Lex Law Offices fields a seasoned team of experts, with decades of experience advising banks, financial institutions, and a range of other prominent market participants. The department has notable strength in ESG matters, and during 2023 advised investment banking company Natixis on a $100m senior secured green term loan financing to Verne Global. Department head Ólafur Haraldsson has expertise in loan and security agreements, corporate financings, and restructurings. Other core team members include Supreme Court Attorney Guðmundur Ingvi Sigurðsson, whose primary strengths are in corporate finance and debt restructuring work, and capital markets specialist Stefán Orri Ólafsson. Eva Margrét Ævarsdóttir, who made partner in January 2023, is a leading name for green and sustainable lending.
‘The team I had was outstanding. Caring and fighting for my interests. Made the legal jargon simple for a novice to understand, and taught me a lot.’
‘They are on top of things, they were aggressive enough to remind the legal counsel of my investors to know their place and made me never feel alone.’
‘Leaders in Icelandic jurisdiction in a wide range of settings. Very pragmatic and commercial. Can find solutions to unusual problems.’
‘Lex is a leading firm in Iceland with excellent and experienced attorneys. Stefán Orri Ólafsson is the authority on securities law in Iceland.’
‘Stefán Orri Ólafsson is highly skilled and experienced in capital markets and banking law.’
Key clients
Kaldalón
Íslandsbanki
Stefnir hf.
Íslandssjóðir
Landsbréf hf.
Kvika Asset Management
atNorth Holding AB
Treble Technologies
Alfa Framtak hf.
Apax Partners LLP
Natixis
Centerbridge Partner Europe LLP
Vitar games ehf.
Arion banki
Work highlights
Representing the creditors of Kaldalón hf., an Icelandic listed real estate company, with regards to the security agency structure. The security agency related to a ISK30bn base prospectus and separate bank loans up to ISK10bn.
Acting as the lead legal counsel to Apax Partners which is financing the growth of the Icelandic company Controlant hf. by lending it $40m.
Advising Natixis on the Icelandic aspects of a senior secured green term loan financing to Verne Global hf., which is a leading data centre platform in Iceland wholly powered by renewable energy.
Lex Law Offices takes a leading role on numerous high-profile domestic and international transactions, providing clients with a comprehensive array of services due to the firm’s full-service offering. The group has experience working across a diverse array of sectors, including the real estate, retail, and energy industries, and regularly acts for private equity clients. Leading the department are Guðmundur Ingvi Sigurðsson, whose key specialisms are corporate finance work and debt restructurings, and managing partner Örn Gunnarsson, whose practice additionally covers M&A and share capital transactions. Tax specialist Garðar Víðir Gunnarsson and Stefán Orri Ólafsson are also key names.
‘There is a team of experts within LEX with extraordinary good know how.’
Key clients
Festi hf.
Kaldbakur ehf.
Alfa Framtak hf
Síldarvinnslan hf.
Carbfix hf.
VEX ehf.
Fossar Investment Bank hf.
Sjová hf.
First Water Salmon from Iceland hf.
Reykjastræti ehf
ADG ehf.
Indie Holdings. S. A.
101 Seafood ehf.
Work highlights
Advising Festi hf., an Icelandic listed holding company focusing on various retail industries, on its acquisition of Lyfja hf., a local pharmacy.
Advising First Water hf. from the outset on all corporate and commercial issues concerning inter alia the company setup and structure, corporate governance, expansion, financing, etc.
Acted as lead counsel and adviser to Alfa framtak when AU 22 ehf., a fully owned subsidiary of Umbreyting II slhf., a private equity fund operated by Alfa Framtak ehf., made a voluntary offer to shareholders of Origo hf. in line with the ‘Takeover Act’.
Lex Law Offices‘s team is experienced in both litigation and arbitration proceedings, and represents clients at all levels of the Icelandic judicial system, including the Supreme Court, where the team is regularly active. The group attracts a diverse range of prestige clients, including commercial and investment banks, shipping companies, insurance companies, and public institutions. Supreme Court attorney Kristin Edwald is a leading name in insurance and corporate disputes, and co-leads the department alongside Arnar Þór Stefánsson, a seasoned litigator with broad sector expertise. Óskar Sigurðsson specialises in real estate disputes, while Garðar Víðir Gunnarsson is an energy expert with notable strength in arbitrations.
‘Broad coverage of knowledge that can handle most areas.’
‘Quick response and effective work.’
‘The team is very good.’
Key clients
ADG ehf. (AERO Design Global)
Kara Connect ehf.
ST ehf.
Bláfugl ehf. airline (Bluebird).
Bondholders of WOW air hf.
Samherji hf.
Landsbankinn hf.
Arion banki hf.
Frigus II ehf.
Nýr Landspítali ohf. (The New National Hospital)
Fjallabyggd Municipality
Thordur Mar Johannesson
Lífeyrissjóður Verslunarmanna – Pension Fund of Commerce
Salt Pay IIB hf.
Sjóvá-Almennar Insurance
Municipality of Árborg
Hejsa ehf.
Work highlights
Representing Landsbankinn hf. in a case brought by a former owner of a payment card company against the bank and certain other financial institutions claiming tort liability.
