Iceland’s Financial Crisis – Quo Vadis International Law

Abstract

In October 2008, Iceland’s banking system collapsed. Within a week, the three major banks comprising ninety percent of the Icelandic banking system had failed. A long-running dispute on who ought to pay for the deposits in failed Icelandic banks has poisoned relations between Iceland, the United Kingdom, as well as the Netherlands. In total, Iceland could be obliged to pay more than US $4.5 billion dollars to the U.K. and the Netherlands. The perceived passivity of the EU in this dispute fueled a backlash against EU membership in Iceland. The article analyses the legal merits of the British and Dutch claims for reimbursement.

Keywords: Iceland, Bank Insolvency, Deposit Insurance, Kaupthing

JEL Classification: K33, E53