Translation of Request for an Advisory Opinion from the Supreme Court of Iceland
Case E-17/11. Doc.: E-17/11/1
Original language: Icelandic
Thursday, 15 December 2011
Aresbank S.A.
(Bjarki H. Diego, Supreme Court Attorney)
v
Landsbankinn hf.
(Erlendur Þór Gunnarsson, Supreme Court Attorney)
the Financial Supervisory Authority and
Iceland
(Jóhannes Karl Sveinsson, Supreme Court Attorney)
No. 169/2011
EFTA Court. EEA Agreement. Advisory opinion.
The Spanish bank A brought an action against L hf. in order to recover a financial claim, directing a
claim for compensation against F and Í as a secondary measure. The District Court acquitted L hf., F
and Í of A‟s demands; A appealed against the judgment to the Supreme Court, which on its own
initiative took a decision to have an advisory opinion sought from the EFTA Court on matters which it
specified in further detail, particularly as regards the interpretation of the term „deposit‟ in Article 1
(1) of Council Directive 94/19/EC on deposit-guarantee schemes.
Decision by the Supreme Court of Iceland
The decision on this case is taken by Supreme Court Judges Ingibjörg Benediktsdóttir, Markús
Sigurbjörnsson and Þorgeir Örlygsson.
The appellant referred the case to the Supreme Court on 21 March 2011. The appeal is against
the Judgement by the Reykjavík District Court of 22 December 2010, in which the defendants were
acquitted of the applicant‟s demands. In the writ of appeal, the appellant requested that the Supreme
Court request an advisory opinion from the EFTA Court regarding the term „deposit‟ in Council
Directive 94/19/EC on deposit-guarantee schemes, and declared its intention of submitting, in its
testimony to the Supreme Court, proposals on questions to be submitted to the EFTA Court. The
appellant later withdrew this request.
On its own initiative, the Supreme Court summoned the parties to the case to a session of the
court on 14 December 2011 at which they were given an opportunity to express their views on
whether an advisory opinion should be sought from the EFTA Court. There, the appellant reiterated its
position that there was no need to seek an advisory opinion from the EFTA Court regarding the
dispute between the parties. It argued that the Supreme Court had, in its recent judgments, interpreted
the meaning of the term „deposit‟ in the aforementioned Directive; this interpretation (it argued) had
significance for the resolution of the dispute between the parties in the present case, and for this reason
there was no need to seek the opinion of the EFTA Court.
2
The defendants declared their position, which was that there was no need to seek an advisory
opinion from the EFTA Court because the term „deposit‟ in the sense of the aforementioned Directive
was of no significance for the resolution of the dispute between the parties.
I
The background to this case is that in September and October 2008, great upheaval took place
on the global finance markets abroad, which had a profound effect on the operations of Icelandic
financial institutions. The outcome was that the country‟s three largest commercial banks proved to be
incapable of tackling the problems threatening them in the early days of October 2008. Partly in view
of this, the Althingi (parliament) approved a bill on the evening of 6 October 2008 which became Act
No. 125/2008, on the Authority for Treasury Disbursements due to Unusual Financial Market
Circumstances, etc. Article 5 of this Act, which became Article 100 a. of the Financial Undertakings
Act, No. 161/2002, authorised the defendant, the Financial Supervisory Authority, to assume the
powers of a shareholders‟ meeting in a financial undertaking in order to take decisions on necessary
measures, including the authority to restrict the board‟s power of decision, to dismiss the board in part
or in its entirety, to take over the financial undertaking‟s assets, rights and obligations, in their entirety
or in part, or to dispose of such an undertaking, in its entirety or in part, including the decision to
merge it with another undertaking.
The legal provision cited above also authorised the defendant, the Financial Supervisory
Authority, to assign all rights to the degree necessary in such instances. Provision was also made
authorising the defendant, when deciding to dismiss the board of a financial undertaking, to appoint a
five-person resolution committee which would exercise all the authorisations of the board according to
the Limited Companies Act. Article 6 of the Act added a new first paragraph to Article 103 of the Act
No. 161/2002, reading as follows: “In dividing the estate of a bankrupt financial undertaking, claims
for deposits, pursuant to the Act on Deposit Guarantees and an Investor Compensation Scheme, shall
have priority as provided for in Article 112, Paragraph 1 of the Act on Bankruptcy (etc.)”.
II
According to the evidence in the case, the appellant is a Spanish Bank owned by the Central
Bank of Libya. It holds a licence to operate as a commercial bank under Spanish Law, but in
accordance with its articles of association, it does not accept deposits from the general public. It
operates on what is known as the „interbank market‟ and raises capital for this purpose from
contributions from its owner and through the issue of financial instruments.
The appellant owned funds in Landsbanki Íslands hf. in summer and autumn 2008. The legal
framework involved regarding these funds was that the appellant paid to Landsbanki Íslands hf. EUR
15,000,000 on 6 June 2008, EUR 15,000,000 on 7 August the same year and finally GBP 7,000,000 on
16 September the same year. It was agreed between the parties that Landsbanki Íslands hf. would
repay the sums in question with interest specified in further detail on due dates that were fixed in
advance. The evidence in the case includes „SWIFT‟ (Society for Worldwide Interbank Financial
3
Telecommunications) notifications regarding the transactions between the appellant and Landsbanki
Íslands hf. Regarding their transaction on 6 June 2008, it is revealed that the appellant offered to lend
Landsbanki Íslands hf. EUR 15,000,000 for six months at 5.2% interest; this is worded: “WE CAN
LEND U 6MTH EUR 15 MIOS AT 5.20 IF SUIT FOR U FRIEND.” Landsbanki Íslands hf. made a
counter-proposal allowing for an interest rate of 5.17% for the same period, worded as follows: “CAN
WE MEET AT 5.17?” The parties finally agreed on an interest rate of 5.18%; this was worded: “OK I
LEND U EUR 15 MIOS AT 5.18 FM 10/6 TILL 10/12/08.”
The next transaction took place on 7 August 2008, when the appellant offered Landsbanki
Íslands hf. “3 MTH EUR DEPO” in the amount of “EUR 15 MIO.”, i.e. EUR 15,000,000 for three
months. Landsbanki Íslands hf.‟s reply to this was that it would pay 5.0% interest. A representative of
the appellant replied to this proposal in the following words: “I HAVE 15 MIO FOR U AT 5.02 IF IT
SUITS U.” The parties then agreed that Landsbanki Íslands would accept EUR 15,000,000 on 11
August 2008, and would repay this sum with 5.02% interest on 12 November the same year. The third
transaction between the appellant and Landsbanki Íslands took place on 16 September 2008, and the
communication took place in Spanish. The appellant offered to lend Landsbanki Íslands hf. GBP
7,000,000 at 6.2% interest from 18 September 2008 to 18 March 2009; this was worded: “7,000,000
STG at 6.20 DEL 18/9/2008 AL 18/3/2009.” It was stated that the sum was to be paid to a bank
(specified in further detail) in London.
According to the evidence submitted in the case, the appellant‟s funds at Landsbanki Íslands
hf. were not placed in a special account there in the appellant‟s name. Landsbanki Íslands hf. did not
issue any special documentation to the appellant for the receipt of the money, and no insurance
premiums on it were paid to the Depositors‟ and Investors‟ Guarantee Fund. These sums of money
were entered as loans in the books of Landsbanki Íslands hf. It can be seen from the evidence in the
case that the transmission of the money from the appellant to Landsbanki Íslands hf. took place
through the agency of other foreign banks.
III
On 7 October 2008, the defendant, the Financial Supervisory Authority, exercised its powers
under Article 100 a. of the Act No. 161/2002 (cf. Article 5 of the Act No. 125/2008) and assumed the
powers of a shareholders‟ meeting in Landsbanki Íslands hf.. At the same time, the board of the bank
was dismissed and a resolution committee was appointed. A new bank was established on the basis of
the one that had collapsed; this bore the name of the older bank with the addition of „Nýi‟ [„New‟] in
front of it. This bank is the defendant in the present case; it is now called Landsbankinn hf. The
financial basis of the new bank was largely laid by the transfer to it of assets from the older bank, with
financing from the Treasury as well. On the other hand, the new bank took over certain obligations of
the older one, consisting primarily of deposits in the bank in Iceland.
At the same time, the defendant, the Financial Supervisory Authority, took comparable
measures concerning Glitnir Bank hf. and Kaupthing Bank hf. Subsequently, Landsbanki Íslands hf.
4
was granted a „debt moratorium‟ (permission to effect financial restructuring) under a ruling by the
Reykjavík District Court of 5 December 2008. Under the Act No. 44/2009, amending some of the
provisions of the Act No. 161/2002, the bank was accepted for winding-up proceedings, which were to
begin on 22 April 2009, when the legislation took effect. On 29 December 2008, the Reykjavík
District Court appointed a winding-up board, which is handling claims against the bank. This issued
an authorisation to the company‟s debt-collectors to call in debts on 30 April 2009, and the period
allowed for filing claims ended on 30 October the same year. A large number of parties, the appellant
among them, filed claims in response to this invitation.
As is stated in the judgment against which appeal has been lodged, the Financial Supervisory
Authority decided on 9 October 2008 that New Landsbanki Íslands hf. should, amongst other things,
take over obligations „of the branches of Landsbanki Íslands hf. in Iceland due to deposits1 from
financial undertakings, the Icelandic Central Bank and other customers.‟ The Financial Supervisory
Authority did not define what was meant by the term „deposits‟ in its decision.
