Lawyers for Kaupthing, formerly Iceland's largest bank, will file a lawsuit at the High Court in London today attacking the way in which Britain forced Kaupthing Singer & Friedlander into administration on 8 October last year. The lawsuit, which has the “full support” of the Icelandic authorities, including financial backing, comes after weeks of threats from Reykjavik.

Iceland took control of Kaupthing on 9 October 2008, the day after Kaupthing Singer & Friedlander was put into administration, and Reykjavik blames the UK for the collapse of the group. The action, prepared by Weil, Gotshal & Manges, an American law firm, will take the form of a judicial review, which allows individuals or businesses to challenge government decisions.

The investment management operations of KSF have been subsequently purchased by Williams De Broe, the UK-based investment house which is part of the London-listed Evolution Group.

Kaupthing's case is expected to focus on whether the Government's actions over Kaupthing Singer & Friedlander were allowed under the Banking Act 2008, the emergency legislation that was passed after the failure of Northern Rock, the UK lender, according to the Times . If the High Court finds that the government acted unlawfully over Kaupthing Singer & Friedlander, it could set the stage for a separate multibillion-pound compensation case from Kaupthing.