Last Friday, a parliamentary committee that was appointed to rule on the legitimacy of foreign investment in Iceland, announced that it was perfectly legal for Magma Energy of Canada to own Icelandic utilities company HS Orka.
Brief recap for anyone who doesn’t know about this case. Last year, a decision was made to sell [privatize] a share in utilities company HS Orka, which provides heating for the entire Suðurnes region of Iceland [the peninsula on which Keflavík international airport is located] to a Canadian company called Magma Energy. All dealings around the HS Orka privatization stank of corruption and the decision spurred massive protests. One of the most obvious deviations in the matter concerned the fact that Magma Energy had set up a “subsidiary” in Sweden in order to be able to purchase the share. This was done to get around Icelandic law, which stipulates that only Icelandic firms or firms from the EEA area can own shares in Icelandic energy companies. The law, obviously, is designed to protect Iceland’s resources, which should be used to benefit the people who own them, not some overseas corporation that will exploit the profits for its own gain.
Unsurprisingly, the Independence and Progressive parties [the duo that brought Iceland to the brink of ruin and ushered in the economic collapse] plus a handful of oligarchs were intimately involved in the deal. I’ve written about this here and here, among other places.
At the time, Magma claimed it only aspired to own a share in HS Orka. Indeed, Magma CEO Ross Beaty, told The Grapevine in September 2009 that he had no intention of acquiring a majority stake in HS Orka. Many of us here found this claim highly suspect, and rightly so, for in May this year Magma increased its share in HS Orka to 98.5 percent.
The last hope for those of us who strongly oppose this deal was that the committee on foreign investment would rule that Magma’s little strategy to set up a shelf company in Sweden was such a blatant violation of Icelandic law that the sale would be annulled. But NO, the committee decided last Friday that the sale should stand, and that Magma had been within its legal rights to acquire HS Orka [and, note bene, gain exclusive rights to Iceland’s geothermal energy fields on Reykjanes for up to 130 years*]. Not to say the decision was unanimous — the committee was divided on the issue, with three members out of five giving the go-ahead. Those three members represented the Independence Party, the Social Democrats [who currently hold the Ministry of Industry] and the Progressive Party. The two who were opposed represent the Left-Greens and the Movement.
The anger flared up instantly. Icelandic bloggers and Facebook users were infuriated. Then, on Saturday, Lára Hanna Einarsdóttir and Teitur Atlason, two of Iceland’s foremost bloggers, publicized something that totally incinerated the public discourse.
At Lára Hanna’s behest, Teitur, who lives in Sweden, took a stroll down to Magma’s alleged “office” in Gothenburg. There he was met by a woman named Mona Jonasson, a lawyer with the legal firm where Magma Energy is registered. They had the following conversation:
TA: Is this the address of Magma Energy Sweden?
MJ: That’s right, welcome. Are you looking for Johann Rapman? He’s on holiday.
TA: Is there someone else who can speak on behalf of Magma Energy?
MJ: Jonas Hallberg. He’s on holiday. Can I help you?
TA: I’d like to know what sort of company this is. Does this company [Magma] have any sorts of operations here, or staff? Or is it just registered here, through Canada? What exactly do you do?
MJ: A-ha. These are questions for the board. This is not Magma’s office, but we’ve worked for them.
TA: This is not Magma’s office?
MJ: No, no. But as lawyers we’ve helped Magma.
TA: So you’ve only helped Magma. This is not Magma’s office or anything like that. Do you know where Magma’s office is?
MJ: No. You’ll have to check the registration.
TA: I’ve done that. The address is listed as being here. My question is, are you here at the legal firm possibly helping Magma to be registered in Sweden?
MJ: Only Jonas or Johann can answer that.
Incidentally, Teitur took photos on the scene that show, among other things, that Magma is not listed in the lobby or anywhere else on the premises.
This is the first actual confirmation that Magma Energy does not really exist in Sweden. [NB Lára Hanna also publishes a link on her blog to Magma’s corporate profile page — again, no Swedish subsidiary listed]. Once that was out, people were furious. How could it be that this matter had gone through numerous committees etc. and no one had thought to actually visit the offices to see if Magma had real operations in Sweden? Others, meanwhile, shrugged and asked what the big deal was — everyone already knew that Magma was a shelf company. This did nothing to add to or dispel that fact.
