KOVAČIĆ AND OTHERS v. SLOVENIA

THIRD SECTION

DECISION

AS TO THE ADMISSIBILITY OF

Application nos 44574/98, 45133/98 and 48316/99
by Ivo KOVAČIĆ, Marjan MRKONJIĆ and Dolores GOLUBOVIĆ

against Slovenia
 

The European Court of Human Rights (Third Section), sitting on 9 October 2003 and 1st April 2004 as a Chamber composed of:

MrG. Ress, President,
MrI. Cabral Barreto,
MrL. Caflisch,
MrP. Kūris,
MrB. Zupančič,
MrJ. Hedigan,
MrsM. Tsatsa-Nikolovska, judges,
and Mr V. Berger, Section Registrar,

Having regard to the above applications lodged with the European Commission of Human Rights on 17 July 1998 and on 2 June 1997 as well as with the European Court of Human Rights on 24 December 1998 respectively,

Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the jurisdiction to examine the applications lodged by Mr Kovačić and Mr Mrkonjić was transferred to the Court,

Having regard to the Court's decision of 13 March 2001 to join the three applications since they related to largely the same issues,

Having regard to the observations submitted by the respondent Government, the observations in reply from the applicants and those from the Croatian Government, acting as third-party intervener, as well as comments by both Governments,

Having regard to the replies of the respondent and intervening Governments to the Judge Rapporteur's and the Court's questions put on 25 October and 11 December 2002 respectively, and to their comments,

Having deliberated, decides as follows:

THE FACTS

The applicants are Croatian nationals. Mr Ivo Kovačić, who was born in 1922 and lives in Zagreb, and Mr Marjan Mrkonjić, who was born in 1941 and lives in Zurich, are represented by Mr Milivoje Žugić, a member of the Croatian Bar. Ms Dolores Golubović, who was born in 1922 and lives in Karlovac, is represented by Mr Zvonko Nogolica, also a member of the Croatian Bar.

At the oral hearing on 9 October 2003, Mr Kovačić and Mr Mrkonjić were represented by Mr Žugić, assisted by Ms Dunja Kuecking. Ms Golubović was represented by Mr Nogolica.

The respondent Government were represented by their Agent, Mr Lucijan Bembič, by Mr Jean-Marcel Cheyron and Ms Claudia Annacker, Counsel, and by Mr François Berbinau, Mr Rudolf Gabrovec, Mr France Arhar, Mr Andrej Rant, Ms Blanka Primec and Mr Miha Pogačnik, Advisers.

The Croatian Government, who had made use of their right to intervene under Article 36 of the Convention, were represented by their agent, Ms Lidija Lukina Karajković, assisted by Mr Domagoj Maričić and by Ms Vanja Jelić, Advisers.

A.  The circumstances of the cases

Before the dissolution of the Socialist Federal Republic of Yugoslavia (“the SFRY”), the applicants or their relatives all deposited hard foreign currencies in savings accounts with the office of a Slovenian bank – the Ljubljana Bank (Ljubljanska banka) – in Zagreb (Croatia). Some of them also held term accounts which matured in the late 1980s or early 1990s.

Under the legislation applicable at the time, funds in hard foreign currencies deposited with commercial banks could be transferred to the National Bank of Yugoslavia (“the NBY”) in Belgrade and were guaranteed by the SFRY. Owing to the monetary crisis, withdrawal of hard foreign currency from such so-called “old savings accounts” was progressively restricted by legislation enacted during the 1980s and the early 1990s. Since then the applicants or their relatives have generally been unable to gain access to the money they deposited.

Until its reregistration on 1st January 1990 the Zagreb office of the Ljubljana Bank was called the Ljubljana Bank Basic Bank Zagreb (Ljubljanska Banka Osnovna Banka Zagreb). Since then, it has been known as the Zagreb Main Branch (Glavna filijala Zagreb).

The facts of the case, as submitted by the parties, may be summarised as follows.

1.  The facts of the individual cases

(a)  Application no. 44574/98, Mr Ivo Kovačić

(i)  Deposit of savings and proceedings in Croatia

Mr Kovačić, who is retired, holds a foreign-currency savings account with the Zagreb Main Branch. He has been a client of the Zagreb office for over 30 years.

On 24 October 1984 the applicant and his wife signed a three-year automatically renewable term-deposit agreement for German marks (DEM) 66,771.12 earning 12.5% interest a year. The agreement stipulated, inter alia, that the SFRY would guarantee their savings. The last withdrawal from the account was made in August 1990.

On 10 September 1990 Mr Kovačić attempted to withdraw DEM 40,000 from his account. As the term had not yet expired the bank turned down his request and suggested he should return after 24 October 1990, the date of maturity. On 25 October 1990 the applicant met the bank manager, who offered monthly payments of DEM 4,000. However, the bank did not make any payments.

Mr Kovačić and his wife made repeated attempts, on one occasion (on 6 February 1991) by a written demand for payment. They were informed by the bank in reply on 17 April 1991 that it was unable to make any payments, as its relations with the NBY had not been determined and the Yugoslav foreign-exchange market was not functioning.

According to a bank statement of 14 October 1993, the amount standing to the credit of the account was then DEM 49,794.30.

Following the bank's refusal, the applicant brought a civil action against the “Ljubljana Bank, Zagreb Main Branch” in the Zagreb Court of First Instance (Općinski sud) claiming back his savings with interest. On 2 December 1997 the court found, inter alia, that Mr Kovačić had inherited the foreign-currency savings account in question from his wife, who had died in the meantime. It ordered “the Ljubljana Bank, Zagreb Main Branch” to pay the applicant the savings plus default interest within fifteen days (which, according to the applicant, came to a total of DEM 61,000).

The court also held that, as the bank's head office was not on Croatian territory, the provisions of the Decree on the Conversion of Nationals' Foreign-Currency Bank Deposits into Croatian Public Debt (Official Gazette no. 71/91) could not apply, as Mr Kovačić had not transferred his deposits to a Croatian bank. On 22 April 1998 the ruling became final and enforceable.

Mr Kovačić then made an application for execution of that decision to the Zagreb Court of First Instance, which issued a warrant of execution in the applicant's favour on 1st October 1998. The Zagreb Court of First Instance later stayed the execution proceedings owing to Mr Kovačić's failure to pay the bailiff's fees in advance, as required by Croatian law.

In 1998 Mr Kovačić attempted to withdraw his funds, firstly, from the Zagreb Main Branch and, subsequently, from the Ljubljana Bank Head Office in Ljubljana. On 6 July and on 14 September 1998 he was informed by bank officials that the bank had no funds and the account was frozen.

In December 2001 Mr Kovačić sought the registration of a charge over land in Osijek (Croatia) belonging to the Zagreb Main Branch. On 5 March 2003 the Osijek Court of First Instance granted his application. On appeal, the Osijek Court of Appeal (Županijski sud) upheld that judgment on 5 June 2003. On 17 July 2003 Mr Kovačić obtained a warrant of execution.

(ii)  Proceedings in Slovenia

On 31 August 1998 Mr Kovačić applied to the Slovenian Constitutional Court (Ustavno sodišče) for an order recognizing the Croatian judgment. On 24 September 1998 the Constitutional Court informed him that it had no jurisdiction to make such an order. He made a like application to the Slovenian Supreme Court (Vrhovno sodišče).

Finally, on 7 December 1998 Mr Kovačić made an application to the Ljubljana District Court (Okrožno sodišče) seeking a declaration regarding the extent to which the Croatian judgment of 2 December 1997 was enforceable. On 21 June 1999 the District Court authorised him to enforce the Croatian judgment. However, Mr Kovačić has not sought to enforce the judgment of 2 December 1997 in the Slovenian courts.

