Iceland has dropped its legal fight with the UK Government, potentially clearing the way for a deal over frozen local authority cash. The Icelandic Government announced it would not go ahead with plans to challenge in the European Court of Human Rights the UK's decision to freeze assets using anti-terrorism legislation. This clears the way for fresh negotiations between the two governments over the fate of the £900m of local authority assets held in collapsed Icelandic banks. ‘There are no plans for the Icelandic Government to go to court over this. ‘This is one of the things that has to be sorted out as part of rebuilding our financial system and restoring the state of government finances,' said minister for business affairs, Gylfi Magnusson. But the UK Government has already signalled it is not going to let Iceland off the hook. England's local government minister, John Healey, pointed out to MPs on the communities committee earlier this month that the frozen assets were equal to the losses of councils and private citizens. The Treasury welcomed the announcement and said there would be further negotiations on ‘outstanding issues'.