Researching Icelandic Law

By Erna Mathiesen

Erna Mathiesen graduated from the Faculty of Law at Reykjavik University in 2008 and she is currently pursuing LL.M. at the University at Oslo, Norway.

Published September/October 2019

(Previously updated by Erna Mathiesen in March 2010)

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1. Introduction

Iceland is an island of 103.000 km2 (39,756 sq.miles) situated on the Mid-Atlantic Ridge, controlling 758.000 km2 of the North Atlantic Ocean within its economic zone. The island was settled by humans around 874 AD and its Parliament (in Icelandic Althingi) was established in 930 AD. The Republic of Iceland was established in 1944, when full independence was gained from Denmark.

The population of Iceland is around 350.000. Thereof, 8,9 % are of foreign nationality. Life expectancy of Icelandic women is 84 years and 80 for men. Roughly half of the population lives in the capital area Reykjavík and its neighboring towns in the southwest. The highland interior is uninhabited, and most centers of population are situated on the coast. Iceland has extensive hydro and geothermal resources and 99, 7 % of all electricity in Iceland comes from renewable resources. The language in Iceland is Icelandic, belonging to the Nordic group of Germanic languages.

Iceland is the 16th largest fishing nation in the world. The economy is heavily dependent on that industry; seafood exports account for nearly three-quarters of merchandise exports and approximately half of all foreign exchange earnings. Yet only 5 percent of the workforce is involved in fishing and fish processing.

However, aluminum production is also an important contributor to economy and in 2008 it was the largest export industry making the fish industry as the second largest. In 2010, a major upswing in tourism began and by 2016 export from tourism had reached 39% of the total export in Iceland thereby replacing fisheries as the largest export product in 2017. The standard of living is high, with income per capita among the highest in the world. The economy is service-oriented: two-thirds of the working population is employed in the service sector, both public and private. The financial sector has been liberalized in past few decades, albeit with significant reform following the financial crisis and the bank collapse in autumn 2008 in Iceland.

The Icelandic State Financial Investments (ISFI) is the state’s holding company on the financial market, while the reconstruction and restoration of the financial system is still in progress. ISFI was established with the parliamentary Act no. 88/2009, which came into effect in August 2009. The institution began operation in January 2010 with the aim of ensuring that the administration of the holdings is professional and reliable.

ISFI was entrusted with the task of managing the state’s holdings in Arion Bank (13%), Íslandsbanki (5%) and Landsbankinn (NBI hf) (81,3%). On 11 April 2013 the state gained larger holdings in Landsbankinn, holding a total of 97,9%. In 2019 the government holding in financial undertakings is 100% of shares in Islandsbanki hf., 98,2% in Landsbankinn hf. and 49,5% in Sparisjóður Austurlands hf.

Like the other Nordic countries, Iceland is characterized by its comparatively strong welfare-oriented profile. The country has a progressive tax system, an education system financed entirely through taxation at the primary level, secondary level, and, to a large extent, at the tertiary level. Icelanders have universal welfare insurance and a social security benefits system.

Iceland participates in a number of international organizations, it is i.a. a member of the United Nations, IMF, World Bank, OECD, EBRD, WTO, EFTA, ESA, the European Economic Area and Schengen, Nordisk Rad, Council of Europe, OSCE, and NATO.

2. The Political System

Iceland is a republic with a parliamentary government. The President, members of the Althingi and local authorities are elected in general elections held every four years.

The Althingi, established in 930 AD, was a key element of Iceland’s existence as an independent state for over three centuries after settlement. However, in 1262-1264 Iceland came under the authority of the Norwegian crown, and towards the end of the 14th century, royal succession brought both Norway and Iceland under the control of the Danish crown. Iceland remained under Danish rule until the 20th century. In 1903 it received home rule and parliamentary government, and in 1918 the Act of Union made Iceland a sovereign state unified with Denmark under its monarchy. The country then received full independence when the union with Denmark was dissolved in 1944. The Republic’s present Constitution dates from the same year, though many of its provisions are much older and can be traced back to 1874 when the country received its first constitution.

The Icelandic legal system is heavily influenced by the systems in the other Nordic countries, especially that of Denmark. The Nordic legal systems share several common features with continental European legal systems. Nevertheless, the legal systems of the Nordic countries have developed distinct characteristics.

