The ´Icesave Agreement´ rejected in a national referendum

- The result will not affect the commencement of payments by the estate of Landsbanki Íslands hf. to priority claimants.

A referendum on the so-called ‘Icesave Agreement' was held in Iceland on Saturday, 9 April. The turnout for the referendum was high and close to 40% voted for and 60% voted against the proposed law. The bill was therefore rejected by the majority of the voters.

The Ministry of Finances issued a statement after the result of the referendum was made known. The following is taken from that statement:

• The Icelandic Government has sought to resolve the Icesave dispute all along in good faith and through negotiations with the British and the Dutch Governments. 44 out of 63 members of Parliament supported the agreement. However, the Icelandic Constitution states that the President has the right to refer a law to a national referendum. That is the rule of law and part of the democratic process in Iceland, although it is very rarely used.
• The outcome of the referendum will not affect the commencement of payments by the estate of Landsbanki Íslands hf. to priority claimants (including the British and Dutch authorities), where partial payments are scheduled to take place later this year. These partial payments are expected to cover close to a third of priority (depositor) claims. Moreover, latest figures on its assets indicate that the estate will be able to pay over 90% of claims for deposits.
• The outcome of the referendum can however only be interpreted to the effect that the Icelandic people will not accept a deal requiring Iceland to cover costs related to the Icesave deposit insurance guarantees, unless the legal obligation for doing so is clear.
• The EFTA Surveillance Authority (ESA: the parallel to the European Commission), had initiated a process seeking to establish Iceland’s obligations under Directive 94/19 on deposit-guarantee schemes. The process will now resume. ESA can ultimately bring the matter before the EFTA Court. The average duration of court proceedings before the EFTA Court is one year.
• The outcome of the referendum should not have major impact on the economic programme which is supported by the IMF. The next review of the programme, the 5th one, will though most likely be delayed by a few weeks as Staff Papers need to be revised to reflect changes in the macro framework. The Government remains committed to the economic programme.
• Given the current size of its foreign reserves, Iceland will have no difficulty covering its external maturities in the coming years (including EUR 870 million maturing in 2011 and 2012).

For more information on the matter please refer to a statement from the Ministry of Finance. http://eng.fjarmalaraduneyti.is/publications/news/nr/14151