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Should we prosecute political leaders after a crisis? Lessons from Iceland

PhD candidate Ragnar Hjalmarsson examines the implications of the conviction of former Icelandic prime minister Geir Haarde over his handling of the country’s financial crisis.

Prosecuting politicians has become popular in the aftermath of the recent global financial crisis. It has mobilised such diverse groups as the Occupy movement and the Indignados in Southern Europe and inspired Trump’s supporters to ask for Hillary Clinton to be ‘locked up’.

The idea of apportioning blame is appealing, and a strong case can be made for seeking accountability, including restoring trust in state institutions and preventing the rise of populism. Less attention has been paid to the perils of prosecuting politicians after crisis. This can partly be attributed to the fact that most countries did not prosecute their political elites after the 2008 financial meltdown.

Iceland is the exception, setting up a Court of Impeachment to try the former Prime Minister for his role in the run-up to the crisis. This makes the Icelandic experience particularly instructive. Iceland’s ‘crash’, which demolished 97% of the banking system within a few days, was followed by a determined policy of accountability. The Office of the Special Prosecutor, a novel prosecutorial authority set up immediately after the crash, has convicted more than 30 bankers responsible for crimes committed in the lead-up to the crash.

An independent truth commission carried out a detailed fact-finding investigation; nine volumes documented the causes of the crash, and offered recommendations to reform state institutions. The commission was by far the most successful commission of inquiry in the aftermath of the Global Recession. Importantly, the report found Prime Minister Geir Haarde responsible for failing to take necessary action to respond to the coming crisis.

Citing the truth commission report and the collected evidence, Iceland’s parliament, in a polarised vote, set up a Court of Impeachment – a special tribunal. Although the tribunal acquitted Haarde on most charges, it found him guilty of gross negligence: he failed to hold official ministerial meetings to formally inform Cabinet of the major danger facing the banks and the State Treasury. He was the only leader of the Western world to be convicted for his pre-crisis conduct.

Mr Haarde took his case to the European Court of Human Rights on the grounds that the Icelandic process had been politicised and he did not receive a fair trial. Yet at the end of November, the European Court upheld the original ruling. The ruling is a landmark one and raises some fundamental questions about the utility of the growing influence of the courts in times of crisis.

Should we prosecute political leaders after a crisis?

Clearly actions punishable by law should be prosecuted. Yet, should the courts hold policy-makers to account for their decisions or should the voters hold them accountable at the ballot box? In effect, is this the remit of the law or politics? This central question has political repercussions in other countries in crisis.

Should Greece, for example, prosecute Yanis Varoufakis – the flamboyant former Greek Finance Minister – for his reckless negotiating strategy with Greece’s external creditors in 2015? Criminalising politics and decision-making can have a high cost, particularly in times of crisis. The prospect of criminal liability could weaken decision-making when decisiveness is most needed. The recent ruling on the Icelandic PM may set a precedent with grave unintended political consequences. In the face of future crisis, leaders may seek to protect themselves from future prosecutions rather than take decisive action.

Second, should courts apportion criminal liability retrospectively based on the consequences of actions or omissions? By finding Haarde guilty of ‘gross negligence’ for not holding meetings in the run-up to the crisis, the court implies that had more meetings taken place, the impact of the crash would have been ameliorated. This ex-post-facto rationalisation is inaccurate and dangerous.

A counterfactual may help illustrate this point: if Haarde had kept the cabinet informed about the dangers and this information had leaked to the press, this most certainly would have accelerated the crash. Economic crises are complex and political leaders have to take one-shot decisions based on limited information available to them. Apportioning criminal responsibility based on the unintended consequences of decisions made in times of crisis can be a dangerous precedent.

Third, such prosecutions may legitimise populists who ride the tide of popular discontent and demand ‘more heads to roll’. As our research with colleagues shows, the excessive focus on scoring political points for past actions or omissions polarises political debates and is an active barrier to consensus-building, something necessary for forward-looking policies of reform. Haarde’s trial haunts the political debate in Iceland. Even members of the opposition parties believe it was a mistake, unnecessarily polarising political debates, leaving a mark on Iceland’s political culture of consensus-building and slowing down the nation’s healing.

The take home lesson is not to let political elites off the hook. Rather, we need to be aware of the pitfalls of criminalising decision-making in times of crisis. Iceland offers an ideal example of an alternative form of accountability, namely carrying out a serious investigation to publicly acknowledge the truth about the causes and those responsible for the crisis. As our research shows, the report of the truth commission not only shed light on individual responsibility, but also converted past policy failures into lessons for future reform. Forward-looking policies could bolster consensus, minimise polarisation and ultimately pave the way for a healthier recovery.

This article was originally published by the LSE European Politics and Policy blog.

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