Representing Lifeyrissjodur Verslunarmanna in a dispute where X, a fund member, is challenging a change made to the pension fund’s amendments that were implemented in December 2022.
Representing Nýr Landspítali ohf., the entity tasked with administering the New National Hospital project (NLSH), before the Public Procurement Complaints Commission in a case regarding a complaint lodged by a bidder in tender on the total Exterior Wall System for NLSH.
Lex Law Offices provides clients with the full suite of employment services, including handling due diligence work, compensation schemes, and employment agreements, in addition to advising employers on cases of harassment, wrongful termination, and the interpretation of collective bargaining agreements. The department has a track record in acting for international clients operating within Iceland, while also catering to a broad domestic client base, including the Municipality of Árborg.Arnar Þór Stefánsson leads the department, and is experienced in representing public entities, businesses and individuals in litigation. Garðar Víðir Gunnarsson and Lára Herborg Ólafsdóttir are also key members of the team.
Representing Bláfugl ehf. airline (Bluebird) in a lawsuit filed by 10 former pilots claiming damages from the company due to termination of employment contracts.
Acted as legal counsel for the Municipality of Árborg in two court cases against the municipality by two former employees who claimed they had been wrongfully terminated.
Provided assistance to Tempo ehf., a software company,on updates to its employment agreements and agreements with independent contractors, in line with the most recent collective agreements.
Lex Law Offices's long-established team offers comprehensive coverage of shipping and the transport of goods, with areas of expertise including contracts of carriage, sea way bills, shipbuilding contracts, and sale and purchase agreements. Major shipping company Samskip is a long-term client of the firm, receiving advice on a broad range of contentious and non-contentious mandates. Team lead Lilja Jónasdóttir, praised by clients for her 'experienced know-how', is a specialist in the practice area with supplementary knowledge of insurance and tort law. Guðrún Lilja Sigurðardóttir made partner in January 2023 and advises both domestic and foreign companies on maritime and shipping law.
‘Lilja Jónasdóttir has it all. Experienced know-how in her profession. Quick in responding, fast to get situation overview, easy to reach at all times, well-connected with the local environment and authorities. Good communicator with everyone at all times.’
‘I am happy to be able to say that in my opinion they are the best in Iceland in all areas but especially in maritime law, particularly Lilja Jónasdóttir.’
Key clients
Samskip hf.
Samherji hf.
Jonar Transport ehf.
SKULD
Síldarvinnslan hf.
Codan Forsikring
Skinney-Þinganes hf.
Gjögur hf.
Sjóvá Almennar Insurance
Íslandsbanki hf.
Nesskip
Work highlights
Assisting SKULD, the P&I club, and owners with all aspects regarding the Wilson Skaw, which stranded at Húnaflói in Iceland on 18th April 2023.
Acted as adviser to buyers on a takeover bid for a large fisheries company in Iceland.
Represented Sjóvá-Almennar Insurance in a dispute on the statute of limitation of claims made by sailors in special accident insurance.
Lex Law Offices acts for prominent public and private clients in the real estate space, and boasts significant strength in the energy sector. Public procurement and local planning work are key areas for the firm, which has been representing Nýr landspítali in a €47m dispute with a bidder in a tender for the exterior wall system of the New National Hospital project. The group benefits from close ties with major domestic engineering companies and contractors, with experience advising on a broad range of projects. The department is co-led by litigators Óskar Sigurðsson and Arnar Þór Stefánsson. Garðar Víðir Gunnarsson advises domestic and international clients on real estate investments, and has particular strength in the tourism sector, while Guðjón Ármannsson is a key name for property litigation.
Advising Reykjastræti ehf., on all corporate and commercial issues concerning the setup of a Reykjastræti as a Real Estate Holding Company.
Defended the interests of Fjallabyggd municipality when the company Selvík ehf. claimed recognition of damages due to a contract for the development of the town Siglufjorður.
Representing Nýr Landspítali ohf., the entity tasked with administering the New National Hospital project, before the Public Procurement Complaints Commission in a case regarding a complaint lodged by a bidder.
Lex Law Offices is highly respected for its expertise in financial restructurings and bankruptcy procedures, with market-leading proficiency in liquidating high-profile estates and companies. Areas covered by the team include moratoria, cessation of payments, and forced agreements with creditors. Financial restructuring specialist Guðmundur Ingvi Sigurðsson leads the practice alongside Þórhallur Bergmann, an expert in bankruptcy proceedings, and Birgir Már Björnsson, whose practice covers both contentious and non-contentious bankruptcies. Other core team members include Arnar Þór Stefánsson, a key contact for litigation, and associate Kara Borg Fannarsdóttir.
Advising on the bankruptcy proceedings of Torg ehf. one of the largest companies in the Icelandic media market.
Advising on the bankruptcy proceedings of Jötunn Vélar ehf., a commercial distributor of agricultural machines with an annual turnover of ISK2.7bn before its bankruptcy.
Advising on the bankruptcy proceedings of the owner and operator of the fine dining restaurant “Héðinn Kitchen and Bar” located in downtown Reykjavík.