In its letter to Landsbanki Íslands hf. of 11 November 2008, the defendant, the Financial
Supervisory Authority, announced that in response to a suggestion, its board had discussed what effect
decisions regarding the disposal of assets and liabilities of Landsbanki Íslands hf., Glitnir Bank hf. and
Kaupthing Bank hf. would have on a specific part of their financing, namely as regards so-called
money market loans/deposits2 from financial undertakings. The letter stated that „various materials had
been obtained from the banks and their auditors regarding the [treatment of this financing]3 on the
operations of the banks.‟ The letter went on to state that at a meeting of the board of the Financial
Supervisory Authority that same day, it had been „decided to reiterate that obligations in respect of
such loans from financial undertakings are not transferred to the New Glitnir Bank hf., New
Landsbanki Íslands hf. (now NBI hf.) and New Kaupthing Bank hf. by the decisions referred to.‟ The
1
The Icelandic word translated as „deposit‟ here is innlán (literally „in-loan‟); its structure, like that of the
English deposit, suggests an element of movement (the result of an act of depositing) in the provenance of the
money referred to. The Icelandic word innstæða (literally „in-standing‟) is also used (e.g. in the available
Icelandic translations of the Council Directive 94/19/EC) to translate deposit; as it lacks the element of
movement which is present in innlán and deposit, this is also used in the static sense of credit balance. In some
instances this opens the possibility of translating innstæða fjármálafyrirtækja either as deposits from financial
undertakings or as credit balances of (or: owned by) financial undertakings without any tendentious intention.
Where official or semi-official translations of original Icelandic documents referred to are available, I have
copied the relevant passages as published; elsewhere, I have tried to maintain clarity as far as possible. Where
rigid consistency in translating the same Icelandic word in the same way in English, occasionally even within the
same sentence or paragraph, may colour the interpretation, I have either adopted the other variant in English
(credit balance or deposit) or else added footnotes calling attention to a possible alternative. [Translator‟s note.]
2
The original text here reads svokölluð peningamarksinnlán/innlán, which would translate as so-called money
market deposits/deposits. This appears to be an error: the expression svokölluð peningamarkaðslán/innlán „socalled money market loans/deposits‟ occurs several times in the District Court Judgement, including passages
referring closely to the Financial Supervisory Authority‟s discussion on 11 November 2008, and I have therefore
translated these words here in conformity with the other occurrences. In other words, both „loans‟ and „deposits‟
are to be construed with the determinant „money market‟. [Translator‟s note.]
3
This is a literal translation of the original Icelandic words meðferð þessarar fjármögunar; the meaning is not
immediately clear. It is possible that meðferð („treatment‟) is a copyist‟s error for, e.g. áhrif („influence‟), or that
some other words have been omitted. [Translator‟s note.]
5
auditors involved in the final preparation of the foundation balance sheets were therefore asked to bear
this specially in mind, and it was „also requested that the resolution committees and boards of the
companies should observe the same instruction since it is important that there should be uniformity in
the execution of this matter.‟ Finally the Financial Supervisory Authority‟s letter said it should be
stated that „ordinary deposits from financial undertakings in current and saving accounts in the bank‟s
systems‟ would be transferred to the new banks, like other deposits.
On 19 November 2008 the appellant wrote the Financial Supervisory Authority a letter
requesting the reasons why the board of the authority had proposed that so-called money market
deposits should not be transferred to the three new banks; in the letter this is worded as follows: „…
the basis upon which it appears that the FME Board has proposed that obligations in relation to money
market deposits will not be taken over by the New Banks (i.e. New Landsbanki, New Kaupthing and
New Glitnir).‟ The letter of 21 November 2008 from the Financial Supervisory Authority to the
appellant stated the authority‟s position that it was not correct that Landsbanki Íslands hf.‟s obligations
towards the appellant should be taken over by New Landsbanki Íslands hf.
IV
The appellant submitted this case [by writs served] on 26 and 27 February 2009. It sued, as a
principal measure, Landsbanki hf. for the payment of the sums of money which, according to the
foregoing, it had paid to Landsbanki Íslands hf. As a secondary measure, the appellant directed its
demands against the defendants, the Financial Supervisory Authority and Iceland (the Icelandic State)
for the payment of the same sums in the event that the principal defendant were to be acquitted of its
demands. The secondary demand is based on the view that the appellant is entitled to claim
compensation from the secondary defendants because, due to their actions, it „was prevented from
receiving its deposits.‟
In accordance with Supreme Court Judgment of 13 October 2009 in Case No. 472/2009, two
assessors were appointed by the District Court on 15 February 2010 to submit a written and reasoned
reply to ten detailed questions regarding deposit transactions, money market deposits and interbank
loans. Their statement was submitted to the District Court on 23 April 2010. The conclusion reached
by the Court in its judgment, against which this appeal has been lodged, was that the transactions
between the appellant and Landsbanki Íslands hf., which have been described above, constituted
transactions between two banks in the form of an interbank loan, and were not regarded as deposit
transactions in the sense of the third paragraph of Article 9 of the Act No. 98/1999, on Deposit
Guarantees and an Investor Compensation Scheme. Accordingly, the defendants were acquitted of the
appellant‟s demands.
V
An account is given above of the legal framework of the relations between the appellant and
Landsbanki Íslands hf., with a description of the foundation on which the appellant bases its claims
6
against the defendants. The third paragraph of Article 9 of the Act No. 98/1999 reads: „ “Deposit”4
pursuant to Paragraph 1 of this Article refers to any credit balance resulting from financial deposits or
transfers in normal banking transactions, which a commercial bank or savings bank is under obligation
to refund under existing legal or contractual terms. However, this guarantee does not extend to bonds,
bills of exchange, or other claims issued by a commercial bank or savings bank in the form of
securities.‟ The Act No. 98/1999 was enacted mainly for the purpose of fulfilling Iceland‟s contractual
obligations in international law under the EEA Agreement (cf. Directives 94/19/EC on depositguarantee schemes and 97/9/EC on investor-compensation schemes). Article 1(1) of the former
Directive, No 94/19/EC, defines „deposit‟ as “any credit balance which results from funds left in an
account or from temporary situations deriving from normal banking transactions and which a credit
institution must repay under the legal and contractual conditions applicable, and any debt evidenced
by a certificate issued by a credit institution.”
Under Article 3 of the Act No. 2/1993 on the European Economic Area Agreement, laws and
regulations are to be interpreted, as far as possible, in conformity with the EEA Agreement and the
rules based thereon. It follows from the appellant‟s presentation of its case that the resolution of the
dispute between the parties depends on the interpretation of the term „deposits‟ in the third paragraph
of Article 9 of the Act No. 98/1999. With reference to this, and taking all the foregoing into account,
the court considers the correct course of action to seek an advisory opinion from the EFTA Court
regarding the interpretation of the term „deposit‟ in Article 1(1) of Directive 94/19/EC on depositguarantee schemes; the questions will be worded as in the Decision below.
No legal costs will be awarded at this stage of the case.
Decision:
An advisory opinion is sought from the EFTA Court on the following:
1. Can funds which bank A delivers to bank B, and which B must repay A on a predetermined
date, together with interest which had been pre-negotiated, be regarded as a deposit in the
sense of Article 1(1) of Directive 94/19/EC on deposit-guarantee schemes, even though the
funds, when they reach B, are not placed in a special account in A‟s name, B has not issued
any special documents to A recording the receipt of the funds and has not paid premiums in
respect of the funds to the Depositors‟ and Investors‟ Guarantee Fund and the funds have not
been entered as a deposit in B‟s books? It is assumed in this question that banks A and B each
hold operating licences as commercial banks in different States in the European Economic
Area.
2. When the first question is answered, is it of any significance whether bank B‟s State of
domicile has availed itself of the authorisation of Article 7(2) of Directive 94/19/EC, on
4
This is an instance of where, in the original text, the Icelandic word innstæða is used to translate deposit and, in
the next line, credit balance.[Translator‟s note.]
7
deposit-guarantee schemes (cf. item 1 of Annex I) to exclude deposits by financial institutions
from deposit guarantee?
3. When the first question is answered, is it of any significance whether bank A, which holds a
licence to operate as a commercial bank according to the laws of the Contracting Party in
whose territory it operates does not exercise the authorisation it has, under its operating
licence, to accept deposits from the general public, but finances its operations by means of
contributions from its owner and through the issue of financial instruments, subsequently reloaning that money on the so-called interbank market?
Judgment of the Reykjavík District Court, 22 December 2010.
This case, which was accepted for judgment on 24 November last, has been brought before the
Reykjavík District Court by Aresbank, Castellana, 257 Madrid, Spain, principally against NBI hf., Austurstræti
11, Reykjavík, and as a secondary measure against the Financial Supervisory Authority, Suðurlandsbraut 32,
Reykjavík and Iceland, Sölvhólsgata 7, Reykjavík, by a writ of summons, service of which was recorded by
signature on 26 and 27 February 2009.
The demands made to the court by the plaintiff are that the principal defendant, NBI hf., be judged to
pay a debt of EUR 30,000,000 with 5.18% interest on EUR 15,000,000 from 6 June 2008 to 10 December 2008
and with 5.02% interest on EUR 15,000,000 from 7 August 2008 to 12 November 2008. Arrears interest is also
claimed under the first paragraph of Article 6 of the Interest and Indexation Act, No. 38/2001, on EUR
15,000,000 from 12 November 2008 to 10 December 2008 and on EUR 30,000,000 from that date to the date of
payment.
Secondary defendants‟ capacity
If the defendant, NBI hf., is acquitted, then the plaintiff directs its demands against Iceland (the
Icelandic State) and the Financial Supervisory Authority, and demands that the court recognise its entitlement to
compensation from the secondary defendants, Iceland and the Financial Supervisory Authority, since it did not
receive payment from the principal defendant of deposits of EUR 30,000,000 with 5.18% interest on EUR
15,000,000 from 6 June 2008 to 10 December 2008 and with 5.02% interest on EUR 15,000,000 from 7 August
2008 to 12 November 2008, and of GBP 7,000,000 with 6.02% interest from 16 September 2008.
