[2][3] The referendum was held under article 26 of the Constitution of Iceland after President Ólafur Ragnar Grímsson refused to counter-sign the corresponding Act of Parliament (known as the second Icesave bill) into law on 5 January 2010.

One of those banks, Landsbanki, had taken retail deposits from more than 400,000 British and Dutch customers through its branches in London and Amsterdam, through a product known as "Icesave".

[9] However, the exact terms of the repayment of the loan were not finalized at the time, and negotiations continued into 2009, held up somewhat by the collapse of the Icelandic government in January 2009 and the subsequent elections in April.

Initially opposed in June, the bill was passed after amendments were added which set a ceiling on the repayment based on the country's gross domestic product (GDP).

[11] Opponents of the bill argued that Icelanders, already reeling from the crisis, should not have to pay for mistakes made by private banks under the watch of other governments.

[13] Revised loan agreements negotiations, including the cap on repayments, were concluded on 19 October 2009 and the issue went back to the Althing on the same day.

[15] Article 26 of the Constitution of Iceland states that bills passed by the Althing must be counter-signed by the President within fourteen days or face a national referendum.

[21] A spokesman for UK Prime Minister Gordon Brown reacted in similar terms: "The Government expects the loan to be repaid.