Lex Law Offices has a long history in the IP and IT spaces, and fields a team praised by clients for its ‘strong sense of professionalism and integrity’. The department has broad IT sector strength, and acts for a client base of software and telecoms companies and financial institutions, in addition to comprehensive IP expertise across trade marks, patents, and portfolio management issues. The ‘highly professional’Erla Árnadóttir co-leads the department alongside Lára Herborg Ólafsdóttir; Árnadóttir is a specialist in IP and IT matters, with further expertise in GDPR work, while Ólafsdóttir is a key contact for public procurement law and acts for prominent multinational technology companies. Senior associate María Kristjánsdóttir is an expert in IP law, and acts as managing director at firm subsidiary, IP boutique GH Sigurgeirsson IP.
‘LEX exhibits a strong sense of professionalism and integrity in their work. LEX consistently adheres to the highest ethical standards, ensuring that all trade mark matters are handled with the utmost confidentiality and discretion. In our experience, LEX shows unwavering commitment to protecting their clients’ interests, establishing them as a trusted and reliable law firm.’
‘María Kristjánsdóttir possesses extensive knowledge of the trade mark practice area, combined with a keen understanding of the complexities of the local and global IP landscape. Her ability to navigate through intricate legal frameworks and provide invaluable guidance to us has been truly commendable. In our experience with María over the years, she has shown exceptional attention to detail.’
‘Highly skilled team of experts in TMT and IP law, responsible in their recommendations and resilient in their follow-up.’
‘Erla Árnadóttir is one of the most experienced lawyers in Iceland in TMT and IP, quick to respond and highly professional in all her work.’
‘Wide area of knowledge. Skilled and knowledgeable staff.’
‘Very professional and easy to talk to. Provide in-depth meetings to fully understand the client’s needs. Their approach is problem-solving oriented, very thorough and applicable.’
‘Lára Herborg Ólafsdóttir is clearly number 1 in Iceland and beyond when it comes to knowledge in her field, and she can explain very clearly the most complicated terms and related topics for anyone.’
‘Lára Herborg Ólafsdóttir is an outstanding lawyer, detail oriented, efficient and an expert in her field. She also comes highly recommended in the technology sector.’
Key clients
Rekstrarfélag Sarps
Kara Connect
The Coca-Cola Company
Reykjavik Engergy
Carbfix ohf.
Tempo ehf.
Treble Technologies
Sharecurely ehf.
The Icelandic State
Ísey Export ehf.
Sýn hf./Vodafone
Yamaha Motor Europe N.V.
Samey Robotics ehf.
Tix eu ehf.
Work highlights
Advised the Cultural Heritage database Sarpur on concluding an agreement for the acquisition of a new computer system.
Taking care of trade mark portfolio management for Reykjavik Energy, and its subsidiaries, ON Power, Reykjavik Fibre Network and Veitur Utilities.
Assisting Sharecurely ehf., a successful software start-up company, with drafting license agreements, terms of use, privacy policy and records of personal data.
Lex Law Offices fields a team with comprehensive competition law expertise, with particular aptitude in relation to M&A issues. The group is highly experienced in merger notices and communication with competition authorities, and has a track record of working across a number of sectors. Competition law specialist Eyvindur Sólnes leads the team alongside Lára Herborg Ólafsdóttir, whose focus is on public procurement law. Eva Margrét Ævarsdóttir and Guðrún Lilja Sigurðardóttir both made partner in early 2023.
Handled the notification of a merger involving Reginn hf.’s public takeover bid of all shares in Eik hf., another company in the real-estate and property development sector.
Advising Festi on a transaction wherein Festi signed a purchase agreement, acquiring all shares in Lyfja ehf., a company that operates pharmacies around Iceland, including notification to the Icelandic Competition Authority.
Acted for Vátryggingarfélag Íslands and Fossar fjárfestingarbanki in obtaining the approval of the Icelandic Competition Authority for VÍS’s acquisition of Fossar.
Lex Law Offices advises clients on tax issues across a diverse range of work, including corporate financings, M&A, financial restructurings, and winding-up proceedings. Team lead Garðar Víðir Gunnarsson focuses on corporate taxation and cross-border investments, and is a prominent name for commercial arbitration proceedings. Guðrún Lilja Sigurðardóttir made partner in January 2023, and advises both large and small companies on tax and corporate law.
Acted on behalf of Hesja ehf., which is an importer and seller of all-terrain vehicles, in a dispute with the Icelandic Revenue and Customs authority regarding the customs classification of all-terrain vehicles.
Provided expert opinions in relation to legislative work at the Icelandic parliament, Althingi. This includes legal opinions on certain tax provisions and the impact and effects of potential legislative amendments.
Lex Law Offices >
Firm Profile
The firm: LEX is one of Iceland’s leading law firms, providing clients with a comprehensive, range of services on a wide spectrum of financial, corporate and commercial issues, as well as other aspects of the law.
It is the firm’s policy to meet the legal requirements of its clients in the context of ever-changing local and international markets.
Founded in 1959, LEX has over the past decades successfully acted on behalf of a large number of internationally respected corporations, organisations and private individuals both in Iceland and abroad.
Among LEX’s clients are major local and international banks, financial institutions, merchants and ship owners, along with a large number of municipalities, government organisations, insurance companies, manufacturers, businesses, media outlets, utilities and private individuals.
