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Iceland: Banking Collapse Trial of Former Prime Minister Begins

(Sept. 6, 2011) On September 5, 2011, the trial of Geir Haarde, former Prime Minister of Iceland, opened in the Landsdomur, a 15-member special court established to try criminal cases involving Cabinet ministers. Haarde faces charges of intentional or gross negligence in failing to prevent the country’s 2008 financial crisis, in which the banking system collapsed. The maximum penalty for the offense is two years’ imprisonment. (Julia Zebley, Trial Begins for Iceland Ex-PM over Role in Banking Collapse, PAPER CHASE NEWSBURST (Sept. 5, 2011).) It is reportedly the first time that the Landsdomur has convened to try a government minister. (Ex-Iceland PM’s Lawyers Ask Court to Drop Charges, THE ASSOCIATED PRESS (Sept. 5, 2011).)

The formal indictment delivered against Haarde was issued “by a sharply divided Parliament.” (Sarah Lyall, Ex-Premier Faces Charges for Iceland’s Fiscal Woes, THE NEW YORK TIMES (Sept. 4, 2011).) The proceedings were brought against him, according to the September 2010 Parliamentary Resolution, for

offences committed, purposely or with gross negligence, during the period from February 2008 through the beginning of October the same year, mainly for violations of the Act on Ministerial Responsibility, no. 4/1963, or, alternatively, violations of Article 141 of the General Penal Code, no. 19/1940. (Parliamentary Resolution on Commencing Legal Proceedings Against a Minister (Sept. 28, 2010).)

There appear to be five counts of indictment brought against Haarde:

  • serious nonfeasance of his prime ministerial duties in the face of major danger looming over Icelandic financial institutions and the State Treasury, a danger that he knew of or should have known of and would have been able to respond to by initiating measures … [to avoid] foreseeable danger to the fortunes of the State;
  • failure to take initiative on either his own measures or proposals regarding them, so that there would have been a comprehensive analysis of the financial risk by the administrative system;
  • neglecting to take active measures for the State to reduce the size of the Icelandic banking system;
  • failure to have followed up on and made sure that Landsbanki’s Icesave accounts in Great Britain were being actively transferred to a subsidiary; and
  • neglecting to ensure that the work of a government consultative group on financial stability and preparedness, set up in 2006, was more purposeful and results-oriented. (Id.)

According to the Act on Ministerial Responsibility, “ministerial responsibility” entails a minister’s personally carrying out, ordering to be carried out, or allowing to be carried out acts that contravene the Constitution of Iceland, or allowing a failure to carry out acts that are ordered thereunder or causing their execution to fail (art. 8(c)). A minister will be culpable under the Act if he carries out or causes to be carried out an act that will forseeably jeopardize the fortunes of the State, even if its execution is not specifically forbidden by law, or if he allows the failure to carry out an act that could avert such a danger or causes execution of such an act to fail (art. 10(b)). Those convicted of offenses under the Act, depending on the circumstances, are subject to loss of office, fines, or imprisonment for up to two years. (Act on Ministerial Responsibility, No. 4/1963 [selected articles in English translation] [cut and paste title in Google and choose “Quick View” under the title of the item at this url among the Google selections if access is blocked when try to click directly]; Lög um ráðherraábyrgð, No. 4/1963 (Feb. 19, 1963, in force on Mar. 18, 1963, as last amended effective Oct. 1,1998), Alþingi [Parliament of Iceland] website.)

Iceland’s General Penal Code prescribes that a civil servant found guilty of major or repeated negligence in his or her work will “be subject to fines or [imprisonment for up to 1 year.]” (as amended by Act 82/1998, art. 61). (The General Penal Code, No. 19 (Feb. 12, 1940), art. 141, Iceland Ministry of the Interior website.)

Haarde’s lawyers have reportedly argued for dismissal of the case on the following procedural grounds:

  • lack of a due probe having been conducted before the charges were brought;
  • a vague, unclear indictment, unbacked by specific arguments;
  • prosecutorial conflict of interest, given that the prosecutor in the case advised the parliamentary committee that proposed the indictment;
  • unclear procedural rules for the Landsdomur; and
  • lack of equal treatment, guaranteed under the Icelandic Constitution, because the court only indicted Haarde and not all four ministers implicated in the “Truth Report” issued by the Special Investigation Committee (SIC) that looked into Iceland’s banking collapse. (Zebley, supra; see also Chapter 21: Causes of the Collapse of the Icelandic Banks – Responsibility, Mistakes and Negligence, REPORT OF THE SPECIAL INVESTIGATION COMMISSION (SIC) (Apr. 12, 2010), SIC website.)

The website of Iceland’s Parliament, the Alþingi, has an overview in English of the impeachment process. (Description Based on the Provisions of the Act on a Court of Impeachment No.3/1963 [“of the prospective course of events following a resolution by Althingi to initiate legal proceedings against a cabinet minister for violation of the Ministers’ Accountability Act No. 4/1963”], Alþingi website (last visited Sept. 6, 2011).) Haarde has pleaded not guilty to the charges; the court is expected to make a ruling within four weeks. (Zebley, supra; see also Wendy Zeldin, Iceland: Former PM Pleads Not Guilty to Gross Negligence Charges in Banking Crisis, GLOBAL LEGAL MONITOR (June 13, 2011).)