New Icesave Deal Presented in Iceland Skip to content

New Icesave Deal Presented in Iceland

The new agreement between Icelandic, British and Dutch authorities on the repayment scheme of Landsbanki’s Icesave deposits in the UK and the Netherland was presented at a press conference in Iceland yesterday evening.

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Iceland’s negotiation committee at yesterday’s press conference. The committee’s chairman, Lee C. Buchheit, is the third from the left. Photo by Geir Ólafsson.

Lee C. Buchheit, chairman of the Icelandic negotiation committee, said the agreement is fair and much more beneficial for Iceland than the agreement rejected in the national referendum on March 6, 2010, Fréttabladid reports.

The main difference is that the interest rates have dropped from 5.5 percent to 3.2 percent and thus the total cost to be covered by the state dropped from ISK 162 billion (USD 1.4 billion, EUR 1.1 billion) to less than ISK 50 billion (USD 434 million, EUR 328 million).

The bankruptcy estate of Landsbanki is expected to cover the remaining amount. It is hoped that repayment will be completed in full by 2016 but if not the repayment period can be extended by 30 years at the most.

The first interest payment, ISK 26 billion (USD 226 million, EUR 171 million), will already be paid by next year, provided the new Icesave agreement will take effect. ISK 20 billion will come from the Depositors’ and Investors’ Guarantee Fund and ISK 6 billion from the state treasury.

Various legal terms are different compared to the former agreement. For example, in the case of a dispute between the negotiation parties, the trial will not take place in Britain but at the International Court of Justice in The Hague where it is guaranteed that Iceland will have a representative.

ESA, the EFTA Surveillance Authority, has filed charges against the Icelandic state because of Icesave. If the new agreement will not be approved in Iceland, it could end up before the EFTA Court.

If the court were not to rule in Iceland’s favor, the Icelandic state could be held liable and the EEA agreement might be in jeopardy, according to the estimate of the Icelandic negotiation committee.

Chairman of the Progressive Party Sigmundur Davíd Gunnlaugsson agreed that the new terms are more favorable than of the agreement rejected in the referendum, but is not prepared to comment on it further for the time being.

He suggests that the nation be given the right to vote on the new agreement as well, reasoning that it isn’t right for the Althingi parliament to have the final say as the first agreement was sent to a national referendum.

Bjarni Benediktsson, chairman of the Independence Party, said that although the new agreement is certainly more favorable than the former, it has to be determined whether it is in the nation’s best interest to close this case by negotiation given that Iceland has no legal obligation to pay back the deposits.

Minister for Foreign Affairs Össur Skarphédinsson told Morgunbladid that he doesn’t find it sensible to wait any longer with closing the agreement in light of much higher interests on loan agreements provided to other European countries in economic difficulties.

“I see this agreement draft as a certain opportunity fluttering before our eyes and I believe we should seize it before our negotiation partners pull back,” the minister commented.

The agreement will now be discussed in parliament and afterwards confirmed by the president—if he were to veto the agreement again, it could end up before a national referendum.

Click here to listen to Buchheit’s description of the new agreement (in English) on RÚV’s news magazine Kastljós and here to read more about Icesave.

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