Main areas of practice: Banking, finance and capital markets: LEX has one of the most experienced banking and finance teams in Iceland and has established itself as a leading advisor to financial market participants.
Competition law: LEX has a robust team of experts in the field of competition law able to advise local and international firms alike in all aspects of the field. LEX has been engaged in many high profile cases that have been brought before the competition authorities and the Icelandic courts for various clients, including cases on alleged anti-competitive collusion and alleged abuse of dominance.
Constitution and human rights: LEX has extensive experience and expertise in all aspects of human rights law, in particular with the protections afforded by the human rights provisions of the Icelandic Constitution and the European Convention on Human Rights, which has legal force in Iceland.
Construction, public procurement and tendering law: For many years, LEX has enjoyed close and cooperative relationship with numerous major Icelandic engineering firms, contractors and public entities in preparation of their major projects.
Corporate and commercial law: LEX has one of the most experienced corporate and commercial lawyers in the country as many landmark ruling by the Icelandic courts establish. Furthermore, in complex transactions, the banking and finance teams has established itself as a leading advisor to financial market participants.
Corporate finance and project finance: A number of experts work at LEX who have participated in many of the largest and most complex financing deals in Iceland in recent years.
Data protection and information technology: For years LEX has provided businesses, institutions and individuals with extensive services in the field of IT law. The attorneys at LEX have a long standing experience in advising software developers, telecommunication companies and other entities that provide access to software solutions and that provide other services in the field of information technology. LEX has also been a leading law firm in implementing the General Data Protection Regulation (GDPR) in Iceland and has provided services to many of the largest companies in the country as well as to municipalities and official institutions. Furthermore, in terms of data security, LEX has been on the forefront, i.e advising many of the governmental institutions in that respect.
Employment and labour law: LEX have experienced professionals in the field of labor law and public employment law and can provide comprehensive advice on these sensitive areas of justice in a short period of time, as it is necessary to respond promptly to these issues.
Energy, natural resources and environmental law: LEX‘s team of experts in the field of energy, natural resources and environmental law is one of the most experienced in Iceland. In recent years, this practice area has become more important with growing demands for fundamental principles such as sustainability with respect to the land and its resources.
Environment, Social, Governance (ESG): ESG is in general referred to as the key factors used to evaluate companies’ performance and impact on ESG-related activities. Our experts in the field are experienced and knowledgeable in providing sustainability advice and can assist clients prepare for new requirements and seek new opportunities.
European law: The importance of European law strengthens every year and today it affects most areas of Icelandic laws. The lawyers at LEX have international education and experience that ensures a service of international standards.
Insolvency, bankruptcy and financial restructuring: LEX has a robust team of experts in the field of insolvency, bankruptcy and financial restructuring. LEX closely monitors any developments in this field to ensure that its clients are provided with accurate and comprehensive legal advice.
Insurance and tort: LEX‘s attorneys in the field of tort and insurance law possess decades of experience in counselling in these areas. This includes both counselling to the claimants and those who claims are directed at.
Intellectual property and trademarks: The attorneys at LEX have extensive knowledge of all aspects of IP law; copyrights, trademarks, designs and patents and they are experts in the legislation on unfair business terms. They provide services in negotiation, registrations (domestic and international) and proceed cases before the courts and authorities.
Litigation, arbitration and dispute resolution: LEX has always been at the forefront in the field of litigation in Iceland and has great ambition to provide outstanding services before the Icelandic courts as well as international courts.
Mergers and acquisitions: LEX has for a long time been a leading law firm in Iceland in respect of mergers and acquisitions. One of the characteristics that identifies LEX is that in addition to its experienced transaction lawyers the firm can draw on experience from lawyers with extensive experience in the investment banking sector and other areas of law as may be necessary from time to time.
Property law: LEX employs many of the country’s leading experts in the field of property rights. LEX’s experts have extensive experience in consulting individuals, companies and public entities on issues related to property rights, as well as having litigated numerous court cases in the field.
Public administration, public parties and urban planning: LEX regularly advises private and public entities as well as individuals on public and administrative law. Projects in this area are rapidly increasing in complexity as the regulatory framework of public law is becoming more extensive and elaborate.
Real estate: The attorneys at LEX have vast experience in representing both sellers and buyers in disputes concerning real estate, under Act No. 40/2002 on Purchase of Real Estate, including disputes regarding non-performance such as defects and payment delays.
Shipping, transportation and maritime law: LEX provides its clients with dedicated experts in the field of shipping, transportation and maritime law. With decades of experience, LEX has provided services to domestic and international shipping- and fisheries companies, individuals, insurance companies and P&I clubs.
TAX: For years, LEX has provided comprehensive advice in the field of tax law to its clients. Taxes affect all operations and individuals. Tax matters can therefore be of various types and sizes. LEX provides tax advice and services on every aspect of tax law to small and large companies, as well as individuals.
Telecommunication law: LEX provides a holistic service in the field of telecommunication, media and technology. For many years we have consulted companies working in these fields both regarding commercial and technical issues.
For several years, LEX has worked in accordance with an Equality Plan. On 17 August 2021 an updated Equality Plan was approved by the Icelandic Directorate of Equality and is in accordance with the Act on Equal Status and Rights Irrespective of Gender no. 150/2020.
