Iceland was entitled to refuse to pay immediate deposit guarantees to savers with failed online bank Icesave in Britain and the Netherlands, a European court said Monday.
The ruling is the latest twist in a bitter dispute which has clouded negotiations on Iceland’s ambitions to become a member of the European Union.
The Court of the European Free Trade Association (EFTA), which covers economic and trading relations between non-EU countries that are a part of the European Economic Area (EEA) single market and their European Union partners, was ruling on Reykjavik’s response to the collapse of the Icelandic banking sector in 2008-9.
The British and Dutch governments spent 3.9 billion euros ($5.5 billion) compensating 340,000 of their citizens who lost their savings in the collapse.
Iceland did not, and the EFTA Court upheld its approach, the court saying it had “dismissed the application” supported by London, The Hague and the European Commission.
The decision was based on three reasons — including the fact that Icelandic banking law at the time did not specify how to handle a major banking crisis of such global scale.
The ruling did not, however, call for monies already reimbursed to be clawed back.
Deals to use tax-payer money to refund the Icesave debt have been twice rejected in referendums so the assets of failed parent Landsbanki are the only way Iceland can settle the row.
In December, the group tasked with winding up Landsbanki reimbursed the first third of monies due to savers who lost money in the collapse of its Icesave — to the tune of 432 billion Icelandic kronor (2.71 billion euros, $3.64 billion).