(b)  Application no. 45133/98, Mr Marjan Mrkonjić

(i)  Deposit of savings and proceedings in Croatia

Mr Mrkonjić holds a foreign-currency savings account at the Zagreb Main Branch.

On 18 July 1984 he made a payment into the account. On 18 July 1987 he signed an automatically renewable three-year term agreement for a deposit of 26,754.26 Swiss francs (CHF) earning 12.5% interest a year.

On 2 May 1993 he closed the account by notice in writing but was unable to withdraw the remaining balance. According to a bank statement of 30 July 1993, the amount of his savings plus accrued interest at that time came to CHF 31,265.92.

On 30 July 1993 Mr Mrkonjić brought a civil action in the Croatian courts to recover his savings plus interest. On 23 August 1994 the Zagreb Court of First Instance ordered “Ljubljana Bank, Zagreb Main Branch” to pay him the money due, namely CHF 31,265.92, plus default interest. The Zagreb Main Branch subsequently appealed. Its appeal was dismissed on 12 September 1995 by a court of appeal.

On 28 December 1995 Mr Mrkonjić withdrew part of his savings (CHF 7,850.07) from his account.

On 10 July 1997 he obtained a warrant of execution from the Zagreb Court of First Instance against the Zagreb Main Branch, which, according to the Slovenian Government, has lodged an appeal against that order.

On 23 July 1997 the Zagreb Main Branch paid Mr Mrkonjić part of the principal together with court fees.

On 12 February 2001 Mr Mrkonjić requested the registration of a charge over land belonging to the Zagreb Main Branch in Osijek. His application was granted on 12 March 2002 by the Osijek Court of First Instance, but the Osijek Court of Appeal overturned that judgment on 25 April 2002. Finally, on 27 February 2003, the Supreme Court reinstated the first-instance judgment of 12 March 2002.

A bank statement dated 12 May 2003 indicates that the amount standing to Mr Mrkonjić's credit on the savings account on that date amounted, with accrued interest, to CHF 28,438.18.

(ii)  Other attempts by Mr Mrkonjić to withdraw his savings

In 1998 Mr Mrkonjić also wrote several letters to the Ljubljana Bank in Slovenia asking to be allowed to withdraw his money.

On 10 November 1998 a bank official informed him that his money had been deposited with the NBY and that immediately after Slovenian and Croatian independence, the bank's access to the deposits in Belgrade had been suspended. He added that a constitutional law made Slovenia the guarantor of savings deposited on Slovenian territory and, further, that Slovenia and Croatia were attempting to find a solution to five issues that remained outstanding, the first of which was the “old savings accounts”. A group of experts were due to meet to discuss these issues shortly.

On 9 December 1998 Mr Mrkonjić was informed by the official that Slovenia and Croatia had agreed that the problem of the “old savings accounts” of “the Ljubljana Bank, Zagreb Main Branch” would be resolved by international arbitration. He was given the same information in a letter dated 18 January 1999.

On 3 January 2000 the official repeated this information. He again indicated that the “Croatian savings” were the subject-matter of negotiations between Slovenia and Croatia and that the Zagreb Main Branch would make the payments once a bilateral agreement had been signed or the succession problems between the former Yugoslav republics had been resolved.

In 2000 and 2001 Mr Mrkonjić again made several requests to the Ljubljana Bank and the Zagreb Main Branch for the withdrawal of his money. By letters of 4 April 2000, 20 and 22 February, and 16 July 2001, bank officials informed him that no solution had been found to the problem of “old savings accounts”.

(c)  Application no. 48316/99, Ms Dolores Golubović

(i)  The applicant's savings

Ms Golubović, who is retired, holds a foreign-currency savings account at the Zagreb Main Branch as the heir to the original account-holder, Mr Ostoje Mejić, by virtue of a decision of the Karlovac Court of First Instance of 20 February 1998. That decision is final and enforceable.

On 6 October 1994 the amounts in Mr Mejić's first savings book were recorded as: DEM 31,065.59, CHF 4,468.50 and 2,897.60 Austrian schillings (ATS). The amounts recorded in Mr Mejić's second savings book at 31 December 1993 were: DEM 5,307.54, USD 13,074.44, CHF 904.94, ATS 6,480.51 and 167,146 Italian lire (ITL). According to the applicant, those sums had been paid in between 1986 and 1990.

On 29 May 2001 the Zagreb Main Branch issued a savings book in the applicant's name, further to the Karlovac Court of First Instance's decision of 20 February 1998. The deposits, including accrued interest, then came to DEM 39,085.45, USD 14,092.89, CHF 5,627.59, ATS 10,077.41 and ITL 193,495.

(ii)  Other information submitted by Ms Golubović

Ms Golubović maintained that the Ljubljana Bank had advised the Croatian savings-account holders in 1992 to limit their withdrawals to DEM 500 in Yugoslav dinar (YUD), the Yugoslav dinar no longer being legal tender in Croatia.

On 3 November 1998 a bank official at the Zagreb Main Branch informed her that all hard-currency accounts had been frozen and that no payments could be made. He confirmed that the Croatian courts had jurisdiction to hear claims but said that judgments were not being enforced owing to the Croatian branch's financial difficulties. The Slovenian and Croatian Governments were seeking a solution to the problem.

Ms Golubović did not bring any proceedings in the Slovenian or Croatian courts against either the Ljubljana Bank Head Office or the Zagreb Main Branch.

2.  Background to the cases

(a)The Socialist Federal Republic of Yugoslavia

(i)  The Ljubljana Bank and its Zagreb Office

The Ljubljana Bank, Ljubljana (in present-day Republic of Slovenia), was founded in 1955 as Komunalna banka Ljubljana and subsequently underwent several changes in status. In 1970 it became the Ljubljana Bank.

In 1969, the Ljubljana Bank's legal predecessor opened an office in Zagreb in the then Socialist Republic of Croatia. It was reregistered in 1974 and in 1977.

From 1978 until 1st January 1990 the Ljubljana Bank Head Office, a company duly organized and existing under the laws of the then Socialist Republic of Slovenia, operated as an “associated bank”, made up of the Ljubljana Bank Basic Banks, carrying on business in accordance with the principles of the socialist self-management system. At the time, the Ljubljana Bank Head Office was one of the major and most reputable socially-owned commercial banks in the SFRY with offices in other Republics within the SFRY. It was also one of only nine Yugoslav banks allowed to effect foreign-currency transactions.

Over much the same period, from 1977 until its reregistration in 1989, the Ljubljana Bank's Zagreb office operated as a so-called “basic bank”, being neither a branch nor a subsidiary of the Ljubljana Bank Head Office. The Ljubljana Bank Basic Bank Zagreb had separate legal personality under the law of the Socialist Republic of Croatia and was financially and economically independent. It was, however, integrated into the organisational structure of the Ljubljana Bank.

On 19 December 1989 the Ljubljana Bank Head Office was reregistred as a joint stock company with effect from 1st January 1990.

On 29 December 1989 the Ljubljana Bank Basic Bank Zagreb was reregistered as the Zagreb Main Branch (Glavna filijala Zagreb) with effect from 1 January 1990.

(ii)  The system of redepositing foreign-currency savings

Individuals were allowed to open foreign-currency savings accounts in the SFRY from 1965 onwards. From 25 December 1969 until the respective dates on which each Successor State declared their independence, all foreign-currency deposits were covered by the Federation's (SFRY's) statutory guarantee (see section 14 of the Foreign-Exchange Transactions Act, Official Gazette, no. 66/85, and section 76 of the Banks and Other Financial Institutions Act, Official Gazette, no. 10/89, below in the section on “Relevant Domestic and International Law and Practice”).

The SFRY encouraged individual savers to deposit foreign-currency savings, which it required to finance domestic economic development, with commercial banks. Annual interest on savings accounts attained levels of 10% and more. Foreign-currency savings became the predominant form of household savings in the SFRY.

