Council claims "huge victory" in Icelandic bank funds fight

The council was informed this week that UK local authorities had been successful in defending their ‘priority’ creditor status in relation to their attempts to recover assets from Landsbanki, an Icelandic bank which went into liquidation in 2008.

The Icelandic District Court had already ruled that local authority deposits such as Wychavon’s should have priority status. But this was contested by other creditors who claimed the money was an investment, not a deposit, and should therefore not be protected.

Council leader Paul Middlebrough, who had previously expressed confidence in getting the money back, said this week: “We are delighted the Icelandic Supreme Court has found in favour of local authorities and other UK wholesale depositors.

“This judgement over the test cases means that UK local authorities have been recognised as deposits with priority status over other creditors’ claims.

“It means they will be paid first when it comes to getting their money back and will recover almost all of the money they had on deposit with the failed Icelandic banks.”

“This decision, which comes more than three years after the banks failed, is a huge victory.”

Some district councillors had been critical of the ongoing dispute, claiming it had already cost local taxpayers £342,000 in legal costs.

But Wychavon’s deputy managing director Vic Allison explained this money was an “impairment figure”, ie. an accounting adjustment to reflect the risk of not being paid the full amount of the original deposit from Landsbanki’s limited assets.

Coun Middlebrough added: “The way in which the Local Government Association and our legal advisors have coordinated the legal action with other local authorities has minimised legal costs while enabling us to advance the strongest possible arguments to secure this result.

“The cost of the litigation to date amounts to less than one per cent of the amount we expect to recover.”