Following are the highlights of LEX’s Equality Plan:
LEX’s equality plan aims to maintain general job satisfaction and good morale, to ensure equality between the sexes, that each employee is valued on their own terms and that full equality and respect is maintained between all the company’s employees. In this way, the company intends to promote loyalty, a good morale, and a positive attitude among employees for their benefit as well as the company’s operations.
LEX emphasizes everyone’s wellbeing, regardless of gender, race, religion, age or place of residence.
Women, men and people with a neutral gender registration in the National Registry shall be paid equal wages and enjoy the same terms for work of equal or comparable value.
Equality considerations shall be assessed in employment and care shall be taken to equalize the share of men and women in different occupations.
LEX shall take the necessary measures to enable employees to align their job responsibilities and responsibilities towards their family. Both the family circumstances of the employees and the needs of the company must be taken into account.
Bullying, gender-based harassment, sexual harassment and other forms of violence will not be tolerated under any circumstances at the workplace.
In order to fulfil the Equality Plan, a Project Execution Plan is in place to ensure regular reviewing, training, and action.
In May 2023 LEX received an official Equal Pay Certification, which confirms that LEX operates an equal pay system following the requirements outlined in the standard ÍST 85:2012 and applies to all LEX employees.
International Capabilities
LEX is a premium full-service law firm servicing the Icelandic legal market. International co-operation is though a very important aspect in LEX’s operation. LEX has a premium position in the Icelandic M&A market as evident by it’s involvement in number of domestic and international transactions over the years. In the international transactions LEX has been servicing international clients in close co-operation with other international law firms.
Other noteworthy sectors where LEX has a strong foothold are the IP sector (including but not limited to Trademark, Patent, Pharmaceutical, IT and GDPR), Capital Markets, Public Procurement, Banking and Finance. The ESG sector is also becoming ever more present in LEX’s operation as it touches upon most fields of law and in international transactions of any kind no transaction is completed without some sort of an ESG review.
A part of LEX’s international competence is the workforce at LEX. Many of its lawyers have both international education, from the US, Asia and Europe and some of them also have international work experience. This gives LEX’s clients a unique proposition as LEX’s lawyers not only have the know-how from different parts of the world but are also familiar with the culture in many places of the world which is as important as the legal know-how.
LEX is in a premium position with regard to global reach. LEX is a member of World Services Group and Energy Law Group, both of which are premium legal networks.
LEX also serves most of the world’s largest independent law firms across the world and many of recent cross-border M&A transactions that LEX has advised on in recent years originate from those law firms including but not limited with the magic circle firms.
Doing Business In
Iceland
THE BUSINESS ENVIRONMENT
The Icelandic business environment can be described as a modern western environment. Iceland is a member of the EEA Agreement and as such enjoys the benefits of the European Single Market. In a recent survey Iceland was ranked 12th in Europe in a country ranking measuring the ease of doing business. Furthermore, Iceland ranked 12th in the world on labour market efficiency.
Traditionally, Iceland´s main and most important export has been fishing and fishing products. Iceland is rich of natural green energy harvesting both hydro power and geothermal resources. Energy extensive industries such as, aluminium smelters and ferrosilicon production have benefitted from those rich energy resources as well as data centres benefitting from the natural cooling the Icelandic weather provides.
In recent years tourism has become one of Iceland’s most important industries and more recently aquaculture has caught the eye of many foreign players in that industry, investing heavily in many of the remote parts of the country.
Iceland has a well-educated and innovation driven workforce. Information and communication technology and engineering are the most popular subjects in Icelandic universities.
Economy
Iceland’s economy is an open high-income economy combining a free market economy with a welfare state which is sometimes referred to as the Nordic model. It is the smallest economy within the OECD, with last year’s annual gross domestic production (GDP) of USD 280.6 billion. The size of the Icelandic economy is approximately 0.65% of the German economy and 0.12% of the United States economy. Although the size of the Icelandic economy is comparatively small, with only around 388 thousand inhabitants, the aforementioned domestic production places Iceland among the top ranked countries in GDP per capita, 55.567 USD (PPP). Iceland, which in the first half of the 20th century was one of the least affluent countries in Western Europe, has over the last few decades consistently ranked among countries with the highest standard of living worldwide. Iceland GDP per capita rank fell in the aftermath of the financial crisis in 2008 but has climbed above its pre-crisis position ranking. In terms of GDP per capita, Iceland currently sits in15th place globally.
Iceland’s success in building a prosperous and globally competitive economy can be attributed to factors such as a strong institutional framework, skilled workforce, high degree of economic freedom, sound democracy and low levels of corruption. Various competitive indices reflect these qualities. Iceland ranks number one in terms of gender equality and peace. Female labour force participation is at 70%, which is significantly higher than elsewhere in Europe. High labour force participation rate, the country’s openness and the economy’s flexibility are key strong-points of the Icelandic economy. For the peace index, Iceland has held its place as the most peaceful country in the world since 2008.