In 1977 a system by which commercial banks redeposited foreign-currency savings with the NBY in Belgrade (in present-day Serbia and Montenegro) was introduced by the Foreign-Exchange Operations and International Credit Relations Act (Official Gazette, no. 15/77). Pursuant to section 51(2) of this Act, the NBY was under an obligation to accept foreign-currency savings deposited with authorised banks and grant loans to the bank depositing the foreign currency. Although the SFRY banks were not required by law to transfer the foreign-currency deposits to the NBY, it is generally agreed that, in practice, they had no other option.

From 1978 to 1988, further legislation regulating the redeposit transactions was passed. Under the 1978 Decision on the procedure for accepting deposits of foreign currency held in citizens' accounts at authorised banks, and for granting interest-free loans to depositing banks (Official Gazette no. 13/78), the redeposit transactions were effected by the national banks of the Socialist Republics (Slovenia, Croatia, Serbia, Bosnia and Herzegovina, Montenegro and Macedonia) and of the autonomous provinces (Vojvodina and Kosovo, both part of Serbia) for and on behalf of the NBY. Those banks, which were not themselves allowed to keep accounts overseas, acted as agents of the NBY. The redeposited foreign currency was eventually transferred to accounts of the NBY overseas.

At the request of the banks, a decision supplementing the initial 1978 decision was adopted later that year (Official Gazette no. 26/78). The new decision introduced the so-called “pro-forma” or “accounting method” of redepositing foreign exchange in order to save considerable sums that would otherwise have gone towards fees for neutral transactions. In the following years, only approximately 14% of foreign-currency deposits were actually transferred by the commercial banks to the NBY by the “effective method”. Both the “pro-forma” and the “effective” methods resulted in requests by the commercial banks to withdraw foreign-currency funds from the NBY if depositors intended to take out deposits.

The 1984 Decision on the procedure for depositing nationals' foreign-currency savings with or withdrawing them from the NBY (Official Gazette no. 43/84) established for the first time the terms and conditions of the redeposit agreements between the savings bank and the NBY, acting through the relevant national bank. As far as the Ljubljana Bank Basic Bank Zagreb was concerned, the redeposit agreements were made with the National Bank of Croatia. As the Ljubljana Bank Basic Bank Zagreb did not have the status of authorised bank under the 1984 Decision, in practice it was the Ljubljana Bank Head Office (that is, the associated bank) which effected the redeposits.

From 1985 onwards, redepositing banks were required to pay interest on the previously interest-free dinar loans granted in exchange for the foreign currency redeposited with the NBY.

The Ljubljana Bank Basic Bank Zagreb redeposited foreign-currency deposits with the NBY from 1978 until 15 October 1988, when, in order to prevent further multiplication of the negative effects of an essentially irrational legal solution, the system of redeposits was brought to an end by amendments to the Foreign-Exchange Transactions Act (Official Gazette no. 59/88). Section 14(4) of that Act provided that “[t]he conditions and procedure applicable to the obligations arising under the guarantee [should] be regulated by a separate federal law”.

As no such law was enacted, the remedies employed by the SFRY were based on ad hoc decrees. The 1990 Decree regulating the procedure for settling the SFRY's obligations arising under its guarantee of foreign exchange deposited on foreign-currency (savings) accounts of retail clients, private-law entities and foreign natural persons (Official Gazette no. 27/90) provided that only banks, not individual depositors, were entitled to demand payment of foreign-currency deposits. The Decree also set out when and how calls could be made on the SFRY's guarantee and how it would be honoured. A bank had to be insolvent or bankrupt before a payment could be made under the guarantee. 

In 1991 the foreign-currency claims of commercial banks against the NBY amounted to approximately USD 12 billion and remained frozen.

(iii)  The monetary crisis and the Marković reforms

(i)  Background

The problems resulting from the foreign and domestic debt of the SFRY caused a monetary crisis in the 1980s, with the SFRY economy suffering hyperinflation. The banking and monetary systems were on the verge of collapse and the SFRY had to resort to emergency measures. Among other developments, legislation imposing restrictions on the repayment of foreign currency deposits to individuals was introduced (see section 71 of the Foreign-Exchange Transactions Act).

1989 was a year of reforms for the SFRY in which many legislative, institutional and structural adjustments were made in preparation for transforming the socialist planned economy into a market-oriented one (the so-called Marković reforms, named after the then Prime Minister).

One of the linchpins of the transformation was a fundamental reform of the banking system, which was carried out in accordance with the Banks and other Financial Institutions Act (Official Gazette no. 10/89). The banks were to be transformed from associated and basic banks, that is financial-service institutions of “associated labour”, into joint stock companies, which were to operate according to the banking principles of liquidity, profitability and solvency. Basic banks could remain independent if they met certain banking and financial criteria set out in the Banks and Other Financial Institutions Act, become branches of other banks, or go into liquidation.

In 1988, 1989 and 1990 the SFRY assumed direct liability for the foreign-currency related losses and for payment of the foreign-currency deposits with the NBY: the foreign-exchange-rate differences were converted into public debt of the SFRY. Because the servicing of public debt was not regulated in 1991, the NBY passed a decision granting banks special liquidity loans in order to enable withdrawals of foreign-currency deposits that they had redeposited with the NBY.

In 1991, in order further to restrict the amount of foreign-currency that could be withdrawn by depositors, a Decree on the procedure for processing withdrawals from foreign-currency (savings) accounts held by domestic and foreign nationals with licensed banks (Official Gazette nos. 28/91, 34/91, and 64/91) was issued.

This general situation lasted until June 1991, when the process of disintegration of the SFRY started. The whole process took place over several months, as the various constituent Republics proclaimed their independence.

Finally, according to the Slovenian Government, on 27 June 1991 the Slovenian and Croatian banks were excluded from the SFRY monetary system.

(ii)Matters in dispute between the parties

(α)  Events as related by the Croatian Government

The Croatian Government maintain that the transformation of the banks was completed by the end of 1989, while harmonisation with the standard international indicators of the quality of banking operations was supposed to take place by the end of 1990.

They further state that by that time the liquidity of banks had been vastly reduced due to a great demand for foreign currency, stimulated by various factors, such as political instability, uncertainty over dinar convertibility, fears of devaluation and the balance-of-payments situation. Such trends provoked financial indiscipline. They also say, inter alia, that the National Bank of Slovenia withdrew funds for agricultural purposes from the NBY without providing any supporting documentation and that Slovenian banks, in particular the Ljubljana Bank, benefited as a result. It was in that climate that the National Bank of Croatia allowed banks facing financial difficulties to exceed the permitted use of secondary sources of liquidity by a total of USD 28 million (and not, as the Slovenian Government state in their observations, USD 170 million).

(β) Events as related by the Slovenian Government

According to the Slovenian Government, the Marković reforms should have been implemented within two years. However, due to the dissolution of the SFRY, the reforms have never been fully implemented.

The Slovenian Government further allege that at the end of 1990, when the monetary crisis came to a head, illegal raids took place on the former SFRY's monetary system. Serbia secretly decided to issue roughly the equivalent of USD 1,300 million in local currency, while Croatia illegally issued the equivalent of USD 170 million. In response, in January 1991 the Board of Governors of the former NBY closed the foreign-exchange market.

(iv) The Ljubljana Bank and the Zagreb Main Branch

(i)  Background

In 1988, following the monetary crisis in the SFRY, the Ljubljana Bank froze all its foreign-currency accounts when customers sought to withdraw their foreign-currency savings.

On 19 December 1989 the Ljubljana Bank joint stock company (d.d. - delniška družba) was established in Ljubljana, in the then Socialist Republic of Slovenia, pursuant to the Banks and Other Financial Institutions Act. The change was registered in the Register of Companies on the same day and became effective on 1st January 1990. As already stated, until then, the Ljubljana Bank had operated as the Ljubljana Bank Head Office.

