News

Decision on a Request to Purchase Land

11/26/11

The Ministry of the Interior has answered a request by the Beijing Zhongkun Investment Group on 31 August for granting a legal exemption as regards purchasing a share in the estate Grímsstaðir á Fjöllum, in all an area of 30,639 hectares. Because of discussion on this matter, the Ministry wishes to point out the following:

Act No. 19/1966, on the Right of Ownership and Use of Real Property, as subsequently amended, addresses in some detail the authorisation to obtain a right to ownership and use of real property in Iceland. In accordance with Sub-paragraph 4 of the first paragraph of Article 1 of the Act, a company in which none of the members bear unlimited liability for the company's or institution's debts is not permitted to obtain a right to ownership or the use of real property in this country unless the company or institution has its domicile and venue in Iceland and all of its directors are Icelandic citizens or have been continuously domiciled in Iceland for at least five years. As regards joint-stock companies, 4/5 of the share capital shall be owned by Icelandic citizens, and Icelandic citizens shall exercise the majority of the votes at shareholder meetings. This entails more particularly, in the event of a request for a joint-stock company to be allowed to obtain real property in this country, when this company does not fall under the exception provisions of Sub-paragraph 1 or Sub-paragraph 2 of the fourth paragraph of Article 1 of Act No. 19/1966, that the company must fulfil the following four requirements of the Act for this to be able to occur:

1.   The company or institution shall have its domicile and venue in Iceland.

2.   All of the company directors shall be Icelandic citizens or have been domiciled in Iceland for at least five years.

3.   Of the company share capital, 4/5 shall be owned by Icelandic citizens.

4.   Icelandic citizens shall exercise the majority of the votes at shareholder meetings.

According to Sub-paragraph 2 of the second paragraph of Article 1 of Act No. 19/1966, the Minister of the Interior, as indicated above, may grant permission to deviate from the conditions of the first paragraph of Article 1 of the Act if other reasons are considered to apply. This involves an exemption provision which, according to general rules of legal interpretation, must be understood narrowly. The Ministry finds it important when applying this exemption provision to note the aim of Act No. 19/1966 and its predecessor of the same name, Act No. 63/1919, and a study of the interpretative documents leads to the conclusion that limitations were considered necessary on foreigners obtaining rights over Icelandic real estate, so as to defend the country's independence or sovereignty as well as the possibility for Icelanders themselves to enjoy the profits from their resources. 

In the opinion of the Ministry, it is impossible to ignore how large an area of land, i.e. 30,639 hectares, is involved in the purchasing plans of the company, and there is no precedent for such a large area of Icelandic land to have been placed under foreign control. The Ministry finds it incompatible with the purpose and aim of Act No. 19/1966 that the Minister grant permission to deviate from the requirements of the first paragraph of Article 1 of the Act when such a large area is in question.

One must also keep in mind that the provision establishes strict requirements for joint-stock companies to be allowed to obtain a right to ownership or to the use of Icelandic real property, and the company under discussion clearly does not fulfil any of these requirements. Thus the Ministry believes the circumstances of this case to be such that granting permission for an exemption from the Act would deviate so far from the general principle stated in the first paragraph of Article 1 that doing so would be indefensible.

The conclusion of the Ministry is that it finds no reason for the Minister of the Interior to grant the Beijing Zhongkun Investment Group permission to deviate from the requirements of Sub-paragraph 4 of the first paragraph of Article 1 of the Act and to purchase a 72.19% share in the undivided overall estate of Grímsstaðir á Fjöllum. Therefore, the company's request to this end is refused.