Icelandic court upholds KSFIOM appeal

Depositors who lost money with Isle of Man-based Kaupthing Singer & Friedlander finally have confirmation that the parental guarantee issued by the bank is valid and binding.

KSFIOM Depositors Action Group (KSFIOMDAG) has been informed by its Icelandic lawyers that their appeal in relation to the parental guarantee has been won. The Supreme Court of Iceland ruled on 10th June 2011 that the guarantee signed by the Icelandic CEO on behalf of Kaupthing hf was valid and binding on the bank.

Depositors with the failed Isle of Man-based bank have always argued that it was the parental guarantee advertised in marketing literature that helped persuade them to deposit funds with the bank. KSFIOMDAG said it welcomed the decision, although it was unhappy about the length of time it has taken to get to this stage. "Despite the efforts of the IOM authorities to play down the potential value to creditors of the contested guarantee which, on their own admission, they did nothing to verify when it was put in place and widely advertised in promotional literature, we estimate that the now validated guarantee may eventually be worth 6 to 8 p/£ to creditors, assuming a pay-out of around 25% from Kaupthing," commented KSFIOMDAG.

The action group is now calling upon the Isle of Man and UK governments to implement the loan trust, which they believe is fully recoverable, and allow hard-pressed depositors to recover their funds sooner rather than later.