Article 60 of the Ljubljana Bank's memorandum and articles of association of 19 December 1989 provided that the Ljubljana Bank would take over the rights, assets and obligations of the Ljubljana Bank Head Office and the Basic Banks of Zagreb, Sarajevo (Socialist Republic of Bosnia and Herzegovina) and Skopje (Socialist Republic of Macedonia) as a legal successor on the day of its formation or registration on the Companies Register.

On 29 December 1989, in accordance with the above-mentioned banking legislation, the Ljubljana Bank Basic Bank Zagreb was reregistered in the Zagreb Commercial Court of First Instance as the Zagreb Main Branch (Glavna filijala Zagreb) with effect from 1st January 1990.

(ii)Matters in dispute concerning the legal position and banking liabilities of the Zagreb office of the Ljubljana Bank at the material time

(α) Events as related by the Croatian Government

The Croatian Government maintain that the decision of the Ljubljana Bank to take over the former basic banks and turn them into branches was a business decision and that the Ljubljana Bank assumed the liabilities of all the basic banks which became its branches. According to the Croatian Government, at the time of its affiliation, the Zagreb office was operating successfully.

As far as the status of the Zagreb office is concerned, the Croatian Government argue that at the material time the Zagreb Main Branch existed as an organisational part of the Ljubljana Bank, that there was an institutional relationship of dependency, and that the Ljubljana Bank's liability for the Zagreb Main Branch's obligations encompassed its total assets and was unlimited. This was apparent from the existing SFRY legislation regulating the legal status of bank branches (see the Banks and Other Financial Institutions Act and the Companies Act).

The Croatian Government state that by accepting jurisdiction to hear the actions brought against the Ljubljana Bank, the Croatian courts were only acting in accordance with the relevant procedural rules (section 60 of the Civil Procedure Act) and did not recognise, either expressly or implicitly, that the Zagreb Main Branch had any special legal status other than that recorded in the register at the Zagreb Commercial Court.

(β) Events as related by the Slovenian Government

The Slovenian Government allege that it was because the Ljubljana Bank Basic Banks in Zagreb, Sarajevo and Skopje did not meet the financial requirements of the Banks and Other Financial Institutions Act to continue operating as independent banks that their founders decided to convert them into branches of the Ljubljana Bank. They stress that the Ljubljana Bank Head Office was not a founder of the Ljubljana Bank Basic Bank Zagreb and that therefore the decision to integrate the Zagreb Main Branch into the Ljubljana Bank's system was not taken by the Ljubljana Bank Head Office.

The Slovenian Government maintain that the dissolution of the SFRY prevented the full conversion of the Ljubljana Bank Basic Bank Zagreb into the Zagreb Main Branch. Thus, the status, operations, assets and liability for deposits of the Zagreb Main Branch have become a succession issue. They say that during the two-year interim period under the Marković reforms, the so-called main branches which had operated previously as basic banks had a sui generis status that was fundamentally different from that of a branch as known to Western European legal systems.

The Slovenian Government contend that, by finding against the Zagreb Main Branch in the 1990s, the Croatian courts have recognised its independent legal status and liability for foreign-currency savings deposited with it.

(b) Republic of Slovenia

On 25 June 1991 the National Assembly of the Republic of Slovenia enacted the Fundamental Constitutional Charter on the Sovereignty and Independence of the Republic of Slovenia and the Constitutional Law relating to its application (Official Gazette no. 1/91). Thus Slovenia became independent.

(i) The Constitutional Law

By virtue of section 19(3) of the Constitutional Law, the Republic of Slovenia became guarantor of all foreign-currency savings deposited with banks on Slovenian territory at that date.

(ii) Developments after independence

In October 1991 a new Slovenian currency was introduced, the Slovenian tolar.

On 14 April 1992 the Ljubljana Bank's memorandum and articles of association were amended. Article 60 of the memorandum and articles of association of 19 December 1989 (providing that the Ljubljana Bank would take over the rights, assets and obligations of the Ljubljana Bank Head Office and the Basic Banks) became the first paragraph of Article 65.

In 1993 rehabilitation measures were introduced in the banking sector. In the same year, the Republic of Slovenia became the Ljubljana Bank's sole shareholder.

On 4 February 1993 the guarantee assumed in accordance with the Constitutional Law was implemented by the Discharge of Liability for Unpaid Foreign-Currency Deposits Act (Official Gazette no. 7/93). Under section 2 of that Act, liabilities arising out of foreign-currency deposits became the public debt of the Republic of Slovenia. Further implementing legislation was passed in 1995.

Thus, foreign currency deposited with banks on Slovenian territory became part of the Slovenian national debt in the form of bonds totalling approximately 1,500,000,000 German marks (DEM) and the account holders were able to make withdrawals as and when they wished.

On 11 March 1993 the Republic of Slovenia Succession Fund Act (Official Gazette no. 10/93) came into force. Under that Act, certain rights of the Republic of Slovenia's against and obligations towards the SFRY, the NBY and other SFRY entities were assigned to the Succession Fund. Further, members of the public and companies with claims against entities from the SFRY were given the right to assign their rights and obligations to the Succession Fund contractually.

On 28 June 1994 the Convention and Protocol No. 1 came into force with regard to Slovenia.

On 5 July 1997 an amendment to the Republic of Slovenia Succession-Fund Act (Official Gazette no. 40/97) came into force. It provided for a stay on any proceedings directly or indirectly affecting legal relations with the SFRY pending resolution of the succession arrangements between the States that were former republics of the SFRY. The proceedings were to be reinstated ex officio once the succession arrangements had been resolved. By virtue of section 15(č) of the Act, the statutory provisions were binding on the Slovenian courts.

(iii)  The 1994 amendments to the 1991 Constitutional Law

(i)  Background

According to the Slovenian Government, the Ljubljana Bank represented 42.4% of the Slovenian banking market in 1991. However, both before and after the dissolution of the SFRY, its financial situation was desperate and it accumulated substantial negative capital (attaining DEM 643,300,000 in 1992). For this reason, the Slovenian Government decided that rehabilitation measures were urgently required to prevent the collapse of the Slovenian financial system and such measures were introduced in the banking sector in 1993.

The Slovenian Government state that the Ljubljana Bank's financial position was further jeopardised by two kinds of succession risk in the absence of any agreement between the Successor States: firstly, a claim by foreign creditors for USD 4.2 billion (under an agreement known as the New Finance Agreement (NFA) following the expiry of a moratorium on this debt in 1994); and, secondly, the continued exposure to the SFRY's liability for redeposited foreign exchange.

The Slovenian authorities decided in 1994 to amend the 1991 Constitutional Law in order to protect the public interest, as is reflected in the preamble to the Act (see Relevant Domestic and International Law and Practice).

(ii)  The legislation

On 27 July 1994 the National Assembly of the Republic of Slovenia amended the 1991 Constitutional Law (Official Gazette no. 45/94) so as to restructure the Ljubljana Bank by creating a new and separate legal entity (section 22(č)): the New Ljubljana Bank was formed as a joint stock company which took over the former bank's entire assets and liabilities on Slovenian territory. The former bank, the Ljubljana Bank, retained its rights against and obligations towards the SFRY (section 22(b)) and its former constituent republics: in particular, full obligations in respect of the foreign-currency ordinary and deposit accounts that were not guaranteed by the Slovenian State under section 19 of the 1991 Constitutional Law, that is to say, those contracted outside Slovenian territory. Thus, the funds were to become assets of the Ljubljana Bank as part of the succession arrangements between Slovenia and the other former republics of the SFRY.

