Iceland's long-term capital controls challenged

Author: Amélie Labbé | Published: 28 Oct 2016

Iceland’s decision to lift a number of capital controls, which came into effect on October 21, has been met with mixed reactions - not least from holders of offshore krona, who are mounting a legal challenge against the government.

They claim that Iceland is discriminating against them by putting their holdings - worth in the region of ISK 180 billion ($1.6 billion) - in locked accounts, and forcing them to accept unfavourable terms to free the funds.

The government has defended its position to remove restrictions for individuals and smaller businesses first, saying it would not be wise to lift all controls at the same time. This move could derail the country’s newfound economic and financial stability.

"Capital controls were primarily the response to an economic question – how do we stop the Icelandic economy from collapsing?," said Guðmundur Ingvi Sigurðsson, partner at Lex. "The Central Bank and...