The decision was withdrawn because it has no legal basis, as Croatia's Supreme Court decided in 2009 that Zagrebačka banka and Privredna banka Zagreb can lead procedures against LB and NLB on the government's behalf, STA has learn from well-placed sources.

The Croatian government allegedly determined today that its decision was superfluous and could be understood as unnecessary meddling of the executive in the powers of the judiciary.

Indeed, after the session, Croatia's Foreign Minister Vesna Pusić told the press that today's decision did not mean Croatia had reversed its position regarding the LB issue; it still insists it should be subject to bilateral talks.

The Slovenian foreign ministry said it expected the withdrawal of the contentious decision to be "a step in the right direction". It believes Croatia will respect the agreement on succession and implement it "consistently and in good faith".

The ministry also confirmed it received a letter from Pusić but added more information would be available on Friday.

Slovenia's high representative for issues related to the succession to Yugoslavia, Rudi Gabrovec, also told the STA the decision was a "step in the right direction".

Croatia's move comes only days after Slovenia's Foreign Minister Karl Erjavec hinted that Slovenia might not ratify Croatia's EU accession agreement until the countries agree on how to proceed in open issues.

Slovenia's position is that the LB bank issue is not a bilateral problem, but one that should be resolved as part of talks on the succession to the former Yugoslavia. After years of objecting to Slovenia's position, the Croatian government agreed to it in 2010.

Slovenia's and Croatia's prime ministers, Janez Janša and Zoran Milanović, are expected to meet in Maribor on Tuesday and discuss topical bilateral issues. The meeting is however yet to be confirmed.