However, I guess just the blatant proof was enough for some.
Margrét Tryggvadóttir from The Movement immediately requested a meeting in parliament’s Industry Committee to discuss these “new” findings. However, just a few hours later, a second bomb was tossed into the fray: Magma sent forth a press release stating that the Ministry of Industry had actually advised Magma to establish the shelf company in Sweden in order to circumvent the Icelandic legislation.
The disbelief and outrage around the country was palpable. People were livid, and wondered who exactly had provided that kind of advice. Was it the current Minister of Industry [Katrín Júlíusdóttir] or the former [Össur Skarphéðinsson — currently Minister of Foreign Affairs]? The current Minister for the Environment, Svandís Svavarsdóttir, immediately stated that she wanted an investigation into the allegations. RÚV interviewed Katrín Júlíusdóttir yesterday, who vehemently denied the charges, saying that “no documentation exists” within the Ministry of Industry to support the claim. When asked whether she could rule out that this had been discussed at meetings, she said no, she could not rule it out, but that it had not been done at meetings that she, herself, had attended.
The meeting in the Industrial Committee will likely be held today. One can only hope that something transpires because this matter is so incredibly debilitating, makes you feel so powerless to do anything to stop the blatant peddling of our resources into private hands, that it’s almost too much to take.
Meanwhile, major props to Lára Hanna and Teitur for their continued fight for the cause.
[* The mind positively boggles. That’s as if someone had made a deal in 1880 that a foreign company could have exclusive rights to Iceland’s resources until today.]
Comments on this entry are closed.
“The law, obviously, is designed to protect Iceland’s resources, which should be used to benefit the people who own them, not some overseas corporation that will exploit the profits for its own gain.”
So if the owners were Italian rather than Canadian that would be preferable? Since you do seem wholeheartedly in favour of Iceland joining the EU.
Don’t see where joining the EU comes into it — this is the case today. And yes, I do see a difference, since concessions are being made for a common good — Iceland, theoretically, could do the same in Italy. But not in Canada.
Congratulations on encapsulating and reporting this all so well.
My concern about KJ is that she is so obviously inexperienced.
Gangsters like BT are still manipulating her over ‘investments’.
The Banks are all wailing, but as we know increasing bonus pay.
Would be great to see if some bluffs were called but alas not.
Things are getting worse and will worsen with spaghetti lawsuits.
Keep it up, as we’re all trying to fight th eexhaustion every day!
Until there are consequences this will just go on. Better stop it now while you can. Every segment of the public infrastructure will be sold off in this way. Then if you complain (re-nationalize), say hello to the ‘peace keeping troops’.
Kris
“Don’t see where joining the EU comes into it”
Really? On the face of it, you seem to be suggesting foreign bids outside of the EU would strip Icelanders of their ownership of natural resources. But inside would be fine.
Or is it just -this particular- Candadian company you have an issue with?
“Iceland, theoretically, could do the same in Italy. But not in Canada.”
Theoretically. Someone could make an offer for EDF Energy. It would be blocked. An offer for Danone, blocked. I think Icelandic companies would find it , in reality, much easier to bid for Canadian rather than EU companies.
new car crash, same victims…
Magma accounts were never healthy enough to complete the intial purchase anyway.
They are privatizing the water, and in working is privatizing of the fish.
Here is (in icelandic) a letter from a law-student who sits in the government-committee which is meant to find að reconsiliation between parties.
This law-student sits in this committee for the “Hreyfing” and he thinks that they are now all four biggest parties in parliament in agreement and not taking the fish back to the people but giving it to the big companies.
https://www.svipan.is/?p=9265
It’s not “almost too much to take”, Alda.
There has to be a point at which the Icelandic people stand up and say, “this IS too much to take”, and we’re damn well going to see to it that this stinking fish is not waved under our noses for one more second.
Our “transparent and accountable” government should easily be able to take the matter in its stride. That’s why we got rid of the old government, er… isn’t it… ?
Livid may not be a strong enough emotion. Perfectly obvious these people are willing to sell Iceland off piecemeal, leaving its citizens behind to pick up the tab.
As for Magma Energy, just as obvious what they are constituted of. Talk about putting your precious natural resources into the wrong hands.
Just how much longer until people say no, no how, no way?
