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A legal victory in Iceland's Supreme Court has confirmed that status of local councils in the UK's "preferred creditors" in Icelandic banks. It means that councils that deposited money in the banks are likely to get nearly all their money back.

Sir Merrick Cockell, Chairman of the Local Government Association (LGA), said:

"This is a £470 million victory for councils and local residents. Securing priority creditor status in the test cases means the 145 local authorities with investments in the Icelandic banks are likely to recover almost all of the more than £1 billion they had on deposit with the four Icelandic banks. Losing this case would have been a huge financial blow. This is a great relief.

"Today's outcome is the culmination of more than two years of extremely hard work and brings the total estimated recoveries on behalf of the sector from Landsbanki and Glitnir to £624m – or 98% of the total on deposit. We are grateful to our legal team and the councils who brought their cases forward."

The LGA estimate that by co-ordinating the class action, the LGA has probably saved about £6 million in legal costs as well as making it financially viable for those councils with smaller amounts at risk to take part in legal action.

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