The law was repealed in 2015 apparently: https://www.theguardian.com/world/2015/apr/29/basques-safe-iceland-district-repeals-decree-kill-on-sight

The edict was issued in 1615 after a storm destroyed three Basque whaling vessels on an expedition in Iceland. Eighty members of the crew survived, said Gudmundsson, and were left stranded in the area. “They had nothing to eat, and there were accounts of them robbing people and farmers,” he said.

The brewing conflict between locals and the whalers prompted then-sheriff Ari Magnússon to draw up a decree that allowed Basques to be killed with impunity in the district. In the weeks that followed, more than 30 Basques were killed in raids led by the sheriff and local farmers. “It’s one of the darkest chapters of our history,” said Gudmundsson, noting that the incident known as the Slaying of the Spaniards ranks among the country’s bloodiest massacres.

Four centuries later, Gudmundsson decided it was time to set right the wrongs of history. Last week, at the unveiling of a memorial dedicated to the Basque whalers who were killed, he repealed the decree. “This decision was made 400 years ago and it has never formally been repealed until now.”