Democracy depends on citizens being angry enough to get involved. My own country is taking it too far right now, but for whatever it’s worth I offer encouraging thoughts to the Icelanders.
The natural resources of many countries are mined [exploited] by overseas companies. The financial costs of exploring and drilling often exceed the recourses available to smaller countries.
These countries should just tax the hell out of them. Forget about royalties and just tax the profits. Providing the State controls the retail price and it’s a renewable resource, then isn’t Iceland in a win win position?
Iceland was sold,lot stock and barrel
by the corrupt,for the corrupt
and only a cry from the people
long after the fact,
after SUV repossessed
house foreclosed
Does Iceland want to stand out again,as an
independent nation/people?
Have my doubts,would mean:
no whaling for the Japanese
making high end products from smelters,not just ingots
end corporation welfare
etc etc etc
well, sure you get the point,
hey we have an ex president here in the States
that sure to get elected there
GWBUSH
as he said after 9/11
go shopping America
sure miss the Iceland of my youth!!!!!
“An offer for Danone, blocked. I think Icelandic companies would find it , in reality, much easier to bid for Canadian rather than EU companies.”
Ok, now thats just plain bullshit.
The EU would offer Icelanders a higher court to dispute its governments actions which would allow its to over rule the Icelandic government. This is the reason for the IP’s opposition to the EU.
Rik, Idunn — absolutely agree. What do you propose we Icelanders do?
@Peter
Ok, now thats just plain bullshit.
Erm … search for Danone in this page ….
https://en.wikipedia.org/wiki/Economic_nationalism
Rather, let me do it for you:
”
Both the French and US government used national security as the reason for opposing takeovers of Danone, Unocal and the bid by DP World for 6 US ports.
“
ground control to major tom….reality check. the real scandal is the “fury about the magma deal” itself. i find it totally bizarre that a large population within this country feels threatened by the acquisition of magma while at the same time icelandic pensioners are living a good life due to transfer payments from abroad. the only reason that the icelandic pension system is still standing and that pensioners are getting their payments at the end of each month is that the icelandic pension funds own tons of stocks and bonds abroad. i bet that the portfolio of the pension funds contains among others a nice collection of stocks and bonds of utilities in europe and north america (including canada).
Well, Alda, I know a lot of outraged Americans write directly to their congressmen and senators.
I have certainly written myself to Icelandic members of parliament (as well as British ones) when I have been outraged (which happens from time to time) and I have often received encouraging replies, although action is, of course, what is needed.
I am nevertheless afraid that the oldest parliament in the world is now working against the interests of its own countrymen and women, due to the same nepotism and corruption which has reigned for twenty years. It is succeeding as well as the IP alone ever did in isolating itself from meaningful contact with intelligent and creative people who could be playing an enthusiastic part in building a society a person would want to live in.
Jim’s suggestion of allowing any pushy entity whatever to take over here, but taxing the hell out of them, almost makes sense, but you can’t do business on the basis of changing the rules retroactively. So Magma Energy wouldn’t even be interested in Iceland if the taxation levels were sufficient to be of benefit to Iceland itself. It would simply cry “Breach of Agreement!” and pull out.
I wrote recently to three þingmenn and received two replies. If all Icelanders who are awake to the danger we are in were to do the same, I honestly believe we would get somewhere, and democracy might start to mean something again.
Apart from that, I reckon I’ll be standing in front of the Icelandic parliament again before the year is out, dressed in my most respectable protesting clothes, and I suggest that all those who still possess respectable clothes do the same. Far too often the drunk/druggie/attention-craving/looney fringe give our dumbed-down media photographers a cheap opportunity to make sincere democratic opposition look like some stupid fashion show for drop-out idiots.
People who care have to be there too.
Rik — I, too, have written to MPs about the Magma Deal. I was also one of those who showed up to protest in Reykjavík City Hall when the decision to sell was made in the Reykjavík City Council. I have written extensively about it. I have also done some things to help out those who are trying to find ways to have the deal overturned.
However, this: you can’t do business on the basis of changing the rules retroactively is precisely the reasoning that is being given for the Magma deal, i.e. you can’t change the laws retroactively. So, in effect, we’re being told that, what is done is done, we’re locked into this situation and there’s no way out.