In both instances, the plaintiff demands legal costs which were scheduled.
The demands made to the court by the principal defendant, NBI hf., are that it be acquitted of all the
demands brought against it before the court by the plaintiff. It also demands legal costs as assessed by the Court.
The demands made to the Court by the secondary defendants, the Financial Supervisory Authority and
Iceland, are that they be acquitted of all the plaintiff‟s demands. They also demand legal costs so as to indemnify
them against all such costs, and that when legal costs are assessed, it be taken into account that the secondary
defendants do not pursue activities that are subject to Value Added Tax.
Facts of the case
The plaintiff is a Spanish bank which is owned by Libyan Foreign Bank, which is owned by the Central
Bank of Libya. In summer 2008, and on into autumn of that year, in the period from 6 June 2008 to 26
September 2008, the plaintiff deposited sums of money on nine occasions in banks in Iceland: Kaupthing Bank
hf. (Kaupþing banki hf.), Glitnir Bank hf. (Glitnir banki hf.) and Landsbanki Íslands hf. These were what are
known as money market deposits, amounting in total to EUR 120,000,000 and GBP 7,000,000. Three of these
deposits were deposited in Landsbanki Íslands hf., first EUR 15,000,000 on 6 June 2008; this deposit was a time
deposit („locked in‟) until 10 December 2008 and bore 5.02% interest. Then the same sum, EUR 15,000,000,
was deposited on 7 August 2008; this was locked in until 12 November 2008 and bore 5.18% interest. Finally,
GBP 7,000,000 were deposited on 16 September 2008; this sum was to be free for withdrawal on 18 March
2009, and bore 6.20% interest.
8
The Icelandic banking system collapsed in October 2008. The three largest commercial banks could not
withstand the international credit crisis which shook the global economy. When the difficulties which Glitnir
Bank hf. had encountered in obtaining finance became generally known at the end of September, the credit
ratings of the Icelandic banks, and of Iceland, were lowered so much that virtually all doors were closed to them
on the international credit markets. At the same time, the exchange rate of the Icelandic króna (ISK) fell sharply.
In a declaration by the Government of Iceland, which was published on the website of the Prime
Minister‟s Office on 6 October 2008, it was stated that deposits in domestic commercial banks and savings banks
and their branches in Iceland would be guaranteed in full. It was stated that by „deposits‟ was meant all deposits
owned by ordinary savings owners and enterprises which were covered by the guarantee of the deposit division
of the Depositors‟ and Investors‟ Guarantee Fund.
Under the Act No. 125/2008, on the Authority for Treasury Disbursements due to Unusual Financial
Market Circumstances, etc., which was passed by the Althingi on 6 October 2008, and which included, amongst
other things, an amendment to the Financial Undertakings Act, No. 161/2002, the Financial Supervisory
Authority (FME) was granted authorisation to take special measures, in view of unusual circumstances or events,
for the purpose of limiting damage, or risk of damage, in the financial markets (cf. Article 100 a. of the Financial
Undertakings Act as amended by the Act No. 125/2008). Thus, the Financial Supervisory Authority was able to
assume the powers of a shareholders‟ meeting in a financial undertaking, dismiss its board and appoint a
resolution committee and/or take over its assets, rights and obligations, in their entirety or in part.
On 7 October 2008, the Financial Supervisory Authority decided, under Article 100 a. of the Financial
Undertakings Act, No. 161/2002, to assume the powers of a shareholders‟ meeting in Landsbanki Íslands hf. and
to dismiss that company‟s board in its entirety. The Financial Supervisory Authority appointed a resolution
committee which, in accordance with Article 100 a. of the Financial Undertakings Act, took over all powers held
by the board of the company under the Limited Companies Act, No. 2/1995.
By a decision by the Financial Supervisory Authority dated 9 October 2008, specified assets and
liabilities of Landsbanki Íslands hf. were disposed of to New Landsbanki Íslands hf. (Nýi landsbanki Íslands hf.,
now NBI hf.) as is described in further detail in the decision, with subsequent amendments. Item 7 of the
decision reads as follows:
“New Landsbanki Íslands hf. takes over obligations of the branches of Landsbanki Íslands hf. in Iceland
due to deposits from financial undertakings, the Icelandic Central Bank and other customers. Furthermore, New
Landsbanki Íslands hf. takes over rights and obligations according to derivative contracts.”
By a decision by the Financial Supervisory Authority dated 12 October 2008, the aforementioned
decision of 9 October 2008 was amended, the second sentence of item 7 of that decision, regarding derivative
contracts, being repealed.
At its meeting of 11 November 2008, the board of the Financial Supervisory Authority discussed what
effect the authority‟s decisions regarding the disposal of assets and liabilities of Landsbanki Íslands hf., Glitnir
Bank hf. and Kaupthing Bank hf. would have on so-called money market loans/deposits from financial
undertakings. At this meeting, the board of the Financial Supervisory Authority decided to reiterate that all
obligations in respect of such loans from financial undertakings were not being transferred to New Glitnir Bank
hf., New Kaupthing Bank and NBI hf.
In its letter of 19 November 2008 to the Financial Supervisory Authority, the plaintiff requested a
written confirmation that the board of the Financial Supervisory Authority had proposed that obligations in
connection with money market deposits would not be taken over by the new banks. The letter itemised in
particular matters which the plaintiff considered as supporting the view that these deposits should be transferred
to the new banks.
In its reply of 21 November 2008, the Financial Supervisory Authority stated that in the case of money
market deposits, it had been decided to classify such sums transferred as deposits, except in cases where the
bank‟s counterparty was a financial undertaking. In those cases, such sums transferred were regarded as loans
from the financial undertakings, which were left behind in the old banks. The letter gave an account of the points
of view on which the decision was based and traced the factors that were seen as being of particular importance
in this connection.
9
The plaintiff answered this letter on 26 November 2008, reiterating its point of view.
The Financial Supervisory Authority, in its letter to the plaintiff dated 3 December 2008, referred to its
previous letter regarding the interpretation of its decision, and also stated that the matter was closed as far as the
FME was concerned.
Grounds on which the plaintiff bases its case; legal arguments
Capacity
The plaintiff‟s demands in this case are directed primarily against the defendant NBI hf., and as a
secondary measure against the defendants, the Financial Supervisory Authority and Iceland. This is in
accordance with the authorisation in the second paragraph of Article 19 of the Act No. 91/1991, and the plaintiff
argues that the conditions regarding the capacity of the secondary defendants are met in this case, as the demands
brought before the court by the plaintiff against the primary defendant and the secondary defendants may be
traced to the same event, circumstance or legal deed.
Grounds on which the plaintiff‟s demands before the court against the primary defendant are based.
The plaintiff bases its primary demand on the view that according to the clear wording of item 7 of the
decision by the secondary defendant, the Financial Supervisory Authority, of 9 October 2008, the principal
defendant took over the obligations of Landsbanki Íslands hf. in branches of the bank in Iceland, these including
obligations relating to deposits from financial undertakings, and consequently including the plaintiff‟s deposits.
Furthermore, the plaintiff argues that under item 8 of the decision, the plaintiff‟s deposits were transferred to
New Landsbanki Íslands hf. (now NBI hf.) as of 9.00 a.m. on 9 October 2008, inclusive (cf. item 5 of the
decision), and thus that the capacity of the primary defendant as a party to the case is unequivocal.
The plaintiff states that this decision on the part of the secondary defendant was in conformity with the
declaration by the Government of Iceland of 6 October 2008. With that declaration, Iceland (the Icelandic State)
undertook to guarantee all deposits in domestic commercial and savings banks and their branches in Iceland. The
decision by the Financial Supervisory Authority of 9 October 2008 thus in fact constituted the execution of the
decision by the Government of Iceland to guarantee all deposits in the three commercial banks. This decision by
the secondary defendant, the Financial Supervisory Authority, insofar as it referred to deposits, was not (argues
the plaintiff) revoked or amended, unlike the situation that applied to derivative contracts; the decision by the
secondary defendant, the Financial Supervisory Authority, to transfer such contracts to the principal defendant
was formally abandoned on 12 October 2008. Thus (argues the plaintiff) an unequivocal obligation rests with the
principal defendant to pay out the plaintiff‟s deposits; the deposits which are relevant to this case were supposed
to be free for disbursement on 12 November 2008 and 10 December 2008.
The aforementioned declaration by the Government defined „deposits‟ as all deposits owned by
ordinary savings owners and enterprises which were covered by the guarantee of the deposit division of the
Depositors‟ and Investors‟ Guarantee Fund. In order, amongst other things, to achieve the Government of
Iceland‟s aim of guaranteeing deposits in Icelandic banks, as described above, the Althingi approved the Act No.
125/2008 on 6 October, granting the Minister of Finance, on behalf of the Treasury, authority to disburse funds
in order to establish new financial undertakings or take over financial undertakings, or their bankruptcy estates,
in their entirety or in part. On the basis of the aforementioned Act, the secondary defendant, the Financial
Supervisory Authority, published its decision, which unequivocally stated that the obligations of Landsbanki
Íslands hf. vis-à-vis the plaintiff had been taken over by the defendant and transferred to it. This declaration was
reiterated on 3 February 2009 by the Government of Iceland in an even more unequivocal manner. There (argues
the plaintiff), it was stated that the goal of guaranteeing deposits had been achieved.
