State of Competition in Iceland “Grave” Says Regulator

Alþingi parliament of Iceland

The Icelandic Competition Authority is not equipped to perform core duties due to budget cuts, according to its leadership. Funding has decreased by 20 percent in the last decade, while economic activity in the country has increased by around 40 percent.

As Alþingi, the Icelandic parliament, debates a 2024 budget proposal, the Authority has submitted a comment on the state of its funding, calling the competition situation “grave”, Heimildin reports. The comment is signed by chairman Sveinn Agnarsson and director Páll Gunnar Pálsson. They warn that due to insufficient funding, the Authority can’t carry out its responsibilities according to law. As a result, they’ve had to prioritise and let important categories fall by the wayside. Despite a significant growth in the economy, the Authority now employs fewer people than it did in 2014, while its budget has not kept up with rising costs and wages. “At the same time, important new tasks have been added, while demands have increased, for example regarding the investigation of mergers,” they write. “These developments have gone beyond our tolerance limit.”

Lack of competition damaging to small economies

The Competition Authority goes on to argue that cutbacks to its budget are inconsistent with the reality that competition in many important Icelandic markets is lacking. The Authority has concluded many investigations that support this, many of whom have been confirmed by court rulings. Such hindrances to competition can be especially damaging in small economies like Iceland’s. Promoting competition would be the right response to the current economic situation, the Authority argues, with inflation at 8 percent. “In many of our neighbouring countries, governments have made efforts to strengthen antitrust authorities,” is stated in the comment.

In the wake of the 2008 financial crash, the interconnectedness of the Icelandic business sector became all too apparent. The Iceland’s Competition Authority subsequently warned of threats to future competition as corporate debt was being restructured and the economy slowly recovered. In the years since, the Authority has intervened in a number of cases, including in the fishing industry and the air travel sector.

Icelandic State Acknowledges Fair Trial Violations in Banking Collapse Convictions

The Icelandic state has acknowledged that five Icelanders who were sentenced in the aftermath of the 2008 banking collapse did not receive a fair trial. The European Court of Human Rights was set to rule on the five cases this morning but has struck the applications out of its list of cases as a result of friendly settlements reached between the Icelandic state and the defendants.

According to a press release from the ECHR, the Icelandic state will pay Sigurjón Þorvaldur Árnason, Ívar Guðjónsson, Sigurþór Charles Guðmundsson, Margrét Guðjónsdóttir and Karl Emil Wernersson €12,000 each in damages and cover any costs incurred. In light of the state’s acknowledgement, the applicants have the possibility of applying to reopen their cases.

The cases concern the applicants’ criminal convictions related to the 2008 financial crisis and its aftermath in Iceland. They were convicted for a variety of financial offences, including abuse of power and negligence of duties related to their high-level positions in the banking industry. The applications were lodged with the European Court of Human Rights on various dates in 2016 to 2018.

Relying on Article 6 of the European Convention on Human Rights (right to a fair trial), the applicants complained of the manner in which the Supreme Court of Iceland overturned or partially overturned their acquittals, or, in Sigurjón and Ívar’s cases, various aspects of the criminal proceedings against them.

Central Bank Was Wrong to Grant Loan During Banking Collapse

Central Bank of Iceland

Central Bank of Iceland Director Már Guðmundsson says that the institution made the wrong decision when it granted a loan to Kaupþing Bank during the banking collapse, RÚV reports. The Central Bank has published a report on the controversial ISK 75 billion ($605m/541m) loan, which it granted to Kaupþing Bank just days before it went bankrupt in the 2008 economic crisis. The report states, however, that no laws were broken in the granting of the loan.

The Central Bank of Iceland granted Kaupþing Bank an ISK 75 billion ($605m/541m) loan on October 9, 2008, just before emergency trading restrictions were put in place by the government. Kaupþing went bankrupt only two days later, leading to a loss for the Central Bank purportedly amounting to ISK 35 billion ($282m/€252m). The decision to grant the loan proved controversial and the reasoning behind it opaque.

No written documentation

The main objective of the recently published report was to clarify the reasoning behind the loan. It has been in the works since 2015 and its release was repeatedly postponed. The report states that information on the loan is lacking, making it difficult to determing the reasoning behind it. Notably, there is no written documentation that Kaupþing requested a loan in the first place. There is also no evidence that the Central Bank’s Board of Directors approved the loan. There is, however, no doubt that the decision was made by the Board in consultation with then-Prime Minister Geir H. Haarde.

Geir was highly criticised for his response to the banking collapse and tried by the High Court in Iceland, which convincted him on one the four charges, namely, not having held cabinet meetings on important matters in the lead-up to the economic collapse. A recorded telephone conversation reveals that Geir did not expect the loan granted to Kaupþing to be repaid.

