Now time has passed and tempers have cooled a little, I want to look back at that, because it seems to me to be a wrong-headed view, and it distracts from some real issues concerning terrorism and civil liberties.
Terrorism
I am as concerned as many over the erosion of civil liberties, which has been justified in part by the government on the basis that it is a government's primary duty to keep members of the public safe, including safe against terrorist outrages. This is a false or at best simplistic analysis on a number of grounds. First, there is no such thing as "safe". Life only offers degrees of risk - degrees of risk about whether you are going to be run down by a car as you walk down the street, as well as degrees of risk about whether you are likely to be blown up by a terrorist when walking down the same street (the former is incidentally considerably more probable than the second). The government is not a one-issue pressure group and must reach a balanced judgement on policy. In this case the balance is between reducing the frequency of criminal killings (or at least, increasing the frequency of being able to mete out justice to those guilty of the killings) on the one hand, and the creation of an invasive "Big Brother" society on the other.
So, for example, the police in England, Wales and Northern Ireland (but not Scotland) have power to take compulsory DNA samples from those arrested and are thereafter under no obligation to destroy them even if the people concerned are subsequently found to be innocent or indeed are never even charged once the investigation is complete. The police now hold over 1.4 million such samples of which over half are from people who have not been convicted of any offence. I was disturbed to see Harriet Harman justify this on the Andrew Marr Show at the weekend on the ground that it assisted in the conviction of rapists. No doubt it does, and rape is indeed a horrible crime, but if the efficiency of obtaining criminal convictions is the sole criterion of policy then let's just introduce the police state now; and this is from a former legal officer of the National Council for Civil Liberties. Road accidents can also be avoided by adopting Pol Pot policies for the banning of all vehicular traffic and establishing a rural paradise. (As an aside, I was pleased when the European Court of Human Rights found in December that a blanket and indiscriminate policy of the kind the government has presently adopted on DNA retention is contrary to the European Convention.)
But I have never fully gone along with the public reaction against the action on the part of the government in protecting UK assets in the case of Landsbanki and Kaupthing. This reaction seems to be based on the proposition that the title of the "Anti-Terrorism, Crime and Security Act 2001" (which is the enactment which contained some of the powers used by the UK government) has the word "terrorism" in it. It also contains the words "crime" and "security". First a run down on some of the facts.
Landsbanki, Glitnir and Kaupthing
On 7 October the Icelandic government stepped in and took control of the Landsbanki bank because of the considerable excess of its liabilities over its assets. It announced that it would do all it could to protect the savings of the bank's Icelandic customers, but this commitment did not in its terms extend to its foreign savers. In addition, the UK government stated that the Icelandic government had been unable to confirm that it would meet its obligations to cover the first £16,000 of sums invested in the bank by foreign savers. There appears to have been, amongst other things, a telephone exchange1 which included:
UK Chancellor: "So the entitlements the people have, which I think is about £16,000, they will be paid?"Later on 7 October the Icelandic government also took control of another bank, Glitnir.
Icelandic Finance Minister: "I hope that will be the case. I cannot state that or guarantee that now but we are certainly working to solve this issue."
The UK government described the special treatment of Icelandic savers, and the refusal to give a straightforward answer to a straightforward question on depositor insurance, as "effectively illegal" (they were perhaps too nice to say that a failure to meet insurance obligations would be "effectively theft"), and the UK government clearly felt that more might be on the way. Frankly, the loss of savings already in Iceland was probably not a surprise to the government, and international defaults do from time to time occur at times of crisis. What it appears that the UK government feared was that such good assets of Landsbanki as it possessed in the UK, and assets of UK subsidiaries of the Kaupthing bank, would be siphoned off in the direction of Iceland, leaving UK savers in those banks high and dry. As any government would and should do in these circumstances, it looked at its options.
UK government action
There were a number of possible routes the UK government could follow to protect UK savers' assets from disappearing abroad, but the most straightforward with respect to Landsbanki and its Icesave operation (which did not operate via UK subsidiaries), and the one which presumably the government on legal advice considered was the most likely to limit the loss of UK savings, was offered by section 4 of the Anti-Terrorism, Crime and Security Act 2001. This provides:
"4(1) The Treasury may make a freezing order if the following two conditions are satisfied.Acting under these powers, on 8 October the Landsbanki Freezing Order 2008 was made by the Treasury, freezing Landsbanki assets in the UK at 10.10am.
(2) The first condition is that the Treasury reasonably believe that—
(a) action to the detriment of the United Kingdom’s economy (or part of it) has been or is likely to be taken by a person or persons, or
(b) action constituting a threat to the life or property of one or more nationals of the United Kingdom or residents of the United Kingdom has been or is likely to be taken by a person or persons.
(3) If one person is believed to have taken or to be likely to take the action the second condition is that the person is—
(a) the government of a country or territory outside the United Kingdom, or
(b) a resident of a country or territory outside the United Kingdom.
(4) If two or more persons are believed to have taken or to be likely to take the action the second condition is that each of them falls within paragraph (a) or (b) of subsection (3); and different persons may fall within different paragraphs."