The plaintiff argues that it is unequivocal that its deposits came under the decision by the secondary
defendant, the Financial Supervisory Authority, since the plaintiff is a financial undertaking and what is involved
here are deposits. Had it been the intention of the Government of Iceland to exclude a specific type of deposit
from a specific type of deposit holder, then this would have been stated clearly in the declaration. However
(argues the plaintiff) no such an exclusion, or narrowing of the state‟s liability, was stated: instead, the only
reservation that was made was that the deposits in question must be in a domestic bank and that they must be
covered by the guarantee of the deposit division of the Depositors‟ and Investors‟ Guarantee Fund. In the same
way, and in accordance with the declaration by the Government of Iceland, no deposits were excluded in the
decision by the secondary defendant, the Financial Supervisory Authority. No specific types of deposit, or
10
deposits from financial undertakings, are excluded there. On the contrary, it is stated specifically in the decision
that it applies to deposits from financial undertakings as long as they are in branches of Landsbanki Íslands hf. in
Iceland. The plaintiff‟s deposits fall unequivocally into this category, since they were deposited in a bank in
Iceland.
The plaintiff points out that the Act No. 98/1999, on Deposit Guarantees and an Investor Compensation
Scheme, to which Iceland has referred, constitutes an incorporation in law of the material rules of Council
Directive 94/19/EC. Article 1 of the Directive defines the term „deposit‟ as follows:
“any credit balance which results from funds left in an account or from temporary situations deriving
from normal banking transactions and which a credit institution must repay under the legal and contractual
conditions applicable, and any debt evidenced by a certificate issued by a credit institution.”
The plaintiff points out that provision is made in Article 7 (2) of the Directive (cf. Annex I) to exclude
deposits by financial institutions from guarantee by the Depositors‟ and Investors‟ Guarantee Fund. This, says
the plaintiff, was done in many parts of Europe when the Directive was incorporated. However, this
authorisation to exclude deposits by financial institutions from guarantee under the guarantee system was not
exercised when the material provisions of the Directive were incorporated in Icelandic Law by the Act No.
98/1999. The only exclusions made there apply to bonds, bills of exchange or other claims issued by a
commercial or savings bank in the form of securities (cf. the third paragraph of Article 9 of the Act No.
98/1999); it is clear (argues the plaintiff) that none of these exclusions applies to its deposit. Thus, argues the
plaintiff, there are no grounds for the conclusion of the secondary defendant, the Financial Supervisory
Authority, that money market deposits are deposits except in cases where they have come from financial
undertakings. There is no basis in law for discriminating in this way between deposit holders. A more reasonable
interpretation (argues the plaintiff) is that the legislature intended that deposits from financial institutions should
be covered because they were not excluded in any way from the guarantee cover, even though it would have
been possible to do this under the Council Directive.
The plaintiff points out that it is stated directly in the definition of „deposit‟ in the third paragraph of
Article 9 of the Act No. 98/1999 that what is involved here is a credit balance resulting “from financial deposits
or transfers in normal banking transactions, which a commercial or savings bank is under obligation to refund
under existing legal or contractual terms.”
Moreover, the explanatory notes to the bill which became the Act No. 98/1999 state, regarding
Article 9:
”Securities are not counted as deposits for the purposes of this Article; this is in accordance with the
Directive on deposit-guarantee schemes, which authorises the Member States to exclude from the guarantee
various types of deposit and also issued securities.”
The comment quoted above from the explanatory notes to Article 9 of the bill indicates clearly (argues
the plaintiff) that it was the intention of the legislature to exclude from the guarantee cover loans in the form of
securities, and not „various deposits‟, including deposits from financial institutions.
In the light of the foregoing, the plaintiff argues that its deposits with the principal defendant fall
unequivocally under the definition given in the third paragraph of Article 9 of the Act No. 98/1999. In the nature
of things, this provision in the Act should be construed in conformity with the definition given in Council
Directive 94/19/EC, as the setting of the Act constituted the incorporation into Icelandic law of the substance of
the Directive. The plaintiff argues that this interpretation which it offers is supported by, amongst other things,
the reply given by the Depositors‟ and Investors‟ Guarantee Fund. The plaintiff argues that, as a result of the
decision by the secondary defendant, the plaintiff‟s deposits were transferred to the principal defendant
according to the clear wording of the decision.
Thus, argues the plaintiff, the arguments presented by the secondary defendant, the Financial
Supervisory Authority, to the effect that the money market deposits are not deposits, do not stand up.
There is a fundamental difference between traditional interbank loans and the money market deposits
under discussion here. Almost without exception, interbank loans are agreed between two or more banks with
detailed, signed loan agreements which generally apply for long periods and run to tens or even hundreds of
pages. In such agreements, says the plaintiff, there are detailed provisions regarding securities, remedies for
default, terms, premises, restrictions and other matters. By contrast, money market deposits are generally only
confirmed by SWIFT (Society for Worldwide Interbank Financial Telecommunications) receipts; this is in
11
conformity with general commercial banking practice all over the world. Money market deposits are generally
made without liens or sureties other than the solvency of the banking institution involved. Thus, argues the
plaintiff, the assertion by the secondary defendant, the Financial Supervisory Authority, that there is no essential
difference between the plaintiff‟s money market deposits and interbank loans, does not stand up. Money market
deposits are a necessary part of the global banking system, and banks rely on transactions of this type being
treated as deposits. Thus, such transactions must be treated according to international accounting standards (IAS
and IFRS; see the letter of 5 January 2009 from PriceWaterhouseCoopers in Spain to the plaintiff).
The transactions under discussion here were deposits with lock-in periods of only from three to just
over six months, which were processed without any signed agreements. Thus, argues the plaintiff, they tally
completely with the points of the Central Bank‟s definition of deposits given in the Regulation No. 373/2008 on
liquid asset requirements. An agreement on these money market deposits was concluded between the plaintiff
and Landsbanki Íslands hf. using telecommunications equipment, i.e. a „point-to-point system‟, and the transfers
were later confirmed by means of simple SWIFT receipts. Nowhere in the documents behind these transfers is
there any provision on those points that generally characterise interbank loans, and no assignable debt
instruments were issued in connection with the transactions.
The assertion by the secondary defendant, the Financial Supervisory Authority, that these transactions
must be classified as loans because the transfers constituted part of the plaintiff‟s traditional operations as a
commercial bank, is (argues the plaintiff) blatantly incompatible with the definition of „deposit‟ in the third
paragraph of Article 9 of the Act No. 98/1999, as has been demonstrated above.
The plaintiff argues that Landsbanki Íslands hf. had an obligation to record these transactions in its
books as deposits according to the International Financial Reporting Standards (IFRS). The plaintiff says it
cannot take responsibility for the bookkeeping of Landsbanki Íslands or bear negative consequences of possible
misrepresentations in the bookkeeping. The plaintiff argues that neither the principal nor the secondary
defendant can acquire a right vis-á-vis the plaintiff due to mistakes of this type in its books. The assertions by the
secondary defendant, the Financial Supervisory Authority, to this effect have no reasons behind them and are not
in conformity with market practice.
The plaintiff argues that the guarantee by the Depositors‟ and Investors‟ Guarantee Fund covers its
money market deposits, since these deposits meet the definitions in law, as has been confirmed by the fund.
Enterprises which are members of the fund, including Landsbanki Íslands hf., have an obligation to pay to the
fund a sum corresponding to a certain proportion of the deposits in the member enterprises in each case. That
Landsbanki Íslands hf. may conceivably have neglected to meet its obligations in this respect does not change
the nature of the deposits. Furthermore, argues the plaintiff, under the Act No. 98/1999 it is the legallyprescribed role of the secondary defendant, the Financial Supervisory Authority, to monitor the operations of the
fund and ensure that its operations, and payments made by the member enterprises, proceed in accordance with
the law, on pain of revocation of their operating licences (cf., for example, Article 8 of the Act No. 98/1999).
The principal defendant cannot acquire a right in this case on the basis of neglect by the secondary defendant in
this respect. The plaintiff says it is out of the question that it should suffer the negative consequences of failure
by of the secondary defendant, the Financial Supervisory Authority, and of the fund, to act in response to
Landsbanki Ísland‟s non-performance of its duty to make payments in respect of this type of deposit to the fund.
Finally, the plaintiff argues that different electronic treatment by Landsbanki Íslands hf. of identical
deposits made, on the one hand, by the plaintiff, and by domestic financial undertakings and the Central Bank on
the other, cannot result in the plaintiff‟s deposits‟ not being regarded as deposits in the sense of the decision by
the secondary defendant, the Financial Supervisory Authority, and of the law. Such a situation would constitute
unlawful discrimination, and would in addition be based on events on which the plaintiff is not able to exercise
any influence. Such electronic treatment does not alter the nature of the underlying transactions as deposits. It
cannot be of crucial significance (argues the plaintiff), whether the sums transferred are entered in a particular
type of account, e.g. an account that is registered at the Banks‟ Electronic Data Centre.
Circumstances on which the plaintiff‟s demands before the court against the secondary defendants are
based.
If the court does not grant the plaintiff‟s principal demand, then the plaintiff argues that the fact that the
secondary defendants, the Financial Supervisory Authority and Iceland, prevented the disbursement of its
deposits establishes, with sufficient likelihood, that they caused the plaintiff financial loss, even though the
12
extent of this loss is not yet known exactly because Landsbanki Íslands hf.‟s estate has not yet been wound up.
The plaintiff demands recognition of the secondary defendants‟ compensatory liability (cf. the second paragraph
of Article 25 of the Code of Civil Procedure, No. 91/1991).
