Wednesday, February 3, 2010

Icesave - Iceland. The Icesave agreements and other national measures in response of the financial crisis: Revisiting the principles of State liability, State aid and non-discrimination in European law

Elvira Méndez Pinedo -

M. Elvira Méndez-Pinedo. Associate Professor of European Law. University of Iceland
Report drafted 1st February 2010. Not published.

(Please contact me by mail at mep(at) for the report with the charts)
Abstract and executive summary
This study describes and analysis the Icesave dispute and Ice-save agreements between Iceland, the UK and Holland in the light of European law (EU and EEA law) focusing on two main issues relevant to the proper resolution of this dispute: 1) the State liability for breaches of EU/EEA law on the basis of Directive 94/19/EC following a systemic bank collapse in Iceland; and 2) the principle of non discrimination concerning the nationalisation of Icelandic banks (State aid) and the payment of the minimum guarantee of 20.889 € to depositors of Icesave accounts in the branches of Landsbanki in the UK and Holland. It will be argued how the European legal order has proved to be incomplete, fragmented and unable to cope with the legal problems arising from the Icesave dispute.

In the first place, the rules of State liability of EU/EEA law in this case are very unclear and uncertain. In the second place, it is questionable whether the Icelandic emergency measures violate EU/EEA law in the light of other national measures adopted by EU Member States during the crisis. In the third place, we will analyse how the real core of the dispute – the nationalisation of private debt left by the collapse of the Icelandic banking system in the UK and Holland and the measures adopted for the reconstruction of the financial sector in Iceland and based on the connection to Icelandic economy– might not fall under the scope of present EU/EEA law after all.

This study will argue that, while the Icesave dispute relates to a highly complicated problem created by the internal market of banking and financial services; the nationalisation of banking entities after a financial crisis is a new problem in EU law for which the EU Treaties and European jurisprudence have no legal answer so far. It will also explain how, from a legal point of view, this cross-border dispute is located at the outer limits of EU/EEA law, in grey areas that are very difficult to solve on a bilateral basis. If the EU has no competence over this new problem, the competence belongs to the Member States. The same applies in EEA law. In these circumstances, the principle of legality would mean that the application of the principles of State liability and non-discrimination in EU/EEA law do not come into play.


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