Population: 296,737

Economy Overview:

Iceland's Scandinavian-type economy is basically capitalistic, yet with an extensive welfare system (including generous housing subsidies), low unemployment, and remarkably even distribution of income. In the absence of other natural resources (except for abundant geothermal power), the economy depends heavily on the fishing industry, which provides 70% of export earnings and employs 8% of the work force. The economy remains sensitive to declining fish stocks as well as to fluctuations in world prices for its main exports: fish and fish products, aluminum, and ferrosilicon. Government policies include reducing the budget and current account deficits, limiting foreign borrowing, containing inflation, revising agricultural and fishing policies, diversifying the economy, and privatizing state-owned industries. The government remains opposed to EU membership, primarily because of Icelanders' concern about losing control over their fishing resources. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, and new developments in software production, biotechnology, and financial services are taking place. The tourism sector is also expanding, with the recent trends in ecotourism and whale watching. Growth had been remarkably steady in 1996-2001 at 3%-5%, but could not be sustained in 2002 in an environment of global recession. Growth resumed in 2003, and estimates call for strong growth until 2007, slowly dropping until the end of the decade.

General Business Practices.

The language used in business transactions in Iceland is Icelandic. In court Icelandic is also the language used. Documents in English or Danish do generally not require translation in order to be presentable before the courts. The monetary unit in Iceland is the Icelandic krona, IKK, and there are approx. 70 IKK to the US dollar.

Collections - General Information

A. Background of Industry

No official data is accessible regarding the amount of collection work in Iceland. Nearly all collection work in Iceland is handled by lawyers and this goes both for consumer and commercial debts. It is though to be noted that many banks and state agencies employ in-house lawyers to carry out their collection work.

B. Licensing Requirments

As from the 1. of June 1998, persons or parties who want to engage in collection work on a professional basis must obtain a license and be insured against professional indemnity claims. Lawyers are exempted from these requirements of the Act as they are under the supervision of their own professional organisation and are obliged to have a professional indemnity coverage.

C. General pre-legal collection proceedures

1. The normal practice is to start a collection case with a pre-action letter of claim followed by a telephone call if need be. If contact is made with the debtor and he is willing to cooperate the next step is normally to obtain the debtors formal acknowledgement of the claim and to negotiate an agreement concerning payment, either in the form of a full payment, an extension of the outstanding credit (with added securities if possible) or an instalment arrangement. If the debt still remains unpaid, the next step is the courts. If the creditor has a retention of title the procedure can vary from that above., but normally following a claim letter the property in question would be repossessed. 2. Litigation is not started unless the creditor has given the go ahead signal based on our information as to the financial status of the debtor and the estimated cost of the proceedings.

D. Charges & Remuneration

1. Typically lawyers charge from 2% to 25% of the collected amount on a sliding scale. This is a charge that the debtor must bear. In addition some<