The plaintiff argues that the secondary defendant, the Financial Supervisory Authority, has been
correctly sued in this case (cf. Article 16 of the Code of Civil Procedure, No. 91/1991), having the capacity of an
independent party to the case (cf., among other things, Section II of the Act No. 87/1998, and also the case-law
of the Supreme Court of Iceland). The plaintiff argues that the secondary defendant, the Financial Supervisory
Authority, bears compensatory liability for its foreseeable loss on the basis of the culpa rule; the secondary
defendant caused loss, which the plaintiff will foreseeably suffer, in a culpable and unlawful manner. The
secondary defendant, Iceland, has been summonsed as a reserve measure in order to recognise its compensatory
liability due to the vicarious liability it bears for the actions of the secondary defendant, the Financial
Supervisory Authority, and due to the culpable damage resulting from the failure on the part of Iceland to honour
its own declaration regarding guarantees. It is clear, argues the plaintiff, that it has sustained financial damage in
consequence of this, and that its reputation has suffered accordingly.
The plaintiff argues that the secondary defendant caused culpable damage by having prevented the
transfer of its deposits to the principal defendant, if in fact this was the case. If it is considered as established,
argues the plaintiff, that its deposits were transferred to the principal defendant, but that the secondary defendant,
the Financial Supervisory Authority, prevented their being disbursed by its letter dated 11 November 2008, then
in the same way this should result in compensatory liability on the part of the secondary defendants, as it is of a
nature to result in culpable damage. The conduct of the secondary defendant, the Financial Supervisory
Authority, caused the plaintiff not to receive disbursement of its deposits, notwithstanding its unequivocal right
thereto.
The plaintiff argues that the secondary defendants had a duty to ensure that all deposits, and not merely
some selected deposits, in domestic banks and their branches in Iceland were transferred to the principal
defendant, so being available for disbursement on the due dates. Thus, the secondary defendants bear
compensatory liability for the loss and damage which wrong interpretation and wrong execution on the part of
the secondary defendant, the Financial Supervisory Authority, of the declaration by the Government of Iceland,
the Act No. 98/1999 and its own decision of 9 October 2009, had and will have in future, for the plaintiff.
In this connection, argues the plaintiff, it makes no difference whether the original decision by the
secondary defendant, the Financial Supervisory Authority, of 9 October 2008, meant that the plaintiff‟s money
market deposits were supposed to have remained in Landsbanki Íslands hf. and that the authority‟s letter of 11
November 2008 in fact constituted a reiteration of this, or whether money market deposits were classified at later
stages by the secondary defendant, the Financial Supervisory Authority, as traditional loans, resulting in their not
being disbursed. In neither case, argues the plaintiff, is the action of the secondary defendant, the Financial
Supervisory Authority, in accordance with the declarations of guarantee by the Government of Iceland, the first
of which was set out in the Act No. 125/2008. Either situation constitutes unlawful discrimination entailing
compensatory liability on the part of the secondary defendants.
The presentation of the case by the secondary defendant, the Financial Supervisory Authority, contains
no reference to the declaration of guarantee by the Government of Iceland or to the decision by the secondary
defendant, the Financial Supervisory Authority, itself. These declarations (argues the plaintiff) contain no
reference to, or indication of, the interpretation expressed in the letter from the secondary defendant, the
Financial Supervisory Authority, of 11 November 2008, regarding exclusions in the case of deposits from
financial institutions. The plaintiff maintains that this declaration by the secondary defendant, and its
implementation thereof, constituted unlawful discrimination, which entails compensatory liability on the part of
the secondary defendant.
The plaintiff points out that the letter which the secondary defendant, the Financial Supervisory
Authority, sent to the new banks on 11 November is dated one day before the plaintiff‟s first money market
deposits were due to be available for disbursement. In the letter, the secondary defendant stated that it was
reiterating its previous decision to the effect that money market deposits from financial institutions were not to
be transferred to the new banks, and that it had also instructed the auditors responsible for preparing the principal
defendant‟s foundation balance sheet, the resolution committees of the old banks, and their boards, to regard
money market deposits as „loans‟. The liability of the secondary defendant, the Financial Supervisory Authority,
for this action, the exclusion of the plaintiff‟s deposits, is therefore unequivocal, argues the plaintiff.
13
The classification adopted by the secondary defendant, the Financial Supervisory Authority, regarding
the plaintiff‟s money market deposits in the same way as any other interbank loans, does not rest on any tenable
argument, contends the plaintiff. The secondary defendant, the Financial Supervisory Authority, as the
monitoring authority over financial institutions, including the commercial banks according to Act No. 161/2002,
is the government authority that is obliged to examine, and to identify correctly, what is to be considered a
deposit in the sense of the Act. The plaintiff argues that this act of identification by the secondary defendant
went wrong in a way that entails compensatory liability, and thus that the secondary defendant failed to perform
its role in terms of its obligation to make an independent investigation according to the principles of
administrative law.
The plaintiff argues that the secondary defendants were obliged to follow the accepted rules applying to
the execution of government administrative functions even though circumstances in autumn 2008 resulted in a
need to exempt their decisions from the procedural rules of the Administrative Procedure Act, No. 37/1993. It is
clear, says the plaintiff, that the decisions taken in October and November 2008 by the secondary defendant, the
Financial Supervisory Authority, had to be taken quickly. On the other hand, it is quite clear that the secondary
defendant, the Financial Supervisory Authority, was under an obligation to examine in a satisfactory manner,
and assess, what were to be regarded as deposits in the sense of the Act No. 98/1999, as it is specifically defined
as the legally-prescribed role of the secondary defendant, the Financial Supervisory Authority, to monitor the
correct application of that Act. It appears that the secondary defendant, the Financial Supervisory Authority, did
not do this. The secondary defendant, the Financial Supervisory Authority, nevertheless had all the necessary
means for stating specifically in its decision of 9 October 2008 that certain credit balances from financial
institutions were not to be transferred. This it did not do; instead, it stated specifically that the principal
defendant was to take over the obligations of Landsbanki Íslands hf. in Iceland due to deposits from financial
undertakings. Nothing in that decision, says the plaintiff, supports the later interpretation and explanation after
the event and „reiterations‟ by the secondary defendant which are expressed in its decision of 11 November 2008
to the effect that specific types of deposits from financial undertakings were not to be transferred on the basis of
the decision of 9 October 2008.
In the period from 9 October 2008 to 11 November 2008, it seems that deposits from 5 various parties in
Iceland – individuals, companies, the Central Bank and other financial institutions – including money market
deposits, were transferred to the new banks. In many cases, the legal framework behind such balances was the
same as that in the plaintiff‟s case, i.e. the depositing of sums of money without a signed loan agreement, the
money being bound for a short period, in return for which it was to be repaid at the end of the period together
with specific interest. The fact that the plaintiff‟s deposits were to be available for disbursement for the first time
on 12 November does not constitute a basis on which the secondary defendant, the Financial Supervisory
Authority, can base its right, in the view of the plaintiff. The plaintiff argues that it had a legally-protected right
to enjoy the same rights as other owners of deposits which met the criteria of the definition in the Act No.
98/1999. The plaintiff maintains that the secondary defendant, the Financial Supervisory Authority, violated this
right.
There is no question, argues the plaintiff, that the distinction drawn between the plaintiff‟s deposits
balances and completely comparable deposits owned by domestic financial institutions and the Central Bank (cf.,
amongst other things, the reasoning presented by the secondary defendant in its letter of 21 November 2008)
constitutes a violation of the principle of equality in the Administrative Procedure Act, and also of the
fundamental principal of equality as stated in Article 65 of the Constitution of the Republic of Iceland, No.
33/1944. Under Article 65, all persons are to be equal before the law and enjoy human rights irrespective of their
gender, religion, national origin, race, colour, financial standing, ancestry and status in other respects.
Furthermore, the discrimination referred to constitutes, in the opinion of the plaintiff, a violation of Article 14 of
the European Convention on Human Rights, which was ratified in Iceland under the Act No. 62/1994.
It is also a violation of the principles of equality in constitutional and administrative law, in the view of
the plaintiff, to discriminate between deposit holders on grounds including that their deposits had received
different electronic treatment, this meaning, amongst other things, that deposits belonging to domestic parties
had been placed in accounts that were registered at the Banks‟ Electronic Data Centre while foreign deposits had
5
This is an instance where innstæður could without distortion be translated as credit balances owned by instead
of as deposits from; see Footnote No. 1. [Translator‟s note.]
14
received different electronic treatment within the bank. The secondary defendants bear unequivocal
compensatory liability for such unlawful discrimination in view of the damage and loss resulting from this
conduct, argues the plaintiff.
Similarly, argues the plaintiff, it is a violation of these fundamental rights to discriminate between
parties who are in the same position, and have made completely comparable transactions, according to the
operations in which they engage, unless there is a special authorisation for this in law, based on relevant
considerations. The assertion, made without any supporting arguments by the secondary defendant, the Financial
Supervisory Authority, that money market deposits are deposits except where the counterparty of the bank
involved is a financial institution, has no basis in law and constitutes culpable and unlawful discrimination.
The wrong and unlawful application by the secondary defendant of its own decision, and of the
guarantee declaration by the Government of Iceland, as described above, caused the plaintiff damage for which
the secondary defendant, the Financial Supervisory Authority, bears liability under the general principles of Tort
Law. There is no need to be in any doubt, asserts the plaintiff, about the causal relationship between the unlawful
actions by the secondary defendant and the consequence, i.e. that the plaintiff is unable to recover its deposits
from the principal defendant in the same way as other deposit holders are able to do.
In particular, the plaintiff argues that the secondary defendant, Iceland, bears full liability for the
actions, and failure to act, by the Financial Supervisory Authority and its employees according to the vicarious
liability principle of Tort Law. The declarations by the Government of Iceland of 6 October 2008 and 3 February
2009 provide for a state guarantee covering deposits in domestic commercial banks and savings banks. The
secondary defendant, Iceland, bears compensatory liability for the fact that the secondary defendant, the
Financial Supervisory Authority, did not implement this decision properly.
