The rejection by Iceland’s voters of a compensation agreement with the United Kingdom and the Netherlands is set to complicate the country’s bid to join the EU. 

In a referendum on Saturday (9 April), 60% of voters rejected a bill to compensate the British and Dutch governments for losses incurred by their account-holders with Icesave, an online bank, when it collapsed in the autumn of 2008, together with Iceland’s financial system. When Iceland’s voters rejected an earlier agreement a year ago, the government succeeded in negotiating improved conditions with the British and Dutch. Saturday’s rejection, by contrast, is expected to lead to international litigation that could take years to run its course, destroying Iceland’s government’s hopes of swift membership negotiations.

The European Commission has described the matter as a “bilateral” issue and maintains that there is no formal, direct link between Icesave compensation and membership talks. But the UK and the Netherlands have made it clear that Iceland can hope to join the EU only if it resolves the matter.

The two sides are currently assessing the extent to which Iceland has implemented the EU’s body of law in each of the 33 policy areas into which accession talks are divided. Actual talks are expected to begin later this year.

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‘Final’ warning

Following Saturday’s rejection of a negotiated settlement, litigation is now expected to commence at the Court of the European Free Trade Association (EFTA). The EFTA Surveillance Authority warned on Monday (11 April) that it will refer Iceland to the Court for its breach of the rules governing the European Economic Area (EEA), which gives EFTA members Iceland, Lichtenstein and Norway access to the EU’s internal market. The Authority had found last May that Iceland’s refusal to reimburse Dutch and British accountholders with Icesave had breached EEA rules.

A diplomat said: “We will hold Iceland to its promises, also in the context of the accession negotiations.”