Financial crisis: Icelandic Emergency Act compatible with the EEA Agreement
PR(10)68 - English version
The EFTA Surveillance Authority decided today to close seven complaint cases concerning the Icelandic Emergency Act as it considers that the Act is not in breach of the EEA Agreement.
In the course of the collapse of the Icelandic banks in October 2008 the Icelandic Parliament passed the Emergency Act (No. 125/2008) aimed at safeguarding the functioning of the banking system and restoring public confidence. The Act granted depositors priority ranking in insolvency proceedings over that of other unsecured creditors. The Act also enabled the Icelandic Financial Supervisor to transfer assets and liabilities from the collapsed banks to new banks.
Several foreign banks had provided loans to the Icelandic banks prior to the collapse. These banks launched complaints to the Authority claiming that the Emergency Act and decisions of the Financial Supervisor discriminated against them as regards rights against the assets of the estates of the collapsed banks.
The Authority has concluded that depositors are in a different situation than general creditors and in a greater need of protection in the event of insolvency of a bank. As for the general creditors, the Emergency Act and the decisions of the Financial Supervisor did not constitute discriminatory treatment of those creditors in conflict with the free movement of capital under Article 40 of the EEA Agreement.
On the assumption that these measures would have been regarded as being restrictive of the free movement of capital, the Authority considered that they nonetheless would have been justified.
“This conclusion is of major importance when it comes to the division of assets of the estates of the collapsed banks and the restructuring of the Icelandic banking system” says Per Sanderud, President of the EFTA Surveillance Authority.
The decision to close these complaint cases does not resolve issues concerning the Deposit Guarantee Directive and discrimination between depositors in Icelandic branches compared to depositors with accounts in branches of the Icelandic banks in other EEA States.
For further information, please contact:
Mr. Trygve Mellvang-Berg
Press and Information Officer
tel. (+32)(0)2 286 18 66
mob. (+32)(0) 492 900 187