Those of us who oppose the deal have done a great deal already. In fact, many people have gone to great lengths to search for any available loophole, including appealing to the above-mentioned committee. Margrét Tryggvadóttir, for instance, yesterday said she’d look into filing a formal complaint with ESA. According to a legal specialist at the U of Iceland, however, that does not seem to be a viable option, either.
So, when all efforts prove fruitless, it’s pretty hard as a normal citizen not to feel powerless and despondent.
Some of those who have commented about the “lack of action” from those who are mad as hell (and this is not directed at you personally) might do well to come up with constructive suggestions, as opposed to bitching about how Icelanders never do anything about anything.
Im offering this as a constructive suggestion Alda.
Changing the law retrospectively happens all the time . And it always has and is nice or horrible depending which side you’re on. Didn’t the Honourable Justice in Iceland just do this recently for the foreign exchange loans debacle? So dont worry about it cause its good for the “people”.
The Australian Government for instance is hoping to retrospectivley pass legislation taxing the profits of the big multinationals that are making very healthy profits from that countries natural resources. Of course the shareholders and the multinationals hate it. Maybe they think that some other place at the other end of the world may try to do the same. Making very healthy profits from that countries natural resources. Of course the shareholders and the multinationals hate it. Maybe they think that some other place at the other end of the world may try to do the same. But these companies own the infrastructure and can’t do much about it. Having said that they have clubbed together and spent millions and millions on national advertising and lobbying the Government to have their way
Isn’t it the nature of capitalisim for big business [and we’re talking democracies here] to reward their shareholders for the risk they took in buying into that company just as its the duty of government to protect the interests of the people? So why not tax the b******ds, pay off the national debt and go back to being the most unique civilization in the western world.
Without knowing anything about the HS Orka situation apart from Alda’s blog, my feeling is that Iceland suffers a bit from small country syndrome which often equates to elites and under the table deals. You can’t really blame Magna/Orka for exploiting a government lacking strong moral leadership in favour of their own shareholders interests. My impression from TIWR is that the mainstream media in Gods Own Country is stifled by cronyism and the general public ill informed. Of course I could be wrong. Thank your god for folk like Alda and their blogs.
Thanks Jim.
Some other people have been coming up with constructive suggestions in other forums — hope to blog about that in due course.
Might I suggest organizing a protest at the Canadian Embassy? Not to equate the actions of Magma to the Canadian government, but rather as an appeal to Canadians.
They are fairly reasonable people, after all, and there is a significant environmentalist movement there. A protest outside the Canadian Embassy might attract the attention of the CBC, the Globe and Mail, etc etc; perhaps mainstream Canadian journalists like George Strombolopolous (who has a pretty solid chat show every night) and David Suzuki would pick up on the story, which would inevitably generate some negative press for Magma back home.
And it seems doubtful that the story is getting much attention there. I apologize to any Canadian journalist who has covered it (I haven’t lived in Canada since 2008) but if a simple search of “Magma Energy Iceland” on CBC.ca reveals anything, its that Canadians – barring those who read up on their Icelandic news – aren’t aware of this issue at all. Many would be fairly disgusted if they knew about it. I can only imagine the furore on the streets of Montreal if an Icelandic (or any foreign) company tried to buy Hydro Quebec, for example.
While organizing such a demonstration may amount to nothing in the end for the HS Orka deal (Canada, after all, is one of the worst abusers of the environment in the world; google “Alberta oil sands”), it may do some damage to Magma; enough negative publicity might cause Canadians to think twice about investing in a politically risky company like Magma, who are already reviled by green-minded folk within the country, if I am not mistaken. Although it would probably do little to stop the privatization, it would be a minor victory, and could discourage further foreign investment in Iceland’s energy sector.
End rant!
Sam – thanks for the suggestion. Not sure how effective that would be — that sends a signal that the Canadian people are somehow responsible in my opinion, and that’s obviously not the case. No — I think the people who need to be taken to task on this are our own politicians.
And BTW I was contacted by a journo from McLeans a while back who was writing a story about this.
Yes, I can see how it could construed as such.
Well, any sizable (by Icelandic standards) protest against the deal should garner media attention in Canada (and elsewhere). If I’m not mistaken, before the Kitchenware Revolution the largest demonstration in Iceland’s history was against the Karahnjukar project. It isn’t unreasonable to think that thousands of Icelanders would turn out to demonstrate against this deal, especially if another concert was organized.
