In the aftermath of the 2008 financial crisis, one country stood out: Iceland was the one nation in the world which not only let its banks fail, but convicted the bankers responsible for the collapse of the country's financial system (incidentally, since then Iceland has been one of the world's economic success stories, with the economy growing over 7% last year). Now, nearly a decade later, Iceland’s ex-bankers, once reviled as symbols of crony and rogue capitalism, say they were scapegoats: and having been "improperly" jailed for their roles in the 2008 financial crisis, they’re now taking their cases to the European Court of Human Rights.
In 2008, after Iceland’s inflated financial system imploded, the three main banks Kaupthing, Glitnir, and Landsbanki collapsed. The government urgently nationalized them, then asked the International Monetary Fund (IMF) for an emergency bailout, a first for a western European country in 25 years. The crisis brought to light the bankers’ questionable practices, often involving artificially inflating the value of the banks’ assets by providing cheap loans to shareholders to buy even more shares in the bank. Thousands of Icelanders had thus placed their life savings in a house of cards.
What Iceland's bankers did was not unique: virtually every other bank around the globe at the time had countless employees who were doing the exact same thing, ending with a similar result - bank failures, bailouts and partial or entire nationalizations. However, only in Iceland were bankers prosecuted wholesale, and only in Iceland did they end up going to prison.
Since then, dozens of so-called “banksters” have been convicted, about 20 of them to prison, for manipulating the market.
Now, some of them now claim they didn’t get fair trials, and have turned to the European Court of Human Rights.
People protest in Reykjavik over the government's handling of the financial crisis
Acording to AFP, Sigurdur Einarsson, the former chairman of the board of Kaupthing, spent one year behind bars after being sentenced by an Icelandic appeals court to four years in prison before being released. He is critical of what he dubs Iceland’s “scapegoat” justice system, which he claims turned a blind eye to unlawful proceedings during his trial.
“Some of the judges were partial … because they had lost a lot of money during the economic crisis,” Einarsson told AFP in an exclusive interview in Reykjavik. This was not a just and fair trial. (This is) very important because Iceland praises itself for being a Western democratic country, and one of the key issues for that is having fair trials for everyone."
While it would have been informative to get his take, Einarsson had no comment on why judges in other countries refused to prosecute any of his peers: surely it wasn't just Iceland's judicial branch that "lost a lot of money" during the economic crisis? In any case, Einarsson was especially critical of a Supreme Court judge who was allowed to rule on his case: the judge’s wife was on the board of the financial regulator during the collapse, his daughter worked at the Ministry of Economy and Finance, and his son was the chief legal advisor to the winding-up committee of Kaupthing.
Einarsson and his lawyers also claimed his rights were violated in the case, including illegal phone taps and excessive custody detentions. After he contacted the European Court, it then addressed a series of questions to the Icelandic government in June 2016. Reykjavik answered a first time in December, then a second time in March, with a 64-page document of which AFP has obtained a copy.
Without denying the Supreme Court judge’s family ties, the Icelandic government rejected the ex-banker’s arguments outright.
All in all, it wrote, “no violation of the applicant’s rights under Article 6 and 8 of the European Convention of Human Rights has taken place”.
The Court told AFP it had received nine appeals linked to the Icelandic bankers’ trials. Einarsson’s is the only one it has begun to study.
Ironically, Einarsson readily admits that some of the banking “practices” would never have been approved today, but he distinguishes between doing “something illegal and something commercially wrong”. Perhaps it was this apriori distinction that prevented other judges from seeking legal recourse against other "crisis" bankers.
Speaking of "commercial wrong", Kaupthing’s collapse is one of the biggest in history in terms of assets, at $83 billion. While a far cry from Lehman Brothers at $691 billion, in the context of Iceland's far smaller economy, the failure was even greater, and led to huge losses for a majority of the island nation's small population.
For better or worse, however, the banker revisionism may not have much traction.
Eva Joly, the French-Norwegian judge who advised Iceland’s special prosecutor on the cases linked to the financial crisis, says the ex-bankers’ attempt to seek vindication from the European Court was “classic” behaviour from the “ruling elite” after being found guilty of their ways. “Men of power always resort to legal means,” Joly told AFP. Iceland’s bankers benefitted from advice from “the best lawyers”, while judges were drowning in cases and working with little means, she said. “Iceland rented out its coast guard to African countries in order to finance” the investigations, she said.
Don't call it a comeback just yet...
The island is now abuzz with rumours about the return of some of the bankers to centre stage, this time in Iceland’s flourishing tourism sector. Finance Minister Benedikt Johannesson sees no problem with that.
“I think people can improve. They should be allowed to be in business as long as they stay within the law,” he told AFP. No recent surveys have been conducted on Icelanders’ opinion of the ex-bankers. But those questioned on the streets of Reykjavik are rarely forgiving.
“I doubt people feel much sympathy for them,” says Kristjan Kristjansson, a 52-year-old who says he lost “a little” money in the crisis.