Reykjavik - Iceland on Tuesday said it was considering asking the European Court of Human Rights to probe the British government's use of anti-terrorist legislation to freeze Icelandic bank assets last autumn.

Britain made the move to force the Icelandic banks into administration in an effort to protect British bank deposits as the Icelandic banks faced collapse. But Iceland has maintained that the action - coming at a particularly serious point of the credit crunch - made matters worse for the North Atlantic nation's banks.

Iceland's three banks were nationalized in October when they faced collapse. The British action further limited options for the banks as they were facing the crisis.

Icelanders set up an online web site at the time to protest the British government's actions, publishing photos with texts stating they were not terrorists.

The committee that runs Kaupthing bank decided Monday to sue the British government over the October 8 decision to force Kaupthing's British subsidiary Kaupthing Singer & Friedlander into administration.

Reykjavik said it would not sue the British government in a British court, after the government received legal advice that suggested its chances of winning were slim.

But the government of Prime Minister Geir Haarde said it was prepared to support the Icelandic banking groups in their legal actions against the British government.

Iceland in November agreed with Britain and the Netherlands to compensate British and Dutch depositors in Icelandic banks. The deal helped clear the way for the International Monetary Fund to approve a 2.1-billion-dollar bridging loan. (dpa)