Slovenia takes Croatia to human rights court over bank LB’s debt


Slovenia alleges multiple violations of the European Convention of Human Rights stemming from LB's inability to recover the debt incurred in the 1990s in Croatian courts.

The Croatian judiciary and executive hampered LB and prevented it from recovering debt, including with intentionally drawn-out court proceedings, arbitrarily affecting its assets, said the Slovenian government in a press release after approving the lawsuit.

The application is based on 26 out of 81 lawsuits that LB lodged against Croatian firms in the 1990s. Justice Minister Goran Klemenčič said the average length of LB's debt recovery proceedings in Croatian courts was 18.2 years.

He explained that LB was the biggest bank in the former Yugoslavia and that the Zagreb subsidiary had financed Croatian companies, enabling them to function and develop. "Loans from LB created positive effects on the Croatian economy."

Since the debtors (Croatian companies) after the 1991 break-up of Yugoslavia failed to settle their debts to LB stemming from loans and guarantees granted after 1980, LB and its Zagreb subsidiary launched enforcement proceedings before Croatian courts between 1991 and 1996.

The Zagreb branch of LB has been at the centre of disputes between Croatia and Slovenia since both countries gained independence, most notably due to the bank's debt to Croatian foreign currency account holders.

The Strasbourg court brought the dispute to a halt in 2014, when it ruled that Slovenia needed to compensate the savers. Slovenia has put in place a compensation mechanism estimated to cost the treasury EUR 385m, money which has already been set aside.

But Slovenia has always insisted that there is another side to the dispute, Croatian companies' debt to LB, which it had been unable to recover.

LB tried its hand at recovering its debts in Strasbourg, but a suit against a Croatian company was dismissed by the court in June 2015 on the grounds that it is inadmissible since LB was a state-owned bank.

At the time, the government said it would use all possible legal avenues to recover LB's claims in Croatia, the lawsuit being the result of these efforts.

"Slovenia has found itself in an unjust position, where on the one hand it needs to pay out the savers…while on the other hand Croatia prevented the repayment of LB claims towards Croatian companies," the government said.

Klemenčič expects the Strasbourg court to take two years at a minimum to decide on whether to admit the case, which was lodged today by the State Attorney's Office, whereupon it will examine the substance.

Slovenian officials do not believe the lawsuit could significantly worsen Slovenia-Croatian relations. On the contrary, it would inprove them in the long run.

Klemenčič had informed his Croatian counterpart Ante Šprljeta about Slovenia's move, which he feels will "neither improve nor undermine" bilateral relations. In the long term, the court decision will close this chapter, the Slovenian minister said.

While Croatia's Foreign Minister Miro Kovač said Zagreb knew only what Klemenčič told his Croatian counterpart, he was quick to point out there was no reason for the Croatian public to get upset.

Slovenian Foreign Minister Karl Erjavec is meanwhile optimistic about the good economic relations and tourism, but he noted that "we are all aware at what level the relations between Ljubljana and Zagreb are". "I believe the lawsuit will not significantly worsen them, but neither significantly improve them."

A similar view was expressed by Prime Minister Miro Cerar, who added that the lawsuit had been filed because "Slovenia is in an absolutely unjust position".

He said that ever since the two countries went independent in 1991, Croatia's judicial and executive branches' were preventing LB from recovering its debt.

He believes Slovenia has a legitimate right to demand from Croatia to fulfil its duty. "I'm confident that, when we are paying out Croatian LB clients, we have a legitimate right to demand from Croatia to fulfil its duty."

Ana Polak Petrič, Slovenia's high representative for succession to former Yugoslavia, meanwhile told the STA that the lawsuit had been filed after thorough deliberation and in cooperation with domestic and foreign legal experts.