That law also laid down that the Ljubljana Bank would continue to deal with branches and subsidiaries whose head offices were situated in other republics of the territory of the former SFRY and retain the rights to the corresponding portion of the debt owed by the NBY in respect of the foreign-currency savings accounts. By virtue of section 22(č) of the 1994 Constitutional Law, the Agency of the Republic of Slovenia for the Rehabilitation of the Banks and Savings Banks became the founder and owner of the Ljubljana Bank.

(iv) The Slovenian Constitutional Court

On 11 April 1996 the Slovenian Constitutional Court dismissed a constitutional initiative (ustavna pobuda) brought by a Croatian savings-account holder, Mr Vukasinović, challenging the constitutionality of the 1994 Constitutional Law, holding that it had no jurisdiction to hear it (see the Relevant Domestic and International Law and Practice below).

However, it did subsequently accept jurisdiction to hear two constitutional challenges to the provision in the 1997 Republic of Slovenia Succession Fund Act providing for a stay on any proceedings directly or indirectly affecting legal relations with the SFRY pending resolution of the succession arrangements (see Relevant Domestic and International Law and Practice below).

(c) Republic of Croatia

On 25 June 1991 the Croatian Parliament adopted the Declaration on the Sovereignty and Independence of Croatia and enacted the Constitutional Act on the Sovereignty and Independence of Croatia. On 8 October 1991 Croatia became independent.

In December 1991 a Croatian currency was introduced, the Croatian dinar, which was replaced in 1994 by the Croatian kuna (HRK).

(i) Adoption of the SFRY's finance regulations and assumption of the guarantee for savings in Croatia

On 26 June 1991 the Republic of Croatia passed the Act on the Applicability to Croatia of the SFRY's Finance Regulations. By virtue of that Act, which entered into force on 8 October 1991 (Official Gazette no. 71/91), forty-two federal statutes were incorporated into Croatian law. The same Act also incorporated five decisions adopted by the Federal Executive Council concerning foreign-currency savings.

On 23 December 1991 the Croatian Government issued a Decree on the Conversion of Nationals' Foreign-Currency Bank Deposits into Croatian Public Debt (Official Gazette no. 71/91). Under the Decree, savings that were deposited before 27 April 1991 with banks whose head office was situated in Croatia (“Croatian Banks”) or were transferred by Croatian nationals into Croatian Banks from other banks within 30 days became, subject to compliance with Articles 15 and 16 of the Decree, part of the Croatian public debt.

The 1991 Decree provided for payment of the foreign-currency deposits in national currency at 30 June 1995 values in 20 half-yearly instalments bearing an annual interest rate of 5%. By 18 June 1993 Croatia had passed four more decrees regulating the conversion of its nationals' foreign-currency deposits into Croatian public debt. On 25 November 1993 Croatia passed the Conversion of Nationals' Foreign-Currency Deposits into Croatian National Debt Act, which replaced the earlier decrees.

According to the Slovenian Government, about two thirds of the account-holders at the Zagreb Main Branch did transfer their former savings accounts to Croatian banks, which in turn transferred their claims to Croatia. Thus, approximately DEM 450,000,000 became Croatian public debt. 140,000 Croatian depositors allegedly kept their accounts at the Zagreb Main Branch. The amount of their deposits came to approximately DEM 300,000,000. Of the remaining depositors, 96,000 have less than the equivalent of 30 Euros in foreign-currency savings standing to their credit with the Zagreb Main Branch.

(ii) Other developments

On 24 February 1996 the Croatian Payment Transaction Institute froze the Zagreb Main Branch's company account. On 14 July 2000 the Croatian authorities closed the Zagreb Main Branch's giro account.

(iii) The Croatian Constitutional Court

According to the Slovenian Government, two Slovenian depositors with the Zagreb Main Branch, Mr Vrečar and Mr Hrastnik, have challenged the Croatian legislation prohibiting them, on grounds of nationality, from converting their deposits into public debt. Their cases are currently pending in the Croatian Constitutional Court.

(d)  Financial documents and information

On 25 October 2002 the Judge Rapporteur invited Slovenia and Croatia to submit any documents that might serve as evidence of the existence or absence of an institutional and financial relationship of dependency between the Ljubljana Bank and the Zagreb Main Branch.

On 5 December 2002 the Court additionally requested both Governments to provide further information as to whether or not the funds on deposit with the Zagreb Main Branch had been effectively transferred to the Ljubljana Bank following the Marković reform, and if so, the amounts transferred in Yugoslav dinars and in hard currencies.

(i)  The Ljubljana Bank's Annual Reports

The Slovenian Government submitted the Ljubljana Bank's Annual Reports for the years 1989, 1990, 1991, 1992 and 1993. They claimed that no annual report for the Zagreb Main Branch existed.

In the Ljubljana Bank's 1990 Annual Report, the assets and liabilities of the Zagreb Main Branch were included for the first and only time.

On page 23 of the Ljubljana Bank's 1991 Annual Report, which contains the accounts audited by Coopers & Lybrand Deloitte, it is stated that the balance sheets of the Ljubljana Bank and the Zagreb Main Branch could not be consolidated because of the political situation and the conflicts in Croatia and in Bosnia and Herzegovina. It is also stated that the Ljubljana Bank had little or no control over the activities of its operations in those two countries and had little prospect of being able to transfer any funds to Slovenia in the foreseeable future. The same situation was noted in the 1992 and 1993 Annual Reports.

(ii) The Ljubljana Bank's financial situation

In reply to questions put at the hearing, the respondent Government said that, according to the Ljubljana Bank's and the New Ljubljana Bank's opening balance sheets of 28 July 1994, the New Ljubljana Bank's assets amounted to 360,007 million tolars (USD 2,862 million) and the Ljubljana Bank's assets to 76,986 million tolars (USD 612 million).

They stated that the 1994 Constitutional Law did not affect any assets and liabilities of the so-called main branches in other Successor States. For the reasons outlined above, the balance sheets of the Ljubljana Bank and the main branches were never consolidated. Slovenia had very limited access to the main branches' financial records. Its rough estimations were that in 1994, the Zagreb Main Branch's assets totalled HRK 4,421 million (USD 750 million).

(iii) The Zagreb Main Branch's accounts

The Slovenian Government also submitted the Ljubljana Bank Basic Bank Zagreb's balance sheet for 1989 and the Zagreb Main Branch's balance sheets for 1990, 1991, 1994 and 2001. They contained the claims of foreign-currency depositors with the Zagreb office and its corresponding claims against the NBY.

The Zagreb Main Branch's 1990 balance sheet showed that its outstanding foreign-currency deposits with the former NBY amounted to approximately DEM 1,000,000,000.

The Croatian Government said that further to the Marković reform, the National Bank of Slovenia became the regulatory authority for the Ljubljana Bank: the Zagreb Main Branch was obliged to submit reports to its head office and to the National Bank of Slovenia. On 12 February 1990 the majority of the Zagreb Main Branch's accounts, which were filed with the Social Accountancy Service, were closed.

They also maintained that the Zagreb Main Branch's claims to foreign-currency deposits redeposited with the NBY were transferred on that date to the National Bank of Slovenia and the funds on deposit at the National Bank of Croatia transferred from Zagreb to new accounts in Ljubljana. However, they stressed that the correct answer to the question concerning the actual foreign-currency movements could be given only after comprehensive and independent financial examination by an expert of the Ljubljana Bank's activities.

The Slovenian Government stated that no such transfer of deposit funds had ever occurred and that only routine banking transactions, none of which involved net transfers of foreign-currency deposits, had taken place.

They further maintained that internal records had been transferred from the National Bank of Croatia to the National Bank of Slovenia following the Marković reforms for statistical purposes only and did not involve any transfer of liability for redeposited foreign currency from the National Bank of Croatia to the National Bank of Slovenia. Moreover, the Zagreb Main Branch's claims relating to the withdrawal of the foreign-currency deposits from the NBY have remained in its balance sheet.

