Iceland has won its case at the court of the European Free Trade Association (EFTA) to avoid paying back the governments of the Netherlands and the UK for not honouring deposit guarantees for savers in collapsed bank Icesave. The court decided that Iceland had not breached the deposit guarantee directive because its financial crisis was so big. It also ruled that the country had not discriminated between its own depositors and those in the Netherlands and the UK.

The case arose after Icelandic bank Landsbanki had attracted international savers to accounts under the Icesave brand by offering high interest rates. When the financial crisis hit, the failed bank did not have sufficient funds to pay out depositors, forcing the governments of the Netherlands and the UK to foot the bill. The countries demanded Iceland pay back the money but their request was rejected in two national referendums.

Judges at the EFTA court rejected that Iceland had any obligation to pay back the funds, writing that the deposit directive “aims expressly to preclude an excessive shifting to the state of the costs arising from a major banking failure.”

Commenting on the case, the Icelandic Foreign Ministry said in a statement: “It is of considerable satisfaction that Iceland’s defence has won the day in the Icesave case; the EFTA Court ruling brings to a close an important stage in a long sage.”