The plaintiff also argues that Iceland made a declaration guaranteeing all deposits in banks in Iceland
which were covered under the Act No. 98/1999 and that the Act No. 125/2008 was introduced, amongst other
things, to provide an authorisation in law for measures to achieve this aim. On the basis of this guarantee, argues
the plaintiff, Iceland is responsible for damage or loss suffered by holders of deposits in banks in Iceland,
irrespective of actions taken by the secondary defendant, the Financial Supervisory Authority, or its failure to
take action.
As regards legal arguments, the plaintiff refers to the Act No. 161/2002, the Act No. 98/1999 (cf.
Council Directive 94/19/EC), the Act No. 125/2008, the Constitution of the Republic of Iceland, No. 33/1944,
the Act No. 62/1994, ratifying the European Convention on Human Rights (see in particular Article 14 of Annex
I to the Act), the general principles of Contract and Claim Law regarding the obligation to pay financial
obligations, the principles of Administrative Law (in particular the obligation regarding examination) and the
principle of equality (cf. the Administrative Procedure Act, No. 37/1993).
The plaintiff‟s demand for legal costs so that it will be indemnified against all such costs is based on
Article 130 of the Act No. 91/1991. Its demand for value-added tax on legal costs is based on the Value-Added
Tax Act, No. 50/1988; the plaintiff is not required to pay value-added tax and it is therefore essential for it to
have the court order the defendants to pay it.
Grounds on which the principal defendant, NBI hf., bases its case; legal arguments
Regarding the circumstances of the case, the principal defendant states that on 7 October 2008, the
Financial Supervisory Authority took the decision, under Article 100 a. of the Financial Undertakings Act, No.
161/2002, to assume the powers of a shareholders‟ meeting in Landsbanki Íslands hf. and dismiss its board in its
entirety. The Financial Supervisory Authority then appointed a resolution committee, which took over all the
authority pertaining to the board of the company under the Limited Companies Act, No. 2/1995, in conformity
with Article 100 a. of the Financial Undertakings Act.
Under the decision by Financial Supervisory Authority of 9 October 2008, New Landsbanki Íslands hf.
(Nýi Landsbanki Íslands hf., now NBI hf.), the principal defendant in the present case, was established and the
assets and liabilities of Landsbanki Íslands hf. were transferred to it, as is described in further detail in the
decision as subsequently amended. The principal defendant rejects the principal argument on which the plaintiff
bases its case, i.e. that its money market deposits in Landsbanki Íslands hf. were transferred to the principal
15
defendant as of 9 October 2008 (inclusive) under the decision by the Financial Supervisory Authority of 9
October [2008]6.
At its meeting of 11 November 2008 (says the principal defendant) the board of the Financial
Supervisory Authority, having received comments on this matter, discussed the effect that the authority‟s
decisions on the disposal of the assets and liabilities of Landsbanki Íslands hf., Glitnir Bank hf. and Kaupthing
Bank hf. could have on so-called money market loans/deposits from financial institutions. At this meeting, the
board of the Financial Supervisory Authority decided to reiterate that all obligations in connection with such
loans were not transferred to New Glitnir Bank hf. (Nýi Glitnir banki hf.), New Kaupthing Bank hf. (Nýi
Kaupþing banki hf.) and NBI hf. This reiteration was reported to the resolution committee of Landsbanki Íslands
hf. by letter the same day.
The principal defendant argues that the Financial Supervisory Authority did not change its position on
this, and that the plaintiff‟s money market loans in Landsbanki Íslands hf., to which reference is made in the writ
of summons and the register of balances owned by the plaintiff in Icelandic banks, were never transferred to NBI
hf. Thus, it is not within its power to discharge the obligations of Landsbanki Íslands hf. towards the plaintiff to
which reference is made and which are the focus of this case. In support of this argument, the principal defendant
refers to the declaration made by the resolution committee of Landsbanki Íslands hf., dated 5 May 2009, which
states that the plaintiff‟s money market loans are recorded in the books of Landsbanki Íslands hf. and had never
been transferred to the principal defendant.
The principal defendant‟s denial of liability is based primarily on the argument that the plaintiff‟s
demand before the court has been wrongly directed at the principal defendant. The principal defendant argues
that the obligations on which the plaintiff‟s demands are based were never transferred from Landsbanki Íslands
hf. to the principal defendant under the decision by the Financial Supervisory Authority regarding the disposal of
the assets and liabilities of Landsbanki Íslands hf. and the special reiteration by the board of Financial
Supervisory Authority on this point of 11 November. Thus, argues the principal defendant, it is not the party that
bears the obligation vis-à-vis the plaintiff which is the focus of this case. For this reason, the principal defendant
argues, it should be acquitted of all the demands brought by the plaintiff before the court since it lacks the
capacity to be a party to the case (cf. the second paragraph of Article 16 of the Code of Civil Procedure, No.
91/1991).
The principal defendant‟s demand for legal costs is based on Article 130 of the Act No. 91/1991 and its
demand for value-added tax on legal costs is based on the Value-Added Tax Act, No. 50/1988. The principal
defendant is not required to pay value-added tax and it is therefore essential for it to have the court pronounce a
judgment in order to have this tax paid by the plaintiff.
Grounds on which the secondary defendants, the Financial Supervisory Authority and Iceland,
base their case; legal arguments
The secondary defendants demand that all of the plaintiff‟s demands in the case be dismissed.
The plaintiff‟s demand against the secondary defendant, the Financial Supervisory Authority, appears to
be based on the view that if the court finds that the plaintiff‟s claims were not transferred to NBI hf. under the
much-mentioned decisions by the Financial Supervisory Authority, then the authority bears compensatory
liability for this situation under the culpa rule. The plaintiff adduces arguments to establish this liability by
reference to four circumstances which will be examined separately and in detail below. The plaintiff bases its
action against Iceland on the rules of Tort Law regarding vicarious liability.
The secondary defendants argue that there is no substance in these arguments presented by the plaintiff
and that the conditions for compensatory liability on the part of the Financial Supervisory Authority are not met
in any way. The main point in this case is that under the Act No. 125/2008, the Financial Supervisory Authority
was granted extensive powers to intervene in the operations of financial institutions which were in difficulty.
Under the third and fifth paragraphs of Article 5 of that Act (which became Article 100 a. of the Financial
Undertakings Act, No. 161/2002), provision was made (argues the Financial Supervisory Authority) for it to be
able, under these circumstances, to dispose of the assets and undertakings of financial undertakings. There has
been no dispute, says the secondary defendant, that under the aforementioned legal provisions, specific assets
and obligations of Landsbanki Íslands hf. could be disposed of, as the bank had become insolvent. It has not
6
The Icelandic text has „2009‟ here, which is evidently a typographical error. [Translator‟s note.]
16
been demonstrated that there was any causal relationship between the decisions taken by the Financial
Supervisory Authority and the loss which the plaintiff claims it sustained as a result of the insolvency of
Landsbanki.
The Financial Supervisory Authority exercised the powers granted to it under the Act in order to protect
important systemic interests at a critical moment, transferring deposits in Icelandic branches of the banks, and
that which was connected to these operations, to a new legal entity. The plaintiff, on the other hand (argues the
secondary defendant) had entered into an agreement with Landsbanki Íslands hf. regarding a loan, and
presumably it has a claim against the bank in that connection. In the winding-up of the bank, which has now
begun under the Act No. 44/2009, it can obtain a decision as to whether its claim is to enjoy priority status when
the estate is divided under Article 6 of the Act No. 125/2008.
There is no legal relationship (argue the secondary defendants) between the plaintiff and the secondary
defendants, either on a contractual basis or as a result of any type of tortious action by the secondary defendants
against the plaintiff.
1)
Alleged obstruction of payments to the plaintiff
The secondary defendants point out that the plaintiff‟s claims were not transferred to the principal
defendant by a substitution of debtor. There is (they submit) no doubt that in the balance sheet that constituted
part of the Financial Supervisory Authority‟s decision, and of its implementation, no allowance was made for the
transfer of claims under money market transactions to the principal defendant. As was stated in its letter of 11
November 2008, the Financial Supervisory Authority had reiterated this to the auditors and resolution
committees that handled the implementation of the authority‟s decisions under Article 5 of the Act No.
125/2008; questions on this point had arisen among the banks‟ employees. The secondary defendants say that
most detailed record of the actual transfer is to be found in the provisional balance sheet and the summary
relating to it, which contains explanations of individual items in the balance sheet. According to the provisional
balance sheet, the plaintiff‟s claim was not transferred to the principal defendant; consequently, the Financial
Supervisory Authority did not obstruct the payment of the claim. Thus, argue the secondary defendants, the
principal ground cited by the plaintiff for its action has no basis in the facts of the case.
2)
That the Financial Supervisory Authority was supposed to ensure that all deposits, according
to the plaintiff‟s definition of that term, were transferred to the principal defendant
The secondary defendants say that no such legal obligation lay with the Financial Supervisory
Authority, in addition to which the authority‟s view is that Landsbanki Íslands hf. had taken a loan from the
plaintiff, which is a credit institution. They argue that the dealings between the plaintiff and Landsbanki were of
a nature that was totally dissimilar from depositing in traditional banking operations. They say that financing on
the money market has little, if anything, comparable with depositing by customers of the banks. It appears
clearly, they say, in the agreements that the plaintiff and Landsbanki Íslands made that the transactions were
viewed as loans. In the agreements between the plaintiff and Landsbanki Íslands hf., there appears to be a
provision stating that the loan sum is to be paid to a third party – Fortis Bank in Brussels – which is the clearest
indication that the plaintiff‟s transactions were not related in any way to depositing in traditional banking
operations. Landsbanki Íslands hf. made its payments of premiums to the Depositors‟ and Investors‟ Guarantee
Fund as if what was involved here was a loan, as can be seen from the evidence in the case. Landsbanki‟s
aggregate liability in the form of interbank loans at the end of 2007 stood at about ISK 190 billion, and all loans
of the type that the plaintiff made were entered under this heading in the bank‟s books. Deposits were entered
under other items, and from this it can be seen clearly that the transactions in question were regarded as loans.