Hindsight and lessons

Although hindsight reveals that granting Kaupþing a loan was the wrong decision, Már asserted that it was not clear at the time the decision was made. The loan would have been justified had it succeeded in rescuing the bank. “It’s not always appropriate to use the metrics of information of later times when assessing particular decisions. In the financial whirlwind that raged around the world then, banks and central banks were fighting to stay afloat and other authorities came to their aid.”

Már stated that two important lessons can be learned from the situation. The first is that regulations on the granting of emergency loans need to be better clarified. The second is that shares in foreign banks are not suitable collateral for such loans, as it can quickly become worthless in a financial crisis.

‘Pots and Pans Revolution’ Key Case Study in EU Project on Populism

The Women’s Day Off protest in 2016 at Austurvöllur square.

The City of Reykjavík has received a grant of ISK 400 million [$32,642,600; €29,154,411] to participate in a three-year study entitled “Populism and Civic Engagement,” or PaCE. The project is one of many sponsored by Horizon 2020, the largest ever research and innovation-driven programme to be sponsored by the EU.

“Across Europe, there is a rise of political movements that claim to challenge liberal elites and speak for the ‘ordinary person’ – movements that can be loosely categorised as ‘populist,’” reads the project abstract. “Many of these movements have undesirable tendencies. The Populism and Civic Engagement project (PaCE)…aims to combat the negative tendencies of populist movements, to build upon the lessons of positive examples (such as Reykjavik), and hence play a part in constructing a firmer democratic and institutional foundation for the citizens of Europe.”

Indeed, the project will use Iceland’s so-called ‘Pots and Pans Revolution,’ which took place in the wake of the country’s 2008 financial crash, as a case study. This movement had some populist characteristics but—in contrast to similar movements in Hungary, Poland, Turkey, the UK, and the US—was ultimately the basis for increased liberalisation in Iceland and improvements to Icelandic democracy, such as changes to the constitution and increased accountability for politicians.

Seven international partners from Austria, Belgium, Bulgaria, Finland, Germany, Ireland, and the UK will be collaborating on this research project alongside the City of Reykjavík and the Iceland-based Citizens Foundation. PaCE will conclude in January 2022.

 

Supreme Court Rules in Favour of Press

Iceland’s Supreme Court has ruled entirely in favour of news outlet Stundin and media company Reykjavík Media in a media injunction case that has been ongoing since October 2017. Kjarninn reports that on Friday, the Supreme Court rejected all claims made by Glitnir HoldCo Ltd, the corporation that oversees the remaining assets of Glitnir bank. The first of these claims was that the journalists involved in the case should be legally compelled to share evidence that might have bearing on it, even if they might, in the course of their testimony, inadvertently reveal information about confidential sources. The company’s secondary claim was that the information reported on by Stundin and Reykjavík Media—information that was obtained from leaked bank documents—should be protected by bank confidentiality.

Friday’s ruling did not address the validity of the original injunction, which was struck down by the Court of Appeals, or Landsréttur, in October 2018. At the time, Landsréttur ruled that Stundin did not have to give up the Glitnir files. It also found that further reporting from the files couldn’t be forbidden. In its ruling, Landsréttur stated that Stundin’s coverage had focused on the business dealings of then prime minister and current Minister of Finance Bjarni Benediktsson, as well as people connected to him, and that this information was undeniably important to the public, especially leading up to elections. It was Glitnir HoldCo Ltd’s contention that the files could be used to report on individuals’ financial affairs which were not matters of public import, a claim that Landsréttur rejected. In that Glitnir HoldCo Ltd appealed Landsréttur’s decision to the Supreme Court, however, the injunction has remained in place since.

Protection of sources is of the highest importance

When the Supreme Court agreed to take the case in November 2018, it did so with the understanding that it would not be reviewing the validity of the initial media injunction, but rather the validity of Glitnir HoldCo Ltd’s assertion that Stundin and Reykjavík Media should not be allowed to use the information found in the leaked files in their reportage and should turn the Glitnir files back over to the holding company. Glitnir HoldCo Ltd’s claims were based on their belief that the data in the files should be protected by bank confidentiality.

The Supreme Court rejected all of the company’s claims. The main of these was that both the District Court and Landsréttur were wrong not to compel three known witnesses, all journalists for the media outlets, to answer questions related to the existence, content, and custody of the leaked bank documents. The company maintained that the courts’ decision not to do this stripped it of its legitimate right to evidence—namely, how the documents were leaked to the media in the first place. The company claimed that being denied this evidence was grounds for automatic dismissal of the first District Court case.

