"The government is preparing measures to protect Slovenia's equity in NLB and respond to Croatian violations of international law," Prime Minister Miro Cerar told the press after Thursday's cabinet session.

The statement comes after it was revealed that Nova Ljubljanska banka (NLB) settled at least two claims stemming from Yugoslav-era savings deposits in Croatia held at Ljubljanska banka (LB), worth several million euro combined.

NLB was created under a special constitutional law in 1994 precisely to shield it from such liabilities, and the fact that it has now paid the LB claims has raised concerns about contingent liabilities potentially reaching into hundreds of millions of euro.

These contingent liabilities were also one of the reasons why Slovenia has delayed privatising the bank despite state aid covenants mandating that it should have been privatised by the end of last year.

The move is also at odds with Slovenia's long-standing stance that LB claims are a succession issue and that NLB has nothing to do with them, even if it appears as a co-defendant with LB in cases at Croatian courts.

Slovenia sees the claims as falling under the purview of succession to the former Yugoslavia, as governed by the 2001 succession agreement, and the 1994 constitutional law specifically states that it cannot have joint and several liability or LB claims.

Cerar stressed that the LB claims were a succession issue and had to be resolved as such. "Slovenia has never changed the position and may not do so."

However, Croatian courts have ignored these restrictions and handed down at least two if not more final judgements ordering NLB to pay up.

"It is patently clear that Croatian courts are processing suits against LB and NLB with a new urgency," according to Cerar.

The bank has been mum about the reports, as has the Finance Ministry, but several media have reported that the bank paid one claim while another was subject to debt enforcement procedure.

Unofficial information indicates the bank decided to settle the claim because it could potentially suffer significant business damage in Croatia.

NLB does not have banking operations in Croatia precisely because of the fraught history with LB, it does however have leasing, factoring and real estate operations.

On the other hand, the bank may now potentially be on the line for dozens of similar claims: the principal on LB deposits is around EUR 175m, more than double that with default interest.

Some reports have suggested that in this case the bank would have to create provisions, which would reduce its capital adequacy.

The bank's move raises the question of who authorized the settlement of these claims. Cerar said the government never provided such guidance.

"We made it clear at a previous session that any settlement of financial liabilities from these suits is not in line with our legal system or the intergovernmental agreement signed by both countries ... which was also a perfectly clear signal to NLB and the Slovenian Sovereign Holding on how to act," according to Cerar.

Cerar refused to go into details about potential government action in the matter saying this could "jeopardise our approach." "Because this is a succession issue, the government must find a solution shielding NLB from significant damage," he said.