTA Surveillance Authority, which monitors compliance with European Economic Area rules, regarding the court procedure, which could last "a year to 18 months".

Lee Buchheit, a US lawyer, who negotiated the deal for Iceland, noted that the authority had concluded in an earlier, preliminary report, that Iceland "had failed in its responsibilities".

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

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

Johanna Sigurdardottir, Iceland's prime minister, said she was disappointed with the result of the referendum, regarded as crucial for a country negotiating to join the European Union.

The result was a "shock" for parliament, which had approved the deal with a  70 per cent majority before it was referred to a referendum, she said.

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