Former President of the European Court of Human Rights confirms findings

Róbert R. Spanó, former President of the European Court of Human Rights, professor at the Faculty of Law of the University of Iceland and visiting professor at the Faculty of Law of the University of Oxford in the United Kingdom, has confirmed the findings of LOGOS Legal Services on the matter of ÍL-sjóður. This is set out in an opinion by Róbert that the Icelandic pension funds have received.

The Icelandic pension funds asked Róbert to assess the premises of, on the one hand, the memorandum by Landslög - lögfræðistofa for the Minister of Finance and Economic Affairs, and, on the other, the opinion by LOGOS Legal Services for the Icelandic pension funds, and to state his position on the premises underlying the main conclusions, in particular as regards the protection of property rights in claims under bonds issued by the Housing Financing Fund, now ÍL-sjóður, in light of the provisions of the Constitution and the European Convention on Human Rights. The occasion for this is the Minister's stated plans for a possible winding-up and bankruptcy of the fund by law.

Róbert's conclusions are unequivocal and consistent with the LOGOS opinion. Róbert considers that such measures by the legislature would be contrary to the Constitution and the European Convention on Human Rights. He also concludes that a winding-up and bankruptcy of ÍL-sjóður on the basis set out in the Minister of Finance and Economic Affairs' report to Alþingi from October would amount to an expropriation that could not be carried out without full compensation to the pension funds, which would, among other things, need to reflect ÍL-sjóður's contractual obligations to pay interest into the future.

More specifically, Róbert's main conclusions are as follows:

1. Claims under three bond classes, issued by the Housing Financing Fund in the 2004 exchange offer, are fully considered „possession“ („possession“) within the meaning of Article 72(1) of the Constitution and Article 1 of Protocol No. 1 to the ECHR, including their principal, indexation, accrued interest and fixed contractual interest (3.75%) up to the maturity dates in 2024, 2034 and 2044.
2. Legislation, such as that discussed in the Minister of Finance and Economic Affairs' report to Alþingi on ÍL-sjóður, that would authorise bankruptcy proceedings for ÍL-sjóður, or another comparable winding-up or financial settlement of the fund, constitutes an expropriation of the portion of bondholders' claims that would not be fully honoured under the terms of the bonds. Such legislation would therefore need to satisfy the requirements of Article 72(1) of the Constitution and Article 1 of Protocol No. 1 to the ECHR.
3. Nothing in the Minister of Finance and Economic Affairs' report to Alþingi on the position of ÍL-sjóður sufficiently indicates that the legislature has authority, under Article 72 of the Constitution or Article 1 of Protocol No. 1 to the ECHR, to enact legislation on the winding-up and bankruptcy proceedings of ÍL-sjóður that would cause claims under the bonds to fall due and their principal, together with indexation and accrued interest, disregarding contractual interest after that point, to be settled out of the bankruptcy estate's assets and then by payment from the Icelandic state on the basis of the state guarantee, without such legislation giving rise to a liability to compensate on the part of the Icelandic state towards bondholders.

Opinion of Róbert S. Spanó regarding the ÍL-sjóður matter