The implementation of the Financial Supervisory Authority‟s decisions was in accordance with this.
The main point here, however (say the secondary defendants) is that the plaintiff has not invoked any
legal authorisations or material rules that could establish this obligation on the part of the Financial Supervisory
Authority, let alone compensatory liability following from a failure to discharge the obligation. The plaintiff is
dissatisfied (they say) with the conclusion reached by the Financial Supervisory Authority and considers them
unfair. This, by itself, can never create compensatory liability on the part of the state. In addition, the plaintiff‟s
position was not made worse by the Financial Supervisory Authority‟s decision than it was previously. It was not
deprived of any rights, and it is therefore out of the question that it can demand compensation for not being in a
better position than it is in. The secondary defendants argue that the plaintiff put itself in this position through its
agreement with Landsbanki Íslands hf.
17
3)
The alleged wrong interpretation by the secondary defendant, the Financial Supervisory
Authority, of the Government of Iceland‟s declaration of 6 October 2008 and the Financial Supervisory
Authority‟s own decision of 9 October 2008
The Government of Iceland‟s declaration was not a factor in the Financial Supervisory Authority‟s
decision, say the secondary defendants, and therefore the interpretation of the legal effects of the declaration had
no bearing on the decision which the Financial Supervisory Authority took regarding the disposal of the assets
and liabilities of Landsbanki Íslands hf. That decision was based on an independent assessment of the situation
in accordance with the Act No. 125/2008. Further implementation of the authority‟s decision was carried out in
accordance with its aims, as has been described in detail above.
4)
The alleged violation of the principle of equality, the examination obligation and the principle
of relevant considerations
The secondary defendant, the Financial Supervisory Authority, argues that it did not violate the
principle of equality in its decisions and their implementation. It argues that what the plaintiff has claimed in the
writ of summons is blatantly incorrect when it maintains that a distinction was drawn between the plaintiff‟s
credit balances and fully comparable balances owned by domestic financial institutions and the Central Bank.
No claims relating to transactions with credit institutions on the money market, either with domestic or foreign
parties, were transferred to the principal defendant. Icelandic financial institutions are, says the secondary
defendant, in exactly the same position as the plaintiff in this respect, though the position of the Icelandic parties
is possibly worse due to their membership of the Depositors‟ and Investors‟ Guarantee Fund.
The plaintiff maintains furthermore that discrimination was practiced due to different electronic
treatment of the sums it lodged, and imagines that the sums lodged by domestic parties were placed in accounts
at the Banks‟ Electronic Data Centre while foreign sums lodged received different electronic treatment „within
the bank‟. This is not correct. No transactions on the money market go into the system of the Banks‟ Electronic
Data Centre, and the nationality of the counterparty is of no significance in this context. If foreign credit
institutions owned funds in bank accounts in Landsbanki Íslands (savings accounts, current accounts or „vostro‟
accounts), all such balances were transferred to the principal defendant. Insinuations about discrimination on
grounds of nationality are therefore without foundation.
The plaintiff maintains that unlawful discrimination was practiced since a distinction was drawn
between parties on the basis of the operations in which they engaged: i.e., that credit institutions were in a
different, and less advantageous, position than were other parties which advanced money to the banks. The
secondary defendants say that this does not constitute a violation of the principle of equality. The secondary
defendants argue that transactions on the interbank market are completely different in their nature from the
balances held in the banks for other customers. They constitute part of the principal activity of the institutions
involved, and not merely the keeping of their operating capital or savings. On the contrary, it would have been a
violation of the principle of equality if the plaintiff had been granted a more advantageous position than was
granted to other financial institutions which loaned money to Landsbanki Íslands. The positions of the plaintiff
and of those institutions are far more comparable than those which the plaintiff has compared in order to adduce
reasons for its assertions that a violation of the principle of equality was committed.
The Financial Supervisory Authority‟s decisions were based, say the secondary defendants, on highly
relevant considerations which the plaintiff has not refuted with any material arguments. The Financial
Supervisory Authority made a special examination of the status of the transactions under discussion in this case,
including how the entries appeared in the banks‟ books and annual accounts, whether premium on them had been
paid to the Depositors‟ and Investors‟ Guarantee Fund and the form of the transactions, as the evidence
submitted demonstrates. The authority‟s conclusion was that financial institutions‟ claims of this type should not
be transferred to the principal defendant. This assessment has not been refuted. As is stated in the eighth
paragraph of Article 5 of the Act No. 125/2008, the provisions of Sections IV-VII of the Administrative
Procedure Act did not apply to the Financial Supervisory Authority‟s working procedures and decisions on this
matter. This provision in the law was made in view of the urgent necessity to resolve the situation quickly, and
thus there was no legal obligation to provide detailed reasoning for the decisions under examination here, in
addition to which the restrictions on amending the decisions did not apply.
In the view of the secondary defendants, it is out of the question that there could be any type of
compensatory liability here, e.g. on the grounds that their employees demonstrated negligence or intention in
deciding that the plaintiff‟s rights were not to be augmented to a level better than they were when Landsbanki
18
became insolvent. No rule exists in law obliging the Financial Supervisory Authority to transfer to other legal
persons individual obligations of the banks. From the point of view of promoting monetary stability and the
general good of the citizens of the country, on the other hand, it was necessary, argue the secondary defendants,
to transfer traditional deposits (retail deposits). It may be mentioned, say the secondary defendants, that it was in
exactly the same way that deposits in the British bank Bradford & Bingley, which had become insolvent, were
transferred to Abbey National Bank on 29 September 2008. Claims arising from transactions on the money
market were left behind.
At the end of the section of the writ of summons dealing with the plaintiff‟s grounds for action, it is
mentioned that Iceland should bear direct compensatory liability due to the Government‟s declaration of 6
October 2008 and that the Act No. 125/2008 had been introduced „to provide an authorisation in law for
measures to achieve the aforementioned aim.‟ From this, the conclusion is then drawn that Iceland is responsible
for damage or loss suffered by holders of deposits in banks in Iceland „irrespective of actions taken by … the
Financial Supervisory Authority, or its failure to take action.‟ This ground for action is without foundation, say
the secondary defendants. A demand for the recognition of compensatory liability cannot be based on what the
plaintiff regards as a declaration of guarantee. Compensatory liability (say the secondary defendants) can only be
based on a culpable act, or failure to take action, which stands in a direct causal relationship with damage or loss.
The plaintiff‟s reasoning does not stand up, say the secondary defendants, since it is not focussed on any action
or failure to take action on the part of Iceland that could be considered culpable in the sense of the principles of
Tort Law.
No judgment can be made on the recognition of the secondary defendants‟ compensatory liability, they
argue, until it is clear whether the plaintiff will suffer any loss as a result of its dealings with Landsbanki Íslands.
The secondary defendants point out that the plaintiff itself maintains that its claim is a priority claim under
Article 6 of the Act No. 125/2008 (cf. Article 112 of the Bankruptcy (Etc.) Act, No. 21/1991). All loss or
damage resulting from its failure to declare this claim in the course of the winding-up proceedings in the bank
will be at its own responsibility and risk.
The secondary defendants also argue that the plaintiff took risks in its dealings with Landsbanki Íslands
hf. which it itself must bear. They point out that the plaintiff is a specialist in the markets involved, yet it
appears to have continued to lend money to Landsbanki Íslands right up to the last days of the bank‟s operations,
without guarantees or care regarding documentation. The Financial Supervisory Authority cannot accept
responsibility for this, and in this connection, reference is made to the rules of Tort Law regarding risk-taking
and parties‟ own culpability.
Regarding the authorisation of the Financial Supervisory Authority to take the decisions under
discussion, reference is made to Article 5 of the Act No. 125/2008. The secondary defendants support their
demand for legal costs by reference to Articles 129-131 of the Act No. 92/1991.
Conclusion
The plaintiff bases its principal demand in this case on the view that „money market deposits‟ of EUR
30,000,000 which it placed in Landsbanki Íslands hf. in two stages in 2008 were transferred, or should have been
transferred, to New Landsbanki Íslands hf. (now NBI hf.) after the collapse of the Icelandic banks in October
2008. Thus, the plaintiff argues, the money, which it maintains constituted deposits, and not loans, should have
been available for disbursement on 12 November 2008 and 10 December 2008.
The plaintiff bases this part of its demands against the principal defendant on the view that the Financial
Supervisory Authority‟s decision of 9 October 2008 on the disposal of the assets and liabilities of Landsbanki
Íslands hf., under Article 100 a. of the Act No. 161/2002, stated 7 in item 7 that New Landsbanki Íslands was to
take over obligations in the branches of Landsbanki Íslands hf. in Iceland due to deposits from financial
undertakings, the Icelandic Central Bank and other customers. The plaintiff argues moreover that under item 8
of the decision, its deposit was transferred to New Landsbanki Íslands hf. (now NBI hf.) as from 9.00 a.m. on 9
October 2008 (inclusive).
7
At this point the original Icelandic text, þar sem tekið var fram, would translate as in which it was stated, so
introducing another subordinate clause. Then sentence is then incomplete, lacking a main verb in the second part
to complete the sense introduced by on the view that in the first line. This amendment is made in the translation
in order to produce a readable text; it is possible that some other construction was intended. [Translator‟s note.]