The Treasury shortly after made the Kaupthing Singer & Friedlander Limited Transfer of Certain Rights and Liabilities Order 2008 under banking legislation, providing arrangements for the taking over and transfer of the assets of the UK subsidiary companies of Kaupthing to ING Direct NV (a Dutch company). Following the making of this order, Kaupthing went into administrative receivership in Iceland (it is in administrative protection but not technically bankrupt) - following the bursting of the Iceland bubble its only worthwhile assets were those of its successful overseas subsidiaries - and some other European countries also made transfer of assets orders of Kaupthing subsidiaries under their own banking legislation. Whether this was linked to fears about the flight of assets is not entirely clear, as the Financial Services Authority appears to have separately reported on 8 October that the Kaupthing subsidiary no longer met its threshold conditions for FSA authorisation due to lack of funding (something not related to its Kaupthing parent except to the extent that there would have been issues about the ability of the parent to further capitalise its subsidiary to bring it within the rules - it probably could not).
I have to say that, had the UK government failed to take emergency steps to protect UK assets in order to prevent them being exported to Iceland, then I think they would rightly have been subject to very substantial criticism. Faced with an Icelandic bank with substantial UK investors having become effectively worthless, an Icelandic government announcing investor protection arrangements only applying to Icelandic nationals, and the havering of the Icelandic Finance Minister over even meeting its insurance obligations at a time when every second counts in terms of capital movements, would have been extremely worrying. The discriminatory treatment against non-Icelandic investors was also probably contrary to the Icelandic government's obligations relating to the European Economic Area (both the Dutch and UK governments are of that view, disputed of course by the Icelandic government).
Icelandic view
Many people in Iceland, including the Icelandic government, seem to be upset about the actions of the UK government, and also at action taken by the Dutch government to protect their investors. The Icelandic government have abandoned proposals to take the UK government to court in the UK by way of judicial review for the freezing of Landsbanki assets, but say that they will bring proceedings before the European Court of Human Rights on Landsbanki. They say they intend to bring judicial review proceedings in the UK in respect of Kaupthing, but they are surely now out of time to do so.
One feels every sympathy with the predicament of the people of Iceland, who having had a significant proportion of their national economy built on a bubble have been victims of their bankers' irresponsibility and avarice to a considerably greater extent than have the people of the UK (and it has been bad enough in the UK); I can also understand why, given the predicament of the Icelandic economy, the Icelandic government might choose to abandon its obligations to those outside Iceland. However, watching UK assets disappear north-westwards is not an option. Furthermore, Part 2 of the 2001 Act (within which section 4 is situated) is not only or even primarily concerned with terrorism, but with economic damage, which undoubtedly would have been caused had there been an exporting of Landsbanki assets to Iceland. Part 2 is most definitely not intended for use in dealing with the proceeds of terrorism, as some have suggested (it is section 1, in Part 1, which does that). Having decided to put its own nationals first with the remaining assets at its disposal - as I say, understandable in the circumstances - it seems odd for the Icelandic government then to complain about the UK government doing the same for UK nationals.
One also has to ask what point the Icelandic government are trying to make on Landsbanki, other than enjoying pointing blame away from themselves by whipping up hysteria against Gordon Brown and Alastair Darling. Everyone agrees Landsbanki is and was bust, and had already ceased trading by the time the freezing order was made. So the Icelandic government seriously wants to argue in the European Court of Human Rights that it was not only lawful for them to move money contributed by UK investors out of the UK for the purposes only of compensating Icelandic savers, but it was also unlawful for the UK government to prevent them from doing so?
Kaupthing is a slightly different case because the making of the transfer order under banking legislation for the transfer of its UK subsidiary's assets appears to have triggered the parent company's move into administration in Iceland. However if it is correct that by 8 October the Kaupthing subsidiary had failed to meet UK funding requirements then some intervention would have been required given that by 8 October it would probably have been impossible for it to re-capitalise.
Part 2 of the Anti-Terrorism, Crime and Security Act 2001
What of Part 2 of the 2001 Act though?
It is a requirement of the making of an Order under section 4 that the Treasury must have reasonable grounds for believing action to the detriment of the United Kingdom's economy is intended, and in order to continue in effect the order must be approved by both Houses of Parliament within 28 days. An order can only last 2 years, and must be reviewed by the Treasury.
Perversely perhaps, the fact that freezing orders are subject to affirmative resolution in Parliament would make it more difficult to bring proceedings in court for judicial review on the ground that the Treasury's belief was not reasonable. Whether there should be a procedure for court approval as well as or instead of Parliamentary approval perhaps depends on where you think the balance between the judiciary and Parliament should lie in relation to such approvals, but it seems highly improbable that a court would have done anything except approve the freezing of assets in this particular case.
Part of the public criticism of the government about Landsbanki is almost certainly a reflection of general public disquiet over the extent to which terrorism and crime are being used as reasons (critics might say excuses) for the slow and apparently continuing erosion of our basic civil liberties. But in my view Landsbanki is not an example of this. Possibly we also see something of ourselves in "plucky little Iceland".
I am much more concerned about the creep towards a surveillance society, arbitrary police powers and the "you don't need to worry if you're not guilty" approach to human rights.
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1See eg the debate in Committee in the House of Commons on the freezing order here
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