Iceland looks to sue UK over Kaupthing

LONDON (Reuters) - The Icelandic government has appointed lawyers to look at suing the British government over comments made about a UK subsidiary of Kaupthing Bank, a day before it collapsed, a media report said on Sunday.

Warnings by the Treasury that action had been taken to protect retail depositors in Kaupthing, Singer and Friedlander, may have led savers to think its assets had been seized, a lawyer for the government told Channel 4 television.

The following day the Icelandic government took control of the country's biggest bank and halted all trade on its stock market.

"They should have been aware that this would caused the collapse of the Kaupthing business in Iceland, which it seems to have done," Richard Beresford of Grunberg, Mocatta Rakison said.

"Certainly according to the Kaupthing board, this is their conclusion which they have reached.

"Then, yes, potentially the British government will be liable to shareholders and creditors of the Kaupthing Business in Iceland and therefore the potential compensation would be substantial ... potentially billions of pounds sterling."

A letter sent from the Prime Minister's office to Iceland's authorities this weekend made it clear Britain had only seized assets belonging to the UK subsidiary of collapsed Icelandic Bank Landsbanki, the programme said.

"To clarify the situation regarding Icelandic companies, I am confirming it is only Landsbanki's assets that have been frozen in the UK... No other Icelandic company's assets have been frozen."

A spokesman for Iceland's Finance Ministry told the programme: "It is no good telling us now that Kaupthing's UK assets have not be seized. It's too late, the whole bank has collapsed."  Continued...