2.1 The Legislative Power

According to the Constitution (Art. 2), the Althingi and the President of Iceland jointly exercise legislative power. In reality, it is the Althingi which holds the power of legislating while the President gives parliamentary bills formal consent; see Art. 26 of the Constitution. Since the establishment of the Republic of Iceland in 1944, the President has twice refused consent, first in the summer of 2004. The bill was on the ownership of media. The second refusal was in January 2010 and the bill was on the authorization for the Minister of Finance to issue a guarantee of the loans granted by the governments of the UK and the Netherlands to the Depositors’ and Investors Guarantee fund of Iceland to enable it to cover payments to the depositors of Landsbanki Íslands hf.

The Althingi consists of 63 elected members who sit in a single chamber. Parliamentary elections must be held at least every four years, the next one being in 2021. There are now eight parties represented in the Althingi (Progressive Party, Reform, Independence Party, People’s Party, The Central Party, Pirate Party, The Social Democratic Alliance and The Left-Green Movement).

All proposed legislation must be submitted within six months of the commencement of the parliamentary session, i.e. before 1st April, but a majority of Althingi can admit a bill which has been submitted after this deadline. According to the Constitution, Art. 44, no draft legislation may be adopted until it has received three readings by the Althingi. Bills are generally referred to their relevant committee between the first and second readings. Once the bill has been adopted and confirmed by the President it has to be published, see Art. 27 of the Constitution.

2.2 The Executive Power

The President and other governmental authorities exercise executive power, see Art. 2 of the Constitution. However, the executive power of the President is of a more formal than actual nature, as described in chapter 2.1. here above. Art. 13 and 19 of the Constitution stipulate that the President entrusts his authority to ministers and that his signature validates a legislative act or government measure when countersigned by a minister. According to Art. 15 of the Constitution, the President appoints and dismisses individual ministers. This has to be seen in the light of the rule of representative government. The President is bound to follow the will of the majority of Parliament. He has the obligation to invite the party which is most likely to be able to form a Government. If it proves to be impossible to form a Government that has a majority of seats in Parliament, a Government based on a minority can be formed or a Government of members outside of Parliament. The latter scenario has only happened once since the establishment of the republic, from 1942-1944. From 1995-2007 there were successive coalition governments of the Independence Party and the Progressive Party, with increased variety of governmental participation and left-wing participation following the economic crisis in 2008.

The President distributes assignments between ministers according to Art. 15 of the Constitution. The distribution is enacted through the Act on the Government Offices of Iceland No. 73/1969 (only in Icelandic). There it is stipulated that the Government Offices of Iceland are to be divided into the following ministries; the Prime Minister’s Office, the Ministry of Justice, the Ministry of Industries and Innovation, the Ministry of Social Affairs, the Ministry of Finance and Economic Affairs, the Ministry of Health, the Ministry of the Environment and Natural Resources, the Ministry of Education, Science and Culture, the Ministry of Transport and Local Government and the Ministry for Foreign Affairs. Each ministry typically consists of a central department with a number of ministerial agencies under its jurisdiction.

According to Art. 78 of the Constitution some public tasks are to be delegated to local municipalities. The extent and circumstances of the delegations is defined by the Local Authorities Act No. 138/2011 (September 28, 2011) (copy and paste the link into browser). According to the recent reform of the structure of local and regional governance, Iceland is now divided into 74 local municipalities. Each municipality is governed by an elected body of locally elected representatives.

2.3 The Judiciary

The Constitution stipulates in Art. 2 that judges exercise judicial power, and according to Art. 59 the organization of the judiciary can only be established by law. The main act on the organization of the judiciary is Act No. 50/2016 on Courts. Unfortunately, there is no official translation of this act currently available. The judicial court system of Iceland comprises eight District Courts, of which the Reykjavík District Court is by far the largest, an Appeal Court (in Icelandic Landsréttur) and the Supreme Court (Hæstiréttur Íslands – see). Additionally, there are two Special Courts; the Labour Court (in Icelandic Félagsdómur) which deals with trade union matters and industrial disputes according to the Act on Trade Unions and Industrial Disputes, No. 80/1938 (as amended by Act NO. 70/1954, No. 10/1983, No. 91/1991, No. 75/1996, No. 83/1997, No. 20/2001, No. 162/2010, No. 126/2011, and No. 130/2016); see Section IV of the Act. The decisions of the Labour Court have been published are available online (only in Icelandic) since the year 2000. The other Special Court is the Court of Impeachment (in Icelandic Landsdómur) which has competence if ministers, in pursuance of their official tasks, are impeached; see Art. 14 of the Constitution and Act No. 3/1963 (not translated). Landsdómur was established in 1905 and has only once convened in 2010 when the Icelandic Parliament, Althingi, indicted the former Prime Minister for negligence on account of his handling of the country´s 2008 banking crisis. In 2012 Mr. Haarde was found criminally liable on one of the four charges. Mr. Haarde referred the court´s decision to the European Court of Human Rights (ECHR) and in 2017, claiming that his trial hand not been fair and the legal provision for his criminal conviction had been vague and unclear. The ECHR judgment unanimously held that there had been no violation of the European Convention on Human Rights

In order to guarantee the independence of the judiciary it is stipulated in Art. 61 of the Constitution that in the performance of their official duties, judges shall be guided solely by the law. In the same article it is further stipulated that those judges who do not also have administrative functions cannot be discharged from office except by a judicial decision, nor may they be transferred to another office against their will, except in the event of re-organization of the judiciary.

