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An Icelandic district court ruled last week that deposits placed by UK local authorities would now have priority creditor status in the winding up of the Landsbanki and other failed Icelandinc banks such as Glitnir.

This ruling could save UK councils upto £400 Million the Local Government Association said.  A group of bondholders of Landsbanki had argued that UK local authorities should not be allowed to continue with as "preferred creditors".

"Securing priority status in the administrations of Landsbanki and Glitnir could save council taxpayers across the country as much as £400m," Baroness Eaton, the LGA Chair said. She also highlighted that about 1% of the recovered funds would go towards legal costs.

However, there are still worries that an appeal to Iceland's Supreme Court could reverse the district court's ruling.  But the LGA said that it would "contine to coordinate support" for UK authorities.

Cllr. James Mcnamara from Cherwell said that the district court ruling would ensure that UK councils would get back much of their investments along with some interests. But like almost all other councils Cherwell recognises that there could be further legal challenges.

UK council had desposited funds with Icelandinc banks during the last decade due to the very high interest rates they were offering but the banks failed in the 2008 financial crash.

Currently, a referendum is also being planned in Iceland after its President refused to endorse a legislation that worked out repayments with the UK and the Dutch governments for bailing out their citizens who had money in Landsbanski and other Icelandic banks.  The first referendum was lost but all the three government involved are hoping that the revised agreement would receive popular backing.