The winding-up committees of the defunct Icelandic banks can now take termination action against individuals and companies in Iceland in spite of them being registered in foreign countries, according to a new legislation passed by parliament on Thursday.
Landsbanki. Photo by Páll Stefánsson.
At the same time, the winding-up committees’ extension to take termination action was increased from 24 to 30 months, Fréttabladid reports.
A number of executives and board members of the defunct banks moved their legal domicile to a foreign country after the banking collapse in 2008 and thereby cases against them should be filed in the respective country.
According to the newspaper’s sources, many of these people were advised to relocate their legal domicile to avoid termination action to be taken against them or to avoid being forced into bankruptcy before Icelandic courts.
However, the new legislation authorizes such actions. Winding-up committees can also sue the banks’ foreign clients who are believed to have taken part in action that can be terminated. Great financial interests are at stake for the estates of the defunct banks.
The bill was submitted following a request from the winding-up committee of Landsbanki because of a verdict in the Supreme Court of Iceland in July 2011.
The case was about a Spanish bank, Banco del Gottardo S.A., having bought a commercial paper issued by Landsbanki in early 2007 for EUR 1 million (ISK 160 million, USD 1.4 million), with the maturity date of December 29, 2008.
However, on October 3, 2008, four days before Landsbanki was taken over by the Icelandic Financial Supervisory Authority (FME), the bank bought the commercial paper back for almost the same amount.
The winding-up committee of Landsbanki wanted to terminate this action because the commercial paper was bought when it was considered clear that the bank was about to go bankrupt even though the commercial paper had not reached the maturity date.
The new owner of the Spanish bank denied this statement and demanded that the case be dismissed as its court wasn’t located in Iceland. Icelandic courts agreed with that interpretation.