The district courts in Iceland have jurisdiction in civil as well as criminal cases. The judges of the district courts are 42 in number and are appointed to their offices for an indefinite period of time by the Minister of Justice, see Art. 29 of Act No. 50/2016.

The appeal court was established in January 2018 with 15 judges who are appointed in office for an indefinite period of time by the Minister of Justice, see Art. 21 of Act No 50/2016. The appeal court serves appeals from all of the district courts, both criminal cases and civil provided that the special condition for an appeal are satisfied. In most instances, the judgement of the Court of Appeal will be the final resolution in the case. However, 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.

The Supreme Court is the country´s court of highest instance and has nationwide jurisdiction. It is composed of seven judges, commissioned for an indefinite period of time by the President of Iceland as proposed by the Minister of Justice, see Art. 13 of Act No.50/2016.

The Judicial Administration (Icelandic Dómstólasýsla), is a new public agency, that commenced work on 1 January 2018. It will manage the administrative work of all the courts and represent their interests in dealing with the government, the media and other parties.

3. Legal Resources

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 and customary law. The recognition of tradition of culture(in Icelandic eðli máls)does bear significantly on Icelandic law in a variety of contexts. Act No. 15/2005 (not translated) stipulates how official materials, including adopted Acts, are published.

3.1 The Constitution

The Constitutional Act represents the highest national legal authority. Iceland received its first Constitution in 1874 and the current Constitution of 1944 (Act. No. 33/1944) can be traced back to it. The Constitution is composed of seven chapters, with a total of 79 Articles: Chapter One provides for Iceland’s status as a republic with a parliamentary government, and the separation of the three principal branches of the government; Chapter Two stipulates the election and powers of the President; Chapter Three and Four set out the composition and mandate of the parliament; Chapter Five addresses the organization and role of the judiciary; Chapter Six lays down that the Evangelical Lutheran Church shall be the State Church in Iceland; Chapter Seven includes thirteen human rights provisions, including the right to equal treatment, freedom from interference with privacy and right to freedom of opinion and belief.

The Constitution has been revised eight times. Fundamental changes were made to the human rights chapter of the Icelandic Constitution 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. Further amendments to the Constitution are envisioned. Early in 2005 the office of the Prime Minister appointed a committee to consider revisions of the Constitution. The committee finished its task in February 2007 and published a report (not translated) on revision of the Constitution at the same time. However, no proposals on changes on the Constitution have been made before Althingi following that report.

Proposals to amend or supplement the Constitution may be introduced at regular as well as extraordinary sessions of the Althingi. If the proposal is adopted, the Althingi shall immediately be dissolved and a general election held. If the Althingi then passes the resolution unchanged, it shall be confirmed by the President of the Republic and come into force as constitutional law (see Art. 79).

3.2 Statutory Law

Except with respect to constitutional issues, legislation enjoys primacy as a source of law. With the increasing complexity of economic and social life, the amount and importance of legislation has grown. 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. 19/1940 (official translation). New general revised acts have been adopted in principal areas of law, such as the Act on Customs (Act No. 88/2005) and the Act in Respect of Children (Act No. 76/2003). In the last few years, numerous pieces of legislation have been adopted in certain fields of law, such as in banking, communications, corporations and intellectual property rights.

Legal Acts are published in the Legal Gazette (Stjórnartíðindi), section A. The publication has been published in electronic form since 2005. All acts are also accessible on the Althingi’s homepage under the heading “Lagasafn” but as with the Legal Gazette they are only in Icelandic. Official and unofficial translations of certain Acts can be found on the webpages of the relevant ministries, accessible through this portal.

3.3 Regulatory Law

Frequently, statutory acts give the administration the authority to issue regulations. As sources of law, statutory acts prevail over regulations. Public executive regulations and directives are published in the Legal Gazette, section B (only in Icelandic). Official and unofficial translations of certain regulations can be found on the webpages of the relevant ministries, accessible through this portal.