Small open economies are by nature often more volatile than larger economies. This is mainly caused by a lack of diversification and relatively large external influences. This has caused significant business cycle fluctuations. In the years leading up to the Covid-pandemic the Icelandic economy had experienced a robust economic growth, greater than neighbouring countries, as well as other high-income OECD countries. In fact, 2016 GDP growth in Iceland was highest among OECD countries and seventh highest globally. The export sector, particularly the fast-growing tourist industry, had been the main growth driver, along with strong contributions from business investment and private consumption. After a deep contraction following the Covid-19 pandemic the economy is recovering on the back of robust export growth. Following a 6.6% contraction in 2020, the economy grew by 5.8% in 2021 and 3.3% in 2022 driven by a rebound of tourism, a successful vaccination programme and the lifting of restrictions. In 2023 the economic growth was 4.1%. The main driver of economic growth last year was a real increase in service exports of 9.8%, but at the same time more favourable trade in goods and increased public and private consumption made a positive contribution.
The unemployment rate, which had been declining since the peak in 2010 rose significantly during the Covid-19 pandemic, being at it heights in 2021, but declined considerably after the pandemic and was at 3.4% in 2023 and had then declined by 0.4% since 2022.
More than half of Icelandic companies are in need of more workforce and the shortage is met to a large extent by importing foreign labour. The Government announced in March 2023 that a new and more efficient system of employment rights for foreigners outside the EEA will be established, with the aim of making the Icelandic labour market more accessible to interested parties.
In 2022, government debt was approximately 69% of GDP, decreasing from previous year, after increasing rapidly due to the Covid-19 pandemic. In the years leading up to the pandemic the GDP had significantly improved from the peak of 2011 when it amounted to approximately 95% of GDP. The budget deficit in 2022 was 4.1% of GDP compared with 8,5% in 2021. Parliament suspended the fiscal rule and the rolling five-year fiscal plan it approved in late 2020 as well as the one it endorsed in Spring 2021 with the aim to support the economy in the short term and to reach a positive primary balance by 2025, when gross public debt according to the National Accounts is set to stabilize at 100% of GDP.
High inflation has long been a concern in Iceland. In March 2001, the CBI converted from an exchange rate targeting monetary policy and adopted an inflation-targeting policy with a 2.5% inflation target. Since the adoption of the policy, inflation has exceeded this target, averaging 5%, but after 2014 inflation has been close to or below its target. One of the characteristics of the Icelandic economy is the small and volatile currency, the Icelandic Króna, and the large impact of exchange rate fluctuations on inflation. Currently, imported goods account for roughly 30% of the consumer price index (CPI). Furthermore, the housing component, which includes housing prices, contributes 25% to the index. Inflation is expected to be around 5,7% in 2024, the rise in house prices weighs heavily. Due to seismic activities and volcanic eruptions in the Reykjanes peninsula in Iceland, inhabitants from parts of that area are looking for new housing which could further increase housing prising. Other domestic cost items have risen considerably, food prices have for example risen by 7,5% in the last year. In addition, global oil and commodity prices are increasing. Recent collective agreements include much higher salary increases than expected. The Central Bank lowered interest rates incrementally, from early 2019 from 6.25% to November 2020 to 2,5%. In May 2021 interested rates were increased again, and are now in March 2024 at 9,25%.
The small size of the domestic economy makes Iceland highly dependent on international trade. Since various goods and services are not produced domestically, they need to be imported. To fund these imports, a strong export sector is required. Thus, international trade plays an important role when examining Iceland’s economic performance. Iceland’s balance of trade has seen drastic changes this century. Historically, Iceland had a significant trade deficit with a corresponding current account deficit, which contributed to a build-up of record high levels of external debt. That has turned around over the last decade, with Iceland running a consistent current account surplus, largely due to a strong trade surplus. This shift is largely explained by the Króna exchange rate. The Króna depreciated fast at the onset of the crisis in 2008 as investors pulled out of Iceland, reducing imports and boosting exports. Iceland’s economic recovery, led by export growth (particularly in tourism), helped the Króna to retain its value. Since late 2016, Iceland’s real exchange rate was back at similar levels as in the years before the financial crisis. After a good period of running a trade surplus, instead of large deficits, the period of trade surplus has halted, and Iceland is currently running a trade deficit.
A key challenge for Iceland is to increase its exports and maintain a healthy current account to support an ongoing and sustainable growth. Two decades ago, the country was heavily dependent on fisheries with more than half of exports originating from the fishing industry. Since then, fish-related exports have remained relatively stable, as the industry is limited by the quantity it can harvest, to preserve the size and sustainability of the fishing stock. In the past couple of decades, three additional export foundations have emerged: the aluminium industry, tourism and the international sector. Around the new millennium, the international sector grew rapidly. The sector engages in international competition but is not reliant on natural resources. Between 2005 and 2008, exports of aluminium took off following the construction of one new aluminium smelter and the expansion of another. In the years pre Covid-19 pandemic, Iceland did witness a rapid growth in the tourism industry, although the industry was hit hard on account of the pandemic. In 2022 the tourism rebounded quickly and is expected to grow to new heights in the next few years. Overall, Iceland’s exports of goods and services have grown rapidly and become more diversified over the last two decades. High-technology exports now account for around 33,5% of service exports. Data processing and storage are growing rapidly, attracted by low energy prices and a cool and windy climate.
