UK councils win £470m Icelandic bank deposit case

The Icelandic Supreme Court has ruled in favour of UK local authorities in the long-running dispute over the status of funds placed with collapsed Icelandic banks Glitnir and Landsbanki.

By a majority of 6 to 1, the Supreme Court upheld the decision of the Reykjavik District Court, which recognised the claims as deposits with priority status.

The decision in the wholesale deposit test case is expected to make a difference of as much as £470m to the global recoveries of the authorities and other wholesale depositors, which included a number of UK universities.

Responding to the ruling, Local Government Association Chairman Sir Merrick Cockell said: “This is a £470m victory for councils and local residents. Securing priority creditor status in the test cases means the 145 local authorities with investments in the Icelandic banks are likely to recover almost all of the more than £1bn they had on deposit with the four Icelandic banks. Losing this case would have been a huge financial blow. This is a great relief.

“Today’s outcome is the culmination of more than two years of extremely hard work and brings the total estimated recoveries on behalf of the sector from Landsbanki and Glitnir to £624m – or 98% of the total on deposit. We are grateful to our legal team and the councils who brought their cases forward.”

Bevan Brittan acted on behalf of the UK local authorities as part of a collective action co-ordinated and led by the LGA. The law firm also acted for ten universities, one public sector organisation and a national energy company in the case.

Partner Virginia Cooper said: “This decision has vindicated the local authorities and other wholesale creditors who always believed they had deposits with the Icelandic banks.

“The prospect of recovering almost all of the money they had with the Icelandic banks will be a huge boost to our clients at a time when many are facing significant budget cuts.”

Philip Hoult