3.4 Precedents

Being a civil law country, court practice in Iceland does not have the same authoritative role as in common law countries. The Supreme Court has no duty to follow its earlier decisions, and the district courts are not obligated to adhere to earlier decisions of the Supreme Court. 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 which did or do not have extensive statutory legislation, e.g., tort, the decisions of the Supreme Court are a source of law of central importance.

Since the beginning of the year 2006, the decisions of the district courts in Iceland have been published online (only in Icelandic) on the Judicial Councils (in Icelandic) webpage. The decisions of the Supreme Court are also published online on the Courts homepage (in Icelandic) and those of the Appeal Court (in Icelandic).

3.5 Customary Law

In Iceland, a custom can acquire the force of law, i.e. become a source of law. For instance, customary law has been an important source of law in Constitutional matters.

NOTE: Regarding the Icelandic codes online, the current codes can be found online on the Parliament website; however, many of the codes have been translated into English and are published on the webpage of the relevant ministries and are accessible through this portal – but that is only a small part of current codes. The latest printed version in Icelandic is from 2007.

3.6 Tradition of Culture (in Icelandic Eðli máls)

Tradition of culturerefers to considerations of fairness, justice and feasibility as to needs of the society and resembles to some extent the legal term “equity”. Some commentators consider the use of this source of law as distinctive for Nordic legal traditions. In particular, when other sources of law have not been able to establish a rule of law, courts in Iceland have in some cases relied on Tradition of Culture.

3.7 Statements and Decisions by Administrative Authorities

In some areas of law statements by an administrative organ can carry considerable authority. For instance, in the area of administrative law, the statements of the parliament’s Ombudsman (in Icelandic Umboðsmaður Althingis) carry considerable authority. Similarly, in the area of tax law, the decisions of the Internal Revenue Board can carry considerable weight.

3.8 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 three out of the four EFTA countries, namely Iceland, Norway and Liechtenstein.

Membership of the EEA has affected Icelandic legislation considerably. The EEA Agreement is based on the primary legislation of the EU, as developed over the past 30 years and on the relevant succeeding secondary legislation (Acquis Communautaire). 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. Importantly, this process is continuous; each month a number of pieces of EC legislation, relevant for the EEA, are incorporated in the agreement by decision of the EEA Joint Committee.

The decisions of the EEA Joint Committee are published in the EEA Supplement to the Official Journal of the European Union– a weekly legal gazette containing EEA-related texts from EFTA and EU bodies.

3.9. European Union Application

On July 16 2009 Althingi voted in favour of presenting an application for membership to the European Union (only in Icelandic). Althingi further agreed to hold a referendum on whether or not to join the EU once membership negotiations had been concluded. That same day, the government of Iceland submitted its application for European Union Membership to the Swedish Presidency of the Council of the EU. At the Council meeting on 27 July, EU Foreign Affairs Ministers acknowledged Iceland’s application for membership of the European Union and invited the Commission to submit an opinion on it. For more information, see European Commission, European Neighbourhood Policy and Enlargement Negotiations – Iceland (last visited September 12, 2019).

On 8 September 2009, the EU Commissioner handed over a questionnaire to the government of Iceland and replies were delivered to the EU on 22 October 2009. On 2 November 2009, Iceland selected Stefan Haukur Johannesson, its ambassador to the EU, as its Chief Negotiator in the forthcoming accession talks. In June 2010 the EU Council decided that accession negotiation would be open, and a period of intense negotiations began. However, after a new government was elected in May 2013 the negotiation where put on hold, and in May 2015 the Icelandic government announced that Iceland should no longer be regarded as a candidate country for EU Membership.

3.10 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 court has made several references to international obligations undertaken by Iceland, and it has interpreted both the Constitution and other laws in coherence with such obligations. Interestingly, these references include also instruments which have not been incorporated into Icelandic law, such as the United Nations Convention on the Law of the Sea and the International Covenant on Civil and Political Rights.

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. Other major human rights instruments ratified by Iceland are the International Covenant on Civil and Political Right and Convention on the Rights of the Child.

International Agreements that Iceland has ratified are published in the Legal Gazette, Section C.

4. Legal Education

There are four schools of law in Iceland. To enter an Icelandic law school, a student should have graduated from a secondary high-school. After three years of study, a bachelor’s degree is delivered, with which it is possible to work as a lawyer. A master’s degree (two years of study) is a requirement to take the Icelandic Bar Examination, and is likely to be the standard diploma sought by students, who are not expected to commonly start a professional career after obtaining a bachelor’s degree in law. A Ph.D. in law is offered at some universities. The following universities have a school of law: Reykjavik University (English version), Bifröst University , the University of Akureyri, (English version) and the University of Iceland (English version).

5. Internet Resources in English