They also stated that the Ljubljana Bank's 1991 Annual Report showed the amount of foreign-currency deposits with the Zagreb office redeposited with the NBY as 13.6 billion Croatian dinars (USD 619 million), whereas foreign-currency deposits with the Zagreb office came to 10.7 billion Croatian dinars (USD 490 million), thereby confirming that 100% of the foreign-currency deposits with the Zagreb office were subsequently redeposited with the NBY.

The amount of foreign-currency deposited by the Zagreb office with the NBY exceeded the Zagreb office's liabilities towards foreign-currency depositors. This was due to the fact that some foreign-currency deposits had been paid out in dinars or from the Zagreb office's current inflow of foreign currency.

(e) The succession negotiations between the Successor States of the SFRY

After the dissolution of SFRY, the Successor States were unable to negotiate a succession treaty due to the ongoing violence in the region and the claims made by the then Federal Republic of Yugoslavia (now Serbia and Montenegro) to be the sole successor to the SFRY.

The succession talks were first conducted within the framework of the International Conference on Former Yugoslavia.

As no tangible results were achieved through the International Conference on Former Yugoslavia, the succession issues were included in the functions of the High Representative in Bosnia and Herzegovina, who was appointed pursuant to the General Framework Agreement for Peace in Bosnia and Herzegovina signed on 14 December 1995.

In March 1996 Sir Arthur Watts was appointed Special Negotiator to assist the Successor States in reaching an agreement. Numerous rounds of negotiations were held.

On 29 June 2001 the Agreement on Succession Issues was signed by Bosnia and Herzegovina, Croatia, the Federal Republic of Yugoslavia (now Serbia and Montenegro), the Former Yugoslav Republic of Macedonia and Slovenia. It stipulated, inter alia, that the SFRY's foreign financial assets should be distributed to the Successor States in the following proportions: Bosnia and Herzegovina 15.50%, Croatia 23%, the Federal Republic of Yugoslavia (now Serbia and Montenegro) 38%, the Former Yugoslav Republic of Macedonia 7.50% and Slovenia 16%. 

By virtue of Article 2 § 3(a) of Annex C to the agreement, the SFRY's financial liabilities included “guarantees by the SFRY or its NBY of hard currency savings deposited in a commercial bank and any of its branches in any successor State before the date on which it proclaimed independence”. Article 7 of Annex C provided: “[g]uarantees by the SFRY or its NBY ... shall be negotiated without delay taking into account in particular the necessity of protecting the hard-currency savings of individuals. This negotiation shall take place under the auspices of the Bank for International Settlements”.

In 2001 and in 2002, negotiations regarding hard-currency savings did take place under the auspices of the Bank for International Settlements, as stipulated in Article 7 of Annex C, but no solution was found.

All Successor States have ratified the Agreement, Croatia being the last country to do so on 3 March 2004. The agreement enters into force thirty days after the fifth instrument of ratification has been deposited.

(f)Bilateral negotiations between Slovenia and Croatia

The unpaid foreign-currency savings deposited with the Zagreb Main Branch have also been the subject of frequent bilateral negotiations between Slovenia and Croatia, but no solution has been found.

The Croatian Government say that although negotiations on arbitration by the International Monetary Fund (IMF) were held in 1998, no arbitration agreement was reached. According to the respondent Government, on 3 March 1999 both Prime Ministers agreed that a list of succession issues should be submitted to the IMF for consultative arbitration and that Slovenia sent such a request in June 1999 to the IMF.

A bilateral Agreement on the Regulation of Property Rights between Slovenia and Croatia entered into force on 23 February 2000. Article 1 of this Treaty provides that the relations between Slovenia and Croatia concerning the Zagreb Main Branch shall be governed by agreements to be concluded between the two States.

B.Relevant domestic and international law and practice

1.Legislation of the Socialist Federal Republic of Yugoslavia (SFRY)

(a)Foreign-Exchange Operations and International Credit Relations Act (Zakon o deviznom poslovanju i kreditnim odnosima – Official Gazette of the SFRY, no. 15/77)

Section 51 (2)

“The National Bank of Yugoslavia shall be bound, at the request of an authorised bank, to accept citizens' foreign-exchange deposits held in accounts at such authorised bank, and at the same time to grant the authorised bank an interest-free credit in the amount of the dinar counter value of the foreign exchange deposited.”

(b)Contractual Relations Act (Zakon o obligacionim odnosima – Official Gazette of the SFRY, nos. 29/78 and 39/85)

Section 1035

“1.  A contract for a monetary deposit is formed when the bank agrees to accept and the depositor agrees to deposit a certain sum of money in the bank.

2.  Under such a contract, the bank shall have the right to use the deposited money and the obligation to return it in accordance with the terms set out in the agreement.”

Section 1038(2)

“Unless otherwise agreed, ... the depositor shall have the right to withdraw all or part of the balance of the deposit at any time.”

Section 1043

“If the money is deposited in a savings account, the bank or financial institution shall issue the depositor with a savings book...”

Section 1046

“Savings deposits may be sight or term and the account closed with or without notice.”

(c)Foreign-Exchange Transactions Act (Zakon o deviznom poslovanju – Official Gazette of the SFRY, nos. 66/85, 59/88 and 82/90)

Section 14, as amended

“(1)  Domestic natural persons may keep foreign currency in a foreign-currency ordinary or deposit account at an authorised bank and use it for making payments abroad, in accordance with the provisions of this Act.

...

(3)  Foreign currency in foreign-currency ordinary or deposit accounts shall be guaranteed by the Federation.

(4)  The conditions and procedure applicable to the obligations arising under the guarantee shall be regulated by a separate federal law.”

Section 71

“(1)  Nationals may sell convertible currencies to an authorised bank or other authorised exchange office or deposit such currencies in a foreign-currency ordinary or deposit account at an authorised bank.

(2)  Foreign currency kept in foreign-currency ordinary or deposit accounts may be used by nationals to pay for imported goods or services for their own and close relatives' needs, in accordance with the Foreign Trade Act.

...

(4)  Foreign currency referred to in subsection 2 of this section may be used by nationals for the purchase of convertible bonds, to make testamentary gifts for scientific or humanitarian purposes in Yugoslavia or to pay for life insurance with an insurance company in Yugoslavia.

(5)  The National Bank of Yugoslavia shall regulate the operation of the foreign-currency ordinary or deposit accounts of Yugoslav nationals and corporations and foreign nationals and corporations.”

Section 103

“(1)  The National Bank of Yugoslavia shall, on request by an authorised bank, accept deposits of foreign currency that has genuinely been deposited by nationals or non-nationals in foreign-currency ordinary or deposit accounts after the entry into force of this Act.

(2)  The procedure for depositing foreign currency with or withdrawing foreign currency from the National Bank of Yugoslavia and the conditions under which such deposits or withdrawals may be made shall be regulated by the Federal Executive Council in accordance with the recommendations of the National Bank of Yugoslavia.”

Section 103, as amended in 1988

“Banks approved to engage in foreign-trade transactions may retain foreign currency referred to in section 71 received as a result of a genuine increase in foreign-currency savings and foreign currency referred to in section 72 in overseas accounts, sell it to the National Bank of Yugoslavia or on the single monetary market with a right of pre-emption at the exchange rate applicable at the date the foreign currency was purchased, or sell it on the forward-exchange market.”

(d)    Decision on the procedure to be followed when depositing foreign currency with or withdrawing foreign currency from the National Bank of Yugoslavia and the conditions under which such deposits or withdrawals may be made (Odluka o načinu i uslovima deponovanja i vraćanja deviza građana iz depozita Narodne banke Jugoslavije – Official Gazette of the SFRY no. 73/85)

Section 5

“1.  By reference to the deposited foreign currency ... the National Bank shall authorise credits to the other banks in dinars in an amount equal to the deposited foreign currency, which shall be established on the basis of the average daily exchange rate applicable at the end of the month in which the foreign currency is deposited.

