The Icesave Dispute: A Case Study into the Crisis of Diplomacy during the Credit Crunch

Abstract

The Icesave dispute Iceland fought with governments of the UK and the Netherlands revealed inherent weaknesses in the European financial system. Bringing forward tensions between public and private law and falling outside the framework of traditionally neatly compartmentalized law the ambiguity of responsibilities was testing understandings and interpretations of international relations. The paper explores how larger and more powerful countries were politically able to pressure a much smaller state in time of crisis into abiding to their own interpretation of international law and in doing so rallying behind them support of international organizations like the EU and the IMF. In January 2013 the EFTA Court finally ruled on the issue, vindicating Iceland of wrongdoing and refusing the UK’s, the Netherland’s and the EU’s claims. Studying the Icesave dispute contributes to understandings of production of international legality trough practices and contested interpretations in the international realm.