Current opportunities & future prospects
As the world has entered out of the uncertainty associated with the covid pandemic another uncertainty has arrived with the war in Ukraine. The end of the covid period has been welcomed by the tourism industry. During the covid period substantial restructuring took place and the growing pains the industry was dealing with prior to the covid period have to a large extend been dealt with and the country is better prepared to deal with the large influx of visitors. Plans have been put in place for significant investment in infrastructure and consolidation in the industry along with foreign investment is expected to have a very positive impact. The war in Ukraine however is having significant effect on the cost side, with increasing oil prices and other raw materials.
Although the supply of electricity for new ventures is not as favourable as it has been in the past and major power companies in Iceland have kind of pulled back from the strategy of providing power to non-green industries. Furthermore, it is uncertain if the power companies will be able to support the data centre industry and new investment opportunities.
Even though there has been some political and judicial unrest associated with the aquaculture industry there has been a significant growth there, fish farming production has increased eightfold in the last decade. The amount produced in 2022 was 51,3 thousand tonnes. The most growth has been in salmon farming where the yield has gone from 1,068 tonnes in 2010 to 45,000 tonnes in 2022. The export value of farmed salmon was approximately 40 billion ISK in 2022. The share of farm products in the export value of marine products reached 12.4% in 2021. The export value of trout, which is in largest part arctic char, but some of which is rainbow trout, amounted to 3.6 billion ISK. The export value of other farm products, of which the Senegal flower weighs the most, was around ISK 830 million during 2022. In recent years foreign industry players have invested heavily in the Icelandic aquaculture, and it would not be surprising if further investments in this area would materialize.
One of the positive effects of the financial crisis that swept the world in 2008, is the vibrant start-up environment it created. Iceland was no different, and now this young country has an attractive start-up community. In recent years global investor have acquired tech companies such as the Black Desert Online developer Pearl Abyss acquisition of CCP Games, the creators of popular spaceship MMORPG EVE Online and the Fortune 500 company NetApp acquisition of Greenqloud. Several other smaller acquisitions have taken place in the technology sector in recent years, and that trend is expected to continue.
More effective support for business R&D would unlock private investment and improve the ability of smaller firms to innovate. Encouraging firms to adopt digital technologies would help Iceland to make the most of innovation niches, with productivity gains. The public sector too could become more digitalised with positive societal impact and in July 2021 a policy regarding digital public services was published where the vision is that Iceland will be one of the leading nations in the world in the field of digital services. This policy is followed through with an action plan and measurement of success and over the last few years many public institutions have taken great measures in adapting new technology and digitising processes to ease the life of the public. Skills for the digital era and strong knowledge exchange through closer business-research collaboration on innovation and international cooperation in research are essential for stronger innovation.
Despite the Covid-19 pandemic hitting the Icelandic economy hard, it is recovering. The government has set up a five-year programme to invest in infrastructure, digitalisation and research and innovation accounting for 0.5% of GDP per year. The long-term outlook is of positive note. Iceland is rich of natural resources and Iceland is known for running them in a very sustainable manner as our fishery resources are a good example of.
Legal system
A new court level was introduced in Iceland on 1 January 2018, replacing the former two tiers with a three-tier system. The new court is called the Court of Appeal (Icel. Landsréttur) and is a court of second instance, situated between the District Courts and the Supreme Court. The introduction of the Court of Appeal is part of a major restructuring of the Icelandic justice system.
All court actions in Iceland commence in the District Courts (Icel. Héraðsdómstólar), which are eight in number and located around the country. The conclusion of a District Court can be appealed to the Court of Appeal, provided specific conditions for appeal are satisfied. In special cases, and after receiving the permission of the Supreme Court, it will be possible to refer the conclusion of the Court of Appeal to the Supreme Court, which will continue to be the country’s court of highest instance. In most instances, the judgement of the Court of Appeal will be the final resolution in the case. These changes to the judicial system will reinforce the role of the Supreme Court of Iceland in setting precedents in jurisprudence. There is a total of 64 judges in Iceland, 42 of whom preside over the eight District Courts. The Court of Appeal has fifteen judges and the Supreme Court has seven.
Iceland has a civil law legal system and thus Icelandic law is characterized by written law. Major sources of law in Iceland include the Constitution, statutory legislation, and regulatory statutes. Other legal resources are precedent, customary law and tradition of culture.
The Constitution
The Constitutional Act no. 33/1944 represents the highest national legal authority and is composed of seven Chapters and 79 provisions. Fundamental changes were made to the human rights chapter with Constitutional Act No. 97/1995. The bill accompanying the Act made several references to the European Convention on Human Rights as well as to other Council of Europe and United Nations human rights instruments to which Iceland is a party.
Statutory and Regulatory Law
Except with respect to constitutional issues, legislation enjoys primacy as a source of law. The area of private law is dominated by a range of individual statutory acts and the area of general criminal law is governed by the General Penal Code No. 19, February 12, 1940. In the last few years, numerous pieces of legislation have been adopted in certain fields of law, such as in banking, communications and corporations.
Frequently, statutory acts give the administration the authority to issue regulations. As sources of law, statutory acts prevail over regulations.
Precedents, Customary Law and Tradition of Culture
Court practice in Iceland does not have the same authoritative role as in Common Law countries. However, in matters of legal uncertainty, the decisions of the Supreme Court have considerable authority for the disposition of future cases. In certain areas of law, the decisions of the Supreme Court are a source of law of central importance, e.g. tort law.