2.  When withdrawing foreign currency on deposit, the bank shall repay the National Bank the used dinar credits in an amount equal to the amount of foreign currency withdrawn from deposit, which amount shall be established on the basis of the exchange rate applicable when the foreign currency was deposited.”

(e)Companies Act (Zakon o poduzećima - Official Gazette of the SFRY nos. 77/88, 40/89, 46/90 and 61/90)

Section 167 § 2

“A part of a social enterprise that is empowered to perform certain legal transactions shall act in the manner and in accordance with the conditions set out in the memorandum and articles of association of the social enterprise, which shall be responsible for its liabilities, to the extent of the powers granted.”

Section 167 § 2, as amended in 1989

“A part of a company in social ownership which has specific rights and obligations with respect to legal transactions shall act in the manner and in accordance with the conditions set out in the memorandum and articles of association of the company in social ownership, which shall be responsible for its liabilities.”

Section 187a

“Decisions to change the status of a company (by merger, demerger or the creation of a subsidiary) shall be taken by the management.

A company created by merger, demerger or as a subsidiary to another shall have joint liability for the obligations of the company or companies that have ceased to exist...”

(f)National Bank of Yugoslavia and Unitary Monetary Functioning of the National Banks of the Republics and Autonomous Provinces Act (Zakon o Narodnoj banci Jugoslavije i jedinstvenom monetarnem poslovanju narodnih banaka republika i narodnih banaka autonomnih pokrajina – Official Gazette of the SFRY, nos. 34/89, 88/89, 61/90)

Section 4

“The Federation shall guarantee the obligations of the National Bank of Yugoslavia.”

(g)Banks and Other Financial Institutions Act (Zakon o bankama i drugim financijskim organizacijama – Official Gazette of the SFRY nos. 10/89, 40/89, 87/89, 18/90 and 72/90)

Section 1

“A bank is an independent self-governing financial institution, which administers deposits, credits and other banking business in accordance with the law. ...”

Section 2

“(1)  Banks shall conduct their activities independently with a view to making profit by reference to the principles of liquidity, security and profitability.

(2)  In connection with banking transactions (pravni promet), banks and all other financial institutions shall have full rights, obligations and responsibilities as regards both social and other funds at their disposal, which they shall use in accordance with the nature and purpose of financial resources.

(3)  Banks and all other financial institutions shall decide independently on the manner and form of their organisation and association and on their activities, by reference to market conditions and profit-making considerations, in accordance with the provisions of this and other acts.”

Section 3

“The operations of banks and other financial institutions shall be governed by the provisions of the general law, save as otherwise provided in this Act.”

Section 14

“Banks are juristic persons. Their rights, obligations and responsibilities shall be established by this Act, other federal laws and their memorandum and articles of association.

Powers to perform specific acts in legal dealings with third parties may be delegated by a bank's memorandum and articles of association to a part of the bank.”

Section 61

“When a bank is wound up as insolvent, liabilities shall be paid out of assets in the following order:

1.  salaries of the bank's employees;

2.  sums standing to the credit of nationals in savings or current accounts or foreign-currency deposit accounts;

3.  creditors' claims;

4.  sums due to the National Bank of Yugoslavia;

5.  claims of the bank's founders in proportion to their initial investment.”

Section 76

“The National Bank of Yugoslavia, in accordance with federal law, shall guarantee dinar-savings deposits on citizens' current accounts in the Post Office Savings Bank and other banks, and the Federation shall guarantee foreign-currency savings deposits and funds in foreign-currency accounts of domestic and foreign natural persons...”

Section 82(a)

“A bank which brings its organisation, business operation and self-management general acts in line with the provisions of ... this Act shall submit to the National Bank of Yugoslavia evidence of compliance with the conditions for the establishment of the bank, together with documentation showing:

...

the legal successor for each individual liability of the bank...”

(h)Rehabilitation, Liquidation and Solvency of Banks and Other Financial Institutions Act 1989 (Zakon o sanaciji, stečaju i likvidnosti banaka i drugih financijskih organizacija – Official Gazette of the SFRY nos. 84/89 and 63/90)

Section 18

“The legal consequences of the commencement of insolvency proceedings shall take effect from the date the initial bankruptcy order is made and are as follows:

(1)  The National Bank of Yugoslavia's and the Federal Republic's guarantees of deposits on citizens' current and foreign-exchange accounts become enforceable...”

Section 25

“A decision to inititate rehabilitation proceedings for a bank that has become part of another bank through the harmonisation of its organisation, operations and self-management acts with the Banks and Other Financial Institutions Act ... may also be adopted in 1990.”

(i)Decision Regulating the Operation of Foreign-Currency Savings Deposits of Domestic and Foreign Nationals (Odluka o načinu vođenja deviznog računa i deviznog štednog uloga domaće i strane fizičke osobe, Official Gazette of the SFRY nos. 6/91, 30/91 and 36/91)

Section 10

“Domestic nationals may withdraw from their accounts foreign currency, cheques and letters of credit for travelling to a foreign country in accordance with applicable regulations.”

Section 17c

“Authorised banks shall execute orders to pay domestic nationals foreign currency deposited in their foreign-currency accounts ... on receipt from such persons of prior notice of their intention to use the foreign currency as follows:

(i) amounts not exceeding DEM 500: 15 days for the first withdrawal ... and 30 days for subsequent withdrawals...;

(ii) amounts not exceeding DEM 1,000: 30 days for the first withdrawal ... and 45 days for subsequent withdrawals ...;

(iii) amounts not exceeding DEM 3,000: 90 days; and

(iv) amounts not exceeding DEM 8,000: 180 days.”

2.Legislation of the Republic of Slovenia

(a)The Constitution (Ustava Republike Slovenije, Official Gazette no. 33/91)

Article 8

“Statutes and regulations must comply with generally accepted principles of international law and with treaties that are binding on Slovenia. Ratified and published treaties shall be applied directly.”

Article 22

“Everyone shall be guaranteed equal protection of rights in any proceedings before a court and before any State or local authority or bearer of public authority which determines his or her rights, duties or legal interests.”

Article 33

“The right to own and inherit private property shall be guaranteed.”

Article 125

“Judges shall exercise their duties and functions independently in accordance with this Constitution and the law.”

Article 153, § 2

“Statutes must conform to generally accepted principles of international law and international treaties currently in force and ratified by the National Assembly and regulations and other general provisions must also conform to other ratified international treaties.”

Article 160

“The Constitutional Court shall have jurisdiction to decide the following matters:

(i)  the conformity of statutes with the Constitution;

(ii)  the conformity of statutes and other provisions with ratified international agreements and general principles of international law;

...

(vi)  constitutional appeals alleging a violation of human rights and fundamental freedoms by specific acts;

...

Unless otherwise provided for by law, the Constitutional Court shall hear a constitutional appeal only if legal remedies have been exhausted. The Constitutional Court shall decide whether a constitutional appeal is admissible for adjudication on the basis of statutory criteria and procedures.”

(b)The Constitutional Court Act (Zakon o ustavnem sodišču, Official Gazette no.15/94)

Like Article 160 of the Constitution, section 21 § 1 of the Constitutional Court Act provide that the Constitutional Court has jurisdiction, among other matters, to decide on the conformity of statutes with the Constitution, ratified international agreements and customary international law.

Individuals have direct access to the Constitutional Court. In particular, they may initiate proceedings for review of the constitutionality and legality of legislative measures and other general acts.

Section 24 of the Constitutional Court Act confers on individuals who have a legal interest in doing so the right to lodge a constitutional initiative (ustavna pobuda) with the Constitutional Court. It provides:

“(1)  Anyone able to establish a legal interest may commence the proceedings by lodging a written initiative.