19
The plaintiff‟s grounds for this part of its action are also that the aforementioned decision by the
Financial Supervisory Authority was in conformity with the Government of Iceland‟s declaration of 6 October
2008, which reiterated that deposits in domestic commercial and savings banks and their branches in Iceland
would be fully guaranteed. The Government‟s declaration sated that „deposits‟ here meant all deposits owned by
ordinary savings owners and enterprises which were covered by the guarantee of the deposit division of the
Depositors‟ and Investors‟ Guarantee Fund. The plaintiff maintains that Iceland bears responsibility for a failure
on the part of the Financial Supervisory Authority to implement this decision properly, and also that Iceland is
responsible, under the declaration, for losses sustained by holders of deposits in Icelandic banks, irrespective of
the actions of the secondary defendant, the Financial Supervisory Authority, or its failure to take action.
A resolution of the dispute in this case depends on the definition of the term „deposit‟ in the Act No.
98/1999, on Deposit Guarantees and an Investor Compensation Scheme, where it is defined in the third
paragraph of Article 9. This states that „deposit‟ refers to a credit balance resulting from a deposit or transfer in
traditional ordinary banking operations and which the commercial or savings bank is obliged to repay under the
legal and contractual conditions applicable. The Act No. 98/1999 was passed to incorporate in Icelandic law the
material rules of Council Directive 94/19/EC. Article 1 of the Directive defines the term „deposit‟ as follows:
“any credit balance which results from funds left in an account or from temporary situations deriving from
normal banking transactions and which a credit institution must repay under the legal and contractual
conditions applicable, and any debt evidenced by a certificate issued by a credit institution.” In an Icelandic
translation by an authorised translator, this reads: “þá merkir hugtakið “innlán” hvers konar inneign sem verður
til við það að fjármagn er látið standa eftir inni á bankreikningi eða vegna tímabundinna aðstæðna sem stafa af
almennum bankaviðskiptum og sem innlánsstofnun skal endurgreiða í samræmi við þar að lútandi laga- og
samningsskilmála, og hvers konar skuld sem viurkennd er með vottorði, útgefnu af lánastofnun.”
In assessing whether the funds which the plaintiff made over to Landsbanki Íslands hf. for its disposal
on a temporary basis constituted „deposits‟ in the sense of the Act No. 98/1999, one of the crucial points is the
nature of the transaction. At its meeting on 11 November 2008, the board of the Financial Supervisory Authority
discussed what effect the authority‟s decisions regarding the disposal of assets and liabilities of the banks that
had collapsed would have on a specific part of their financing, namely as regards so-called money market
loans/deposits from financial institutions. According to the letter of the same date from the Financial Supervisory
Authority to Landsbanki Íslands hf., the board furthermore decided to reiterate that all obligations in respect of
such loans from financial undertakings would not be transferred to the new banks.
During the hearing of this case, the plaintiff obtained assessments by court-appointed assessors. In their
report, they draw a distinction between money market deposits and interbank loans and describe the difference in
their natures. It is stated there that the difference lies chiefly in different definitions and the identity of the parties
involved in the transactions. A traditional interbank loan is a short-term money market loan (Icelandic:
„peningamarkaðslán‟) between two financial institutions. „Money market deposit‟ (Icelandic:
„peningamarkaðsinnlán‟) has a broader meaning in which the parties to the transaction may be other than banks
and other financial institutions. It is exceptional, however, for either of the parties in such transactions not to be a
bank or financial institution. „Money market transactions on the interbank market‟ refers to depositing and
lending by banks between themselves, generally for periods shorter than 12 months. These transactions are
generally based on predetermined authorisations, or „lines‟, and it is normally regarded as sufficient to confirm
them in the SWIFT („Society for Worldwide Interbank Financial Telecommunication‟) system. Loans of both the
types described above are short-term loans, i.e. loans for financing for periods of less than 12 months. Such loans
are generally defined as „Money Market‟ or „Deposit‟. When loans are for longer periods, they are generally
termed „bank loans‟, which may be between two banks (bi-lateral) or between groups (syndication). Such loans
are not connected in any way with interbank loans. The custom among the staff of the finance management
departments of banks is to regard money market deposits in the same way, i.e. as loans, since they do not draw a
distinction between this type of financing and other types of financing on the interbank market. According to the
report, money market deposits by parties other than financial institutions are regarded as deposits primarily
because such parties‟ principal activities do not consist of lending money; rather, they are investing cash on a
temporary basis. The report by the assessors also states that money market deposits are not recorded in special
accounts in the Banks‟ Electronic Data Centre; they are only recorded in the Treasury systems of the financial
institutions.
20
It has been established that interbank loans are loans between two financial institutions. Money market
loans are interbank loans, according to the definition by the assessors. In the case of money market deposits, the
definition is not quite so clear, as one of the contracting parties may be an enterprise or an individual. Money
market loans have customarily been entered in the accounts of the Treasury department of the borrower
involved, in accordance with terms approved by the lender and the borrower. Such loans have not been recorded
in deposit accounts, and the definitions for bookkeeping and accounting purposes in the annual accounts of the
Icelandic banks is therefore consistent with the view that these are loans, and not deposits. In addition, it has
been established that none of the three Icelandic banks paid insurance premiums on money market deposits in
cases where the lenders were financial institutions.
In his testimony to the court, the chairman of the plaintiff‟s board, Juan Carlos Montanola, stated that
the plaintiff had had spare cash which it used to make deposits in Icelandic banks. Having examined the risk (in
a „deep study‟) involved in the operations of Landsbanki Íslands, the plaintiff had deposited money in/loaned
money to the bank. This was done following an investigation to see which financial institution offered the best
interest rates. The agreement was concluded in a few minutes through the dealing system. It was a revealed that
about one third of the plaintiff‟s equity had been loaned to Icelandic banks following the plaintiff‟s examination
of the Icelandic economy and the banks. The plaintiff‟s credit lines to Iceland were raised (increased) in
February 2008.
The plaintiff‟s transactions with Landsbanki Íslands hf. which are under discussion here took place
through the SWIFT system. The text of the SWIFT message regarding these transactions on 6. June 2008 ran:
WE CAN LEND U 6MTH EUR 15 MIOS AT 5.20 IF SUIT FOR U FRIEND
which means: “ We can lend you EUR 15 million for six months at 5.20 (5.2% interest) if that suits
you.”
The same SWIFT message reveals that agreement was reached on EUR 15 million at 5.18: OK I LEND
U EUR 15 MIOS AT 5.18 FM 10/6 TILL 10/12/08
Transactions of this type are normal in agreements on the interbank market, and the text of the message
indicates that what was involved was a loan.
In the light of the evidence in the case, and the foregoing discussion, the court is obliged to regard the
transfer of money from the plaintiff to Landsbanki Íslands hf. as a short-term loan between two banks, i.e. an
interbank loan. Nowhere is it stated that Landsbanki Íslands hf. issued a deposit certificate for these payments, or
that this had been requested by the plaintiff. Moreover, it has been established that the plaintiff did not have an
account with Landsbanki Íslands hf. It has been shown that special arrangements were negotiated regarding
interest rates and the term of the loans; interest rates vary according to the length of the term. When it is also
taken into consideration that what was involved here was a transaction between two banks (an interbank loan),
the court must take the view that what was involved was a money market loan, and not a money market deposit.
In the light of the foregoing, the court‟s conclusion is that the loan by the plaintiff to Landsbanki Íslands
hf. cannot be regarded as a deposit, which is defined as a credit balance which lies in an account in a bank,
savings bank or other type of financial institution. From this it follows that the claim cannot be regarded as a
deposit in the sense of the Act No. 98/1999, on Deposit Guarantees and an Investor Compensation Scheme.
Accordingly, the decisions by the Financial Supervisory Authority did not entail any obligation to transfer the
obligations in question on the part of Landsbanki Íslands hf. towards the plaintiff to New Landsbanki Íslands hf.
(now NBI hf.) and the plaintiff has not demonstrated that these obligations were ever transferred. Thus, the
principal defendant, NBI hf., is to be acquitted of the plaintiff‟s claims against it in this case.
The above conclusion in the case also entails that the court is unable to grant the plaintiff‟s demands
against the secondary defendants in the case. The Financial Supervisory Authority did not in a culpable manner
obstruct the payment of the plaintiff‟s claim or its transfer to the principal defendant. In accordance with the
conclusion that what was involved here was a loan, and not a deposit, the court cannot concur with the view that
the decision by the Financial Supervisory Authority involved a violation against the plaintiff of the principle of
equality set forth in the Administrative Procedure Act and the Constitution. For the same reason, the ground for
action cited by the plaintiff, that Iceland bears independent liability under the declaration of 6 October 2008,
cannot be accepted. Other grounds for action cited by the plaintiff also lack any firm foundation.
Consequently, the secondary defendants, the Financial Supervisory Authority and Iceland, are to be
acquitted of the plaintiff‟s claims against them.
21
According to this conclusion in the case, the plaintiff is to be sentenced to pay the defendants their legal
costs, which under the circumstances the court considers to be fairly assessed at ISK 1,500,000 to each
defendant. No account is taken of value-added tax.
This judgment is delivered by Eggert Óskarsson, District Court Judge, with the co-judges Áslaug
Björgvinsdóttir, District Court Judge, and Már Wolfgang Mixa, a financial specialist.
CONCLUSION:
The defendants, NBI hf., the Financial Supervisory Authority and Iceland, shall be acquitted of claims
by the plaintiff, Aresbank, in this case.
The plaintiff shall pay each of the defendants ISK 1,500,000 in legal costs.