In Iceland, a custom can become a source of law. For instance, customary law has been an important source of law in Constitutional matters.
Tradition of culture refers to considerations of fairness, justice and feasibility. Iceland courts have in some cases relied on Tradition of Culture when other sources of law have not been able to establish a rule of law.
Statements and Decisions by Administrative Authorities
Statements by an administrative organ can carry considerable authority in some areas. For instance, in the area of administrative law, the statements of the parliament´s Ombudsman carry considerable authority. Similarly, in the area of tax law, the decisions of the Internal Revenue Board can carry considerable weight.
The EEA and its Effect on Icelandic Legislation
Iceland is a member of the European Economic Area (EEA). The Agreement on the EEA, which came into force in 1994, extends the Single Market of the European Union (EU) to Iceland, Norway and Liechtenstein.
Membership of the EEA has affected Icelandic legislation considerably. To achieve homogeneity between the EEA and EU, the agreement incorporates hundreds of acts, largely identical to the relevant parts of the EC legislation, and these acts are made part of the internal legal order of the contracting parties. Each month a number of pieces of EC legislation, relevant for the EEA, are incorporated in the agreement by decision of EEA Joint Committee.
International Law
With respect to the relation between municipal law and international law, Iceland adheres to the principle of dualism. Therefore, ratified international treaties do not assume the force of domestic law, but rather are only binding according to international law. The Supreme Court of Iceland has sought to interpret Icelandic law, as far as possible, in conformity with Iceland’s international obligations.
The European Convention on Human Rights was incorporated into Icelandic law by Act No. 62/1994. Following its incorporation, its provisions can be directly invoked in court as domestic legislation.
Foreign investment restriction
In principle, foreign parties are permitted to invest in Iceland within the limitations imposed by law. The limitations are mostly laid out in Act. No. 34/1991, which addresses investments by non-residents in business enterprises, and in specific legislation. The limitations mostly stipulate that certain conditions must be met or that a specific license has to be obtained.
Because Iceland is a part of the European Economic Area, investment in Iceland by EEA residents is in principle unrestricted. All residents and entities within the European Union and EFTA, enjoy in most cases the same rights to invest as Icelanders do. However, there are some sector-based restrictions that apply to all non-residents, including EEA residents, and some requirements are made regarding investments of residents outside the EEA. These sector-based restrictions were mostly negotiated as they were considered to be of national political importance. The main sectors where restrictions apply in are in the field of real estate ownership, in the fishing industry and in the field of energy affairs. However, in the foreign exchange sector there have been major changes recently and a lot of restrictions have been abolished.
Foreign exchange transactions were subject to restrictions following the collapse of the banks in 2008. In October 2016 a major step was taken to amend the restrictions on financial transactions with legislation and on 14 March 2017 capital controls were almost entirely abolished with new rules on foreign currency matters. With the new rules, most restrictions on cross-border movement of domestic and foreign currency were lifted.
When it comes to ownership of real estate in Iceland, all Icelandic citizens and foreign citizens domiciled in Iceland are permitted to own real estate. The right to own real estate in Iceland is provided for in Act. no. 19/1966 on Ownership Rights and Utilization Rights. Special rules apply to those who enjoy rights based on the EEA agreement, EFTA agreement and Hoyvík Agreement between Iceland and the Faroe Islands. They are not required to apply for a special permission from the Minister of Justice to own property in Iceland. However, parties outside the EEA are required to have permission from the Minister. Large scale investment projects are generally exempt from the restrictions via a standard clause in an investment agreement with the Ministry of Industries and Innovation. The Minister of Justice can also grant exemptions to those that are permitted to run a business in Iceland when the property is to be used as business premises or a permanent residence, or when other reasons apply.
In the Icelandic fishing industry only those who fulfil certain requirements and conditions are allowed to conduct fishing operations within the Icelandic fisheries jurisdiction or own or run enterprises engaged in fish processing. Those requirements and conditions are laid out in Article 4 in Act. no. 34/1991. In short, the party must be an Icelandic citizen or an Icelandic entity. Icelandic legal entities must be wholly owned by Icelandic persons or Icelandic legal entities and fulfil the following conditions: i) be controlled by Icelandic entities, ii) not under more than 25% ownership of foreign entities, 33% in certain circumstances, and iii) be in other respects under the ownership of Icelandic citizens or Icelandic legal entities controlled by Icelandic entities.
Lastly, when it comes to ownership of energy exploitation rights relating to waterfalls and geothermal energy for other than domestic use, only Icelandic citizens and other Icelandic entities, as well as individuals and legal entities domiciled in another member state of the EEA, are permitted to own such rights. The same applies to enterprises which produce and distribute energy.
Top tips to takeaway “What to know before Investing”
It is a good advice before entering into an investment in a new country, to be familiar with the culture of the nation. Iceland is no different, so it is recommended to any potential investor in Iceland to consider the lay of the land. Furthermore, depending on the relevant sector it is important to understand the regulatory environment and to be aware of any implication the regulatory environment can have on any given investment. Iceland is in general a friendly country to any foreign investment with knowledgeable and skilled workforce hungry for additional knowledge and opportunities.
