Iceland Responds to the Reply to its Defense in Icesave Skip to content

Iceland Responds to the Reply to its Defense in Icesave

icesave-logoIceland served the EFTA Court with its Rejoinder in the Icesave case on Friday. In the Rejoinder Iceland responds to the arguments put forward by the EFTA Surveillance Authority in its Reply to Iceland’s Statement of Defense, submitted to the Court in early March.

This completes the second round of the written procedure of this case. A third round is expected to commence with the European Commission submitting its Statement of Intervention on May 24. Written observations by other third parties are due by May 15.

A press release from the Icelandic Ministry for Foreign Affairs (in English) reads as follows:

The Reply of the EFTA Surveillance Authority

The short Reply doesn’t deal with Iceland’s case in any detail and doesn’t challenge Iceland’s account of certain key aspects of the factual background.

Instead the Authority has mischaracterized Iceland’s case, it has failed to engage with the central issue raised by the Defense, and it has sought to evade the consequences of its own argument.

The Authority’s claim is that the Icelandic Government is in breach of the Deposit Guarantee Directive by failing to ensure minimum compensation to depositors under the Directive.

However, the emphasis of the Authority seems to have shifted from what it claimed in the original Application to the Court. According to its Reply, State funding is not required by the Directive, but not impossible.

The Directive does not specify how the Deposit Guarantee Scheme is to be funded. Therefore, the Authority seems to conclude that Iceland was free to take any number of possible measures to secure the result.

Iceland’s Rejoinder

In view of the Government, this position is highly inconsistent with the Application lodged with the EFTA Court. The State cannot “ensure” that a Deposit Guarantee Scheme always pays out other than with its own resources.

The Authority completely ignores the economic reality that a Deposit Guarantee Scheme cannot protect in all circumstances. According to the Authority’s conclusion, a heavy burden is placed on the States that is not set out in the Directive.

According to an analysis submitted with Iceland’s Defense, the findings of which are not challenged by the Authority, a system-wide banking crisis, that would force the DGS in each Member State of the EU to pay out funds corresponding to all reimbursed deposits, would on average equal 83 percent of gross domestic product (“GDP”).

The costs though vary widely between countries, with the shortfall amounting to up to 372 percent of GDP.

In Iceland’s view, the Authority’s argument accordingly exposes the EU Member States to a vast potential liability, which could materialize at the worst given time, viz. in systemic financial crisis.

The consequences of such a result may prove to be exceptionally serious. Iceland contends that it would require the clearest possible language in a Directive to impose an obligation requiring State funding in a time-span far beyond capabilities of most Governments.

Iceland’s full rejoinder can be found here.

Click here to read more about Icesave.


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