It is somewhat shocking that the CBC have done nothing on the story, though. Not even a short blurb.
And the most I could find on the Globe and Mail’s website was a passing mentioning of the deal in a profile of Ross Beaty. It made no mention of the deal being controversial.
https://www.theglobeandmail.com/globe-investor/magma-steams-full-speed-ahead/article1275611/?cmpid=rss1
I would have expected better from both.
Yes, absolutely. Me too.
However, I don’t think we’ve seen the last of this. I believe we’ll hear and see a lot more in the next while.
Sam-
Considering the level of foreign ownership in Canada, I doubt we will have any problem with a Canadian company having interests in Iceland. In fact most people will probably see it as a good thing, since they are buying out a company which deals in clean energy. Magma already owns geothermal projects in several other countries.
Again, considering the level of foreign ownership in Canada (including companies owned by EEC countries), I don’t know why the fact that the company itself is Canadian is a big deal. It’s the same as an Icelandic company operating in Canada… if Iceland had a big enough population and economy, I don’t think we would be terribly concerned about it investing in Canada, though at the moment it is not in the position to. It seems xenophobic, and I have to agree with Michael Lewis in a way…
It’s just globalisation. I don’t think it is fair to allow EEC countries invest but to not allow Canada. If you allow one, you should allow them all.
https://en.wikipedia.org/wiki/Foreign_ownership_of_companies_of_Canada
Ok. I was thinking about your request and looking at a particular US Supreme Court case that I linked to below.
My suggestions are as follows. First of all, the letter of the law was obeyed but not the spirt in the case of the Magma affair. That is one thing to be looked at.
I think that the primary tactics that could be used are legal. Either use the higher court system, like was done with Katzenbach v. McClung to invalidate the purchase or pass new laws that make it difficult or impossible for Magma to do business.
https://en.wikipedia.org/wiki/Katzenbach_v._McClung
@Zig
Its not just about foreign ownership. Its about the privatization of public utilities.
There are a significant amount of Canadians who would be up in arms if provincial utilities like BC Hydro and Hydro Quebec were sold off to foreigners. Especially if they were sold to Americans.
I think the goberment is not working for the people, not this goberment nor the last one, It is as simple as that, so I think people have to take action in showing they are not willing to take this BS anymore, this is not the Iceland of 20 or 30 yeqrs ago, where the govrment officials had morals, people can send them as many letters as they want, if the situation is not in their best interest, they will find good use for them in the toilet, people have every right to get angry, but they have to remain angry till they listen to them, not allow them to give them some exiting news and forget all about it, people get so angry, and then they feed them, constant news about a volcano blowing its top, and “look, look, everybody arrownd the world is trying to pronaunce the name, look we are in the news, thats soo cool” and they forget about their anger, they get angry again, and “look, look, we are soo cool, we passed some gay marriege laws”, and again people forget, about the real things, everybody gets so happy and proud about the PM’s marriege. People have to get and remaind angry untill they listen to them. People can choose to get angry and blog and blog about it day and night, or can acctually go and protest and protest, and use their blogs to organize people to protest and protest untill they listen to them, you can press delete to mails and mails, but you can not delete, 5, 6, 10, 40, 50 thousand protesters.
Sam- I believe a great portion of our petroleum industry is foreignly operated, crude oil being a natural resource.
That is what they would like people to feel and think: that nothing can be done.
There is every reason to retroactively change the result of fraud, and this case seems fairly blatant. Asking those responsible to change what they’ve wrought would be too optimistic. They must be compelled to do so through popular opinion and decision.
You’ve said before that few in Iceland read this blog, which is a shame as they might learn much. But there are surely other ways to reach them, and in understanding and knowledge can come transparency, the demand for it. Understanding that those with low aims and morals can least stand the light.
From there can come another chorus of pots and pans, quite public, pointed, and determined. This need not follow comprehension, but in conjunction with, or even lead. People can come to learn the reason and need, to find the will themselves, begin to see. Through knowledge they will know why, and feel all the stronger for it.
Those you oppose would prefer all stayed home and hopeless, ignorant and misinformed. They need not have their way. If they do there will be nothing, not even the water that is sacred to them . . . nothing but money.
@Michael Lewis
“I think Icelandic companies would find it , in reality, much easier to bid for Canadian rather than EU companies.”
