ICELAND CRISIS: Angry Icelandic Government to Sue Britain in Kaupthing Fury
FURIOUS Icelandic ministers are today pointing the finger of blame for the collapse of their largest bank, the Kaupthing, at the British government. Legal moves are being taken after Gordon Brown PM used a 2001 Anti-Terrorist Law to freeze the assets of a Kaupthing owned unit in England by having one part taken over by ING and the other by Administrators, claiming a default by the bank in not being able to protect savers' interests.
So far, administrators have sold off £4bn worth of Kaupthing assets. The diplomatic breakdown comes shortly after a furious Gordon Brown accused the recently nationalised Landesbankki of acting illegally when thousands of British savers were unable to access their accounts with the bank's internet arm, Icesave. Hundreds of millions of pounds of local authority money from all over the UK is tied up in Icelandic banks.
LONDON (Reuters) - The Icelandic government has appointed lawyers to look at suing the British government over comments made about a UK subsidiary of Kaupthing Bank, a day before it collapsed, a media report said on Sunday.
Warnings by the Treasury that action had been taken to protect retail depositors in Kaupthing, Singer and Friedlander, may have led savers to think its assets had been seized, a lawyer for the government told Channel 4 television.
The following day the Icelandic government took control of the country's biggest bank and halted all trade on its stock market.
"They should have been aware that this would caused the collapse of the Kaupthing business in Iceland, which it seems to have done," Richard Beresford of Grunberg, Mocatta Rakison said.
"Certainly according to the Kaupthing board, this is their conclusion which they have reached.
"Then, yes, potentially the British government will be liable to shareholders and creditors of the Kaupthing Business in Iceland and therefore the potential compensation would be substantial ... potentially billions of pounds sterling."
A letter sent from the Prime Minister's office to Iceland's authorities this weekend made it clear Britain had only seized assets belonging to the UK subsidiary of collapsed Icelandic Bank Landsbanki, the programme said.
"To clarify the situation regarding Icelandic companies, I am confirming it is only Landsbanki's assets that have been frozen in the UK... No other Icelandic company's assets have been frozen."
A spokesman for Iceland's Finance Ministry told the programme: "It is no good telling us now that Kaupthing's UK assets have not be seized. It's too late, the whole bank has collapsed."
DIPLOMATIC relations between Britain and Iceland fell to an all time low tonight as a bitter row broke out between the deposed directors of Iceland's largest bank the Kaupthing and furious British Prime Minister Gordon Brown who is suing the Icelandic government for £1bn for failing to let British investors access their funds in Icesave, an internet banking arm of the no. 2 bank, Landesbankki, nationalised by Iceland on Monday. "It is quite illegal", stormed Mr. Brown in an interview with BBC's political commentator, Nick Robinson.
Kaupthing – among Britain's 20 largest banks – became the third financial institution to be taken over by the Icelandic government this week, after Chancellor Alistair Darling seized its UK operation on Tuesday and ruled out help through the bail-out.
Sigurdur Einarsson, the bank's chairman, said the seizure of the UK arm directly led to the collapse of the entire group. "It is very sad, unfortunate and disappointing," he said.
Meanwhile a fierce diplomatic row broke out between the UK and Iceland with Prime Minister Gordon Brown accusing Iceland of "completely unacceptable" behaviour by not recompensing UK savers in the failed Icesave bank. Mr Brown said he is freezing assets of Icelandic companies in the UK as a result.
Mr Einarsson said that Kaupthing wanted to take part in the UK government's rescue plan, but was rebuffed – the catalyst for its collapse just hours later.
"We are not Barclays, HBOS or Lloyds TSB, but I believe we are the twelfth largest bank in the UK and we were not allowed to participate in the rescue plan. We asked and the answer we got was a firm no," he said.
He added that a "significant number" of Kaupthing's 30,000 shareholders were British investors, whose stakes were wiped out when the Icelandic government put the bank into receivership yesterday.