Iceland the nation may sue Iceland the frozen goods retailer over the use of the name, despite the supermarket trading under it for 45 years.
Amid concerns of a legal challenge the shop has said it has never before encountered any confusion over which one is which.
"Iceland Foods has traded under the Iceland name in the UK since 1970, and is today one of the UK's most recognized brands,” a spokesman told the BBC.
"We have also traded as Iceland for many years in other EU countries, and in non-EU countries, including Iceland itself.
"We are not aware that our use of the Iceland name has ever caused any confusion with Iceland the country."
Rumors of a legal case appear to have been confirmed Friday when a spokesman for the country’s foreign minister made a statement saying “that this is being looked into” although “no decision has been made."
Jon Asbergsson, who heads the Scandinavian nation’s tourism body ‘Promote Iceland’, told the BBC: “We didn't make any objections in the beginning, as we were never going to be running any supermarkets."
"But over the course of the years they have been registering the name in several other categories and companies that have Iceland in the name, they [the supermarket] have been objecting to them using the word Iceland in their names or logos."
One Icelandic lawyer suggests the use of the name might be an issue of democratic consent.
"We are contemplating whether it is fair to be able to trademark the name of a country without its inhabitants having any say in the matter,” Bergthora Halldorsdottir, a lawyer for Business Iceland, said.