The resolution committee of the old Kaupthing Bank, which has now been nationalized, has decided to sue British authorities with support from the Icelandic state for seizing Kaupthing’s subsidiary in the UK in October 2008.

British authorities seized the control of the deposits of Kaupthing Edge on October 8 and afterwards a moratorium was put on the payments of Kaupthing’s subsidiary in London, Kaupthing Singer & Friedlander, Morgunbladid reports.

Kaupthing headquarters in Reykjavík. Copyright: Icelandic Photo Agency.

“We believe that it is of great importance to find out whether laws in the UK were violated, damaging Icelandic interests,” Prime Minister Geir H. Haarde said at a press conference yesterday.

The Kaupthing resolution committee has until 4 pm tomorrow to file the lawsuit. According to Haarde, the Landsbanki resolution committee has a longer time limit to decide whether British authorities should also be sued for freezing the bank’s Icesave deposits in the UK, Fréttabladid reports.

Haarde said four British law firms have worked on reviewing the case with Kaupthing and that one of these law firms will represent the bank.

The prime minister emphasized that Kaupthing’s case is not at all related to the agreement on the Icesave deposits, which is being worked on by Icelandic and British authorities on political grounds. The lawsuit will neither strengthen nor weaken Iceland’s position in the Icesave negotiations, he claimed.

Haarde added that the resolution committee of Kaupthing, and the committees of the other nationalized banks, have the right to seek their legal rights and protect the interest of the banks they represent and the interests of the banks’ loan granters.

“There is nothing unusual about people seeking their rights. It is just part of our constitutional state, both here and in Britain, and I believe that everyone, right-minded people in Britain, would admit that people have the right to do so,” Haarde said.

Haarde does not fear the outcome of Kaupthing’s case against British authorities. “I have reasonable faith in British courts,” he said. The prime minister added that Kaupthing’s case may also be taken to the European Court of Human Rights in Strasbourg.

In regards to how much the lawsuit could potentially cost the Icelandic state, Haarde commented, “Sometimes it can be expensive to seek one’s rights. But there is also a question of whether the outcome of this case could lead to a compensatory case against the British state and then all ideas of cost would naturally change.”

The prime minister said he could not estimate how likely it is that Kaupthing will win the case against British authorities.

Click here read more about Kaupthing’s preparations for the lawsuit and here to read more about Landsbanki and Icesave.