Ok, now thats just plain bullshit.
Both the French and US government used national security as the reason for opposing takeovers of Danone, Unocal and the bid by DP World for 6 US ports.”
I said its bullshit that an Icelandic company would find it easier to take over a Canadian company rather that an EU company. Citing examples of the US and French government actions doesn’t alter the fact that Icelandic companies have take over many EU companies. How many Canadian companies have been bought by Icelanders?
Today at 12:00 there was a protest outsaid the IMF temporary offices again, do you know how many INFURIATED people were there?… not more than 5 protesters, and probably 10 curious looking from a distance at the 5 protesters. Where is ALL the angry people? the people that has had enough, the people that wants some change, where are they?
I wasn’t criticizing, Alda. When people ask, as you did, “What can we do?”, I suggested the very limited options I feel I have at my disposal, while depressingly aware that they don’t actually solve the problem of corruption here.
Easy is right to point out that only a tiny handful of people turned up to protest, but I am afraid that only a tiny handful of people has any idea of the issues at stake. And for that we can thank our “impartial” and “informative” media.
I certainly intend to continue informing people of the existence of blogs like this one, since I believe there is every reason to be optimistic when such information and commentary are readily available.
Sticking your neck out takes courage, but we can’t do without a few individuals who are prepared to do that as well.
By that I mean making a quiet little scene and being devastatingly blunt, without appearing to have lost your marbles or to be uninformed… I’ve seen it happen here, but of course the general media try to ensure that such people get no more than one chance to speak… Wish I spoke perfect Icelandic…
@Easy and Rik Hardy
A protest at noon on a Thursday? I can think of a lot of reasons that protest wouldn’t have a lot of people. The word wasn’t spread adequately(I myself would probibly wait until next Thursday and spend the weekend spreading the word during the Friday and Saturday parties), it is during a work week, people were worried about being arrested, just to name a few.
Easy — in case you missed it, this post is about people who are livid about the Magma-HS Orka deal, not the IMF.
Rik — I get it and am in total agreement with you. Especially the part regarding the protesters being pigeon-holed as loopy and not credible.
when the ministry of industry, energy and tourism advised magma to found the shell company, they simply did what they are suppossed to do. under current circumstances its in the interest of this country to attract foreign direct investments and provide relevant information.
btw, this link is to a oecd paper (1998/2000) about foreign direct investments in oecd countries and the particularly high barriers in iceland. according to this paper iceland has actually the highest entry barriers.
https://www.oecd.org/dataoecd/24/35/2956455.pdf
This is the reason why I thought my comment was related to this post, I could be wrong but, Isn’t it really about the fury of the people because of one more drop in the allready full glass? this drop beeing called the Magma issue, I assumed that the same people that is furious because of Magma is also or at least should also be furious because of an extra 25% hike in food taxes(IMF) I am fed up with Magma, with the handelings of the crisis, with the freedom that the criminals that did this to the country still enjoy, with the rise and rise of taxes, with the FX loans, with loans from some elected friends of the right people beeing wiped off, etc,etc; and I would guess that the people that are furious and angry are for the same reasons, not just becuse Magma, but the whole thing. Like I said at the begining, I could be wrong but I honestly thought the comment was relevant.
Easy — The IMF has not recommended an extra 25% percent in food taxes — they’ve said food taxes should rise to 25.5% in line with everything else. And note bene it was the government that commissioned the IMF to write a report suggesting how the tax system could be amended — the IMF did not just decide to do that on its own initiative.
Let’s have our facts straight here.
And no, I do hold that everyone who is angry about the Magma deal should automatically be angry about everything else. To me, that’s about as ridiculous as getting angry about nothing — just the other side of the same coin. People should use their heads and their common sense to make their own judgments — not just rush out with all the other people because this or that is supposed to make them angry.
“This was done to get around Icelandic law, which stipulates that only Icelandic firms or firms from the EEA area can own shares in Icelandic energy companies. The law, obviously, is designed to protect Iceland’s resources, which should be used to benefit the people who own them, not some overseas corporation that will exploit the profits for its own gain.”
If that is the law’s design, then the law remains ineffective because it does not protect Iceland’s resources from being controlled by non-Icelanders, as non-Icelandic companies in the EEA are still allowed to buy up and exploit Iceland’s energy resources.