On Tuesday the government of Iceland announced it had hired Cleary Gottlieb Steen & Hamilton to advise on a new round of negotiations with the U.K. and Netherlands over losses suffered by Iceland’s banks. Donald Johnston, the founding partner of Canadian firm Heenan Blaikie and former secretary-general of the Organization for Economic Co-operation and Development (OECD), is also advising Iceland’s government.
Cleary corporate partner Lee Buchheit, an expert on sovereign debt management, international transactions, and project finance, is leading the firm’s team on the matter. Buchheit and four other attorneys from the firm previously advised the Iraqi government on how to shed its massive $120 billion debt load accrued under former president Saddam Hussein, according to sibling publication The National Law Journal. The New York-based Buchheit has also has handled sovereign debt restructurings for Russia and Argentina.
Iceland is facing a similar challenge. A little more than a year ago, the country’s economy went into a deep freeze as the nation’s over-leveraged banks collapsed in the midst of the global banking crisis. The Am Law Daily spoke with one sleep-deprived Icelandic lawyer at the time and several firms were tapped to advise on the process of nationalizing the north Atlantic island nation’s three largest banks.
The demise of the country’s banking sector jeopardized the savings of foreign depositors and led the British government to take the controversial step of invoking antiterror legislation to freeze the U.K. assets of Landsbanki, Iceland’s second-largest bank. Roughly 300,000 depositors in the U.K. and another 100,000 in the Netherlands had accounts with Landsbanki’s online banking arm, Icesave.
The British and Dutch governments compensated depositors’ losses and then in turn sought reimbursement from Iceland under provisions in European Union law. The three sovereigns reached an agreement last summer called the Icesave bill, which would repay nearly $6 billion to the U.K. and the Netherlands, but leave Iceland deeply in debt.
The U.K. Treasury was advised on the agreement by Slaughter and May finance partner Andrew McLean in London, while the Dutch government turned to finance partner Jan Marten van Dijk from De Brauw Blackstone Westbroek in Amsterdam, according to a report by The Lawyer.