The Supreme Court rejected this claim, stating that compelling the journalists to testify put their source(s) at risk, since there was a significant likeliness that during such testimony, journalists would inadvertently share the names of, or information about, their source(s). With its ruling, then, the Supreme Court determined that the importance of protecting sources takes precedence in such cases.

Public figures necessarily have less right to privacy

On the matter of bank confidentiality, the Supreme Court found it significant that the original injunction was levied on October 16, 2017—just 12 days before parliamentary elections—which made it all the more important that media coverage related to elected officials should not be any more restricted than was absolutely necessary. It noted, however, that the outlets’ coverage was primarily related to the former prime minister’s dealings with Glitnir bank in the lead up to the failure of the Icelandic banks in 2008 and that the tenor and focus of the coverage has largely been the same from the beginning, even after the injunction went into effect.

In its judgement, the Supreme Court noted that is generally understood that individuals involved in public offices have less claim to privacy and confidentiality than private citizens. The role of the media in a democratic society must be considered in such cases, it continued, as must the relevance of the topics and dealings that were under discussion in this instance. “In light of the enormous overall impact that the banking collapse had on Icelandic society, it’s only natural that a reckoning like this would be conducted in the media and the public discussion that usually follows,” read the judgement. The business dealings of former prime minister Bjarni Benediktsson fall within the purview of open public debate, concluded the Supreme Court. Moreover, the business dealings of people close to Bjarni are also open to public discussion, as they are “so interwoven with” those of Bjarni’s that “they should not be separated.”

Finally, the court found that prior to the injunction, all media coverage of parties whose connection to Bjarni Benediktsson was not clear “immediately” was focused on parties who were publicly prominent in the run-up to, and wake of, the 2008 banking collapse and who, therefore, enjoy less privacy and confidentiality than the average private citizen. This was further evidenced by the fact that the media outlets’ coverage of these parties and their part in the 2008 banking collapse has not needed to be adjusted in any meaningful way following the injunction.

The damage is “irreversible”

 Although today’s Supreme Court ruling was in the media’s favour, however, Stundin editors Ingibjörg Dögg Kjartansdóttir and Jón Trausti Reynisson and Reykjavík Media Editor-in-Chief Jóhannes Kr. Kristjánsson expressed dismay at the fact that although “Freedom Has Won,” in the end, the effect of the 522-day media injunction still had what they consider to be a seriously deleterious effect on public discourse. For one, it “…without a doubt, had a deterrent effect on people in our society who hold information or data that has significant relevance to the public, people who want to come to the media in the name of justice,” they wrote in a public statement on Facebook.  They continued by saying that the possible legal costs associated with losing a case like this are not enough to deter unlawful injunctions from being made about topics that are of vital public importance. Regardless of the outcome of the case, they concluded, “[t]he fact remains that there has been a violation of the public’s right to information and when you really think about it, the right to free elections.”

Ingibjörg Dögg repeated this sentiment in an interview with RÚV, wherein she said that although she and her publication felt a sense victory with the ruling, the entire situation remained “incredibly sad.” Given the relevance of the information that was being published had to the 2017 elections, the damage that this injunction did is irreversible.

Former PM Haarde Takes Position on Board of World Bank

Former Prime Minister Geir H. Haarde will step down as Iceland’s ambassador to the United States on July 1, 2019 and will take up a position as a representative for the Nordic and Baltic states on the board of the World Bank, Kjarninn reports. Geir’s new position was announced on the website of the Ministry for Foreign Affairs on Friday.

The announcement came almost ten years to the day since Geir notified the nation of the gravity of Iceland’s financial situation in a televised address. He concluded his statement with the words “Guð blessi Ísland” (May God bless Iceland). This marked the beginning of the economic collapse and in the next few days, Iceland’s banks crashed one by one.

Geir was later tried by the High Court in Iceland for violations of the constitution. This was a historic trial, marking the first time an Icelandic minister was indicted for misconduct in office.

He was acquitted of three charges, but was convicted of one, namely, not having held cabinet meetings on important matters in the lead-up to the economic collapse.

The majority opinion in the conviction stated that when Geir became aware of the risk to which the Icelandic banks were exposed, which could jeopardize financial stability in the country and thus the position of the state treasury, he should have realized that it had to be immediately investigated whether this information was true. Information on impending danger which Geir knew about, or was bound to know about, should have been reason for him as prime minister to discuss it at a cabinet meeting, if not immediately then as soon as possible.

Geir later referred the case to the European Court of Human Rights on the grounds that he had not received a fair trial, and also stating that the Icelandic parliament’s decision to press charges against him was made on political grounds. The court ruled, however, that Geir’s rights were not violated in the landmark case.

Geir has been Iceland’s ambassador to the US since 2015. He will be succeeded by Bergdís Ellertsdóttir, who is currently Iceland’s permanent representative to the United Nations.