As we reported at the time (June 18th and 21st), the Supreme Court of Iceland decided that loans pegged to the exchange rates of foreign currenty were illegal.   Ever since the verdict was pronounced, it has been an open question whether the rate of inerest should remain unchanged  from the original loan contracts (around 3 percent p.a.) or be in line with considerably higher interest rates on loans in Icelandic krónur as prescribed by the Central Bank of Iceland.  The Reykjavik local court decided on Friday of last week that the Icelandic rates should prevail.  The court came to the conclusion that since the foreign loans were illegal, the same would apply to the foreign-related ratest of interest.  The  case is being referred to the Supreme Court which is likely to pronounce its verdict in September.  (Icelandic media).