(2)  A person shall be recognised as having a legal interest to lodge an initiative if the regulation or general act involving the exercise of public authority submitted for assessment by the initiator interferes directly with the initiator's rights, legal interests or legal position.”

The Constitutional Court's powers under section 24 of the Constitutional Court Act are not limited to declaring an impugned statute unconstitutional. Pursuant to section 43 of the Constitutional Court Act, it may strike down the offending provisions. Section 43 provides:

“The Constitutional Court may abrogate all or part of a law which does not conform with the Constitution. Such a decision shall come into effect one day after the publication of the order or the expiry of a time-limit set by the Constitutional Court.”

Equally, the Constitutional Court has the power to quash any regulations or generally applicable decisions which it has declared unconstitutional or illegal (section 45).

The Constitutional Court also has jurisdiction to determine complaints of breaches of human rights and fundamental freedoms in individual cases. Any person may lodge a constitutional appeal (ustavna pritožba) with the Constitutional Court if he believes that an individual act of a State, local or statutory authority has violated his or her human rights or fundamental freedoms.

Section 50 of the Constitutional Court Act reads as follows:

“(1)  Any person may, under the conditions defined by this Act, lodge a constitutional appeal with the Constitutional Court if he or she believes that his or her human rights and basic freedoms have been violated by an individual act of a State, local or statutory authority.

...”

The Constitutional Court's powers under section 50(1) are not limited to a declaratory statement that the impugned act is unconstitutional. Pursuant to section 58, it may suspend implementation of the act if it would cause irreparable harm. It may also suspend the implementation of a general act that serves as the basis for a specific impugned individual act.

Pursuant to section 59(1), the Constitutional Court is entitled to quash, either ex tunc or ex nunc, the act complained of and to remit the case to the competent authority. Furthermore, the Constitutional Court may quash the illegal general act or acts on which the impugned individual act is based. Section 59 provides:

“(1)  The Constitutional Court shall issue a decision declaring that the appeal was unfounded or shall allow the appeal and quash with retrospective or prospective effect all or part of the act that was the subject of the appeal, and remit the matter to the competent body.

(2)  If the Constitutional Court establishes that an act that has been quashed with retrospective effect was founded on an unconstitutional regulation or general act performed under public powers, such act may be quashed with retrospective or prospective effect pursuant to the provisions of Chapter IV of this Act.”

Pursuant to section 60, if the Constitutional Court quashes an individual act ex tunc, it may also deliver a decision on the contested right or freedom if that is necessary to remedy the situation or required by the nature of the right or freedom in question, always provided that it has sufficient information before it. The public authority concerned is required to implement any such decision.

Finally, any person who suffers harmful consequences as a result of a general act that is later annulled by the Constitutional Court may require that they be remedied. If the consequences occurred as a result of an individual act adopted on the basis of an annulled general act, he or she has the right to require the amendment or annulment of the act by the body which made the decision in the first place. If the consequences were a direct result of an annulled general act, the remedy must be sought directly from the issuing body. If the consequences cannot be remedied, the victim may request compensation from the courts.

(c)1991 Constitutional Law relating to the Fundamental Constitutional Charter on the Sovereignty and Independence of the Republic of Slovenia (Ustavni zakon za izvedbo Temeljne ustavne listine o samostojnosti in neodvisnosti RS – Official Gazette no. 1/91)

Section 11

“In accordance with an[y] agreement [that is made] on the legal succession to the SFRY, the Republic of Slovenia will assume liability for the portion of the SFRY's state debts that relate to the Republic of Slovenia and the portion of the SFRY guarantee obligations to juristic persons based in the territory of the Republic of Slovenia.”

Section 19 § 3

“The Republic of Slovenia shall assume the obligations borne by the SFRY until the entry into force of this law to guarantee foreign-currency deposits in ordinary or deposit foreign-currency accounts in banks on the territory of the Republic of Slovenia in accordance with the statement of current liabilities.”

(d)1994 Constitutional Law amending the Constitutional Law relating to the Fundamental Constitutional Charter on the Sovereignty and Independence of the Republic of Slovenia (Ustavni zakon o dopolnitvah Ustavnega zakona za izvedbo Temeljne ustavne listine o samostojnosti in neodvisnosti RS – Official Gazette no. 45/94)

Preamble

“Considering the reluctance of certain other States that have emerged on the territory of the former Socialist Federal Republic of Yugoslavia (hereinafter referred to as the 'former SFRY') and the banks based in those States;

Whereas practical and legal considerations arising from the war on part of the territory of the former SFRY, international sanctions imposed on the so-called FRY (Serbia and Montenegro) and the breakdown, as a result of efforts to finance the war of aggression on a part of the territory of the former SFRY, of the financial and economic systems in some States that have emerged on the territory of the former SFRY mean that it is currently impossible for the agreement on legal succession and on the assumption of the obligations and claims of the former SFRY and the legal entities on its territory to be put into effect and seriously jeopardize its immediate future;

And whereas the enforcement of the claims of foreign creditors and entities of the so-called FRY (Serbia and Montenegro) who have become creditors following the purchase of such claims in accordance with the New Financing Agreement (hereinafter referred to as the 'NFA'), which makes banks based in the Republic of Slovenia jointly and severally liable for the repayment of the full debt, would seriously jeopardize the financial and economic system of the Republic of Slovenia;

And with the purpose of finding, through negotiations with foreign creditors, a fair solution to the assumption of an adequate share of the state debts of the former SFRY in cases in which the direct beneficiary may not be established...”

Section 22(a)

“The Republic of Slovenia, the Bank and Savings-Bank Rehabilitation Agency of the Republic of Slovenia and the banks referred to in this constitutional law shall discharge the obligations and implement the measures set out herein.”

Section 22(b)

“ The Ljubljana Bank d.d., Ljubljana and the Maribor Credit Bank, d.d. Maribor shall transfer their respective business and assets to the new banks created hereunder.

Notwithstanding the provisions of the preceding paragraph, the Ljubljana Bank d.d., Ljubljana and the Maribor Credit Bank, d.d. Maribor shall retain:

(i)  full contingent joint liability under the 'New Financing Agreement' and other contingent liabilities arising out of relations with the National Bank of Yugoslavia and the former SFRY if the debtors are located in another republic of the former SFRY;

(ii)  the corresponding amount of the related contingent claims;

(iii)  full liability for foreign-currency ordinary and savings accounts not guaranteed by the Republic of Slovenia under section 19 hereof;

(iv)  liabilities to the National Bank of Yugoslavia and foreign creditors that were guaranteed by the SFRY and the resources for which have been used by the ultimate beneficiaries from other republics within former Yugoslavia;

(v)  the claims related thereto.

The Ljubljana Bank d.d., Ljubljana shall maintain its links with the existing branches and subsidiaries of Ljubljana Bank d.d. based in the other republics on the territory of the former SFRY, but shall retain the corresponding share of claims against the National Bank of Yugoslavia in respect of foreign-currency savings accounts.”

Section 22(c)

“The competent court shall of its own motion record:

(i)  the Bank and Savings-Bank Rehabilitation Agency of the Republic of Slovenia as the owner and administrator of the Ljubljana Bank d.d., Ljubljana, Trg republike 3, and the Maribor Credit Bank d.d., Ljubljana, Trg republike 3;

(ii) the commercial activity as being the administration of the remaining assets.”

Section 22(č)

“Two banks shall be formed on the date this law enters into force:

Their trade names shall be:

(i)  the New Ljubljana Bank d.d., Ljubljana, Trg republike 2; and

(ii)  the New Maribor Credit Bank d.d., Maribor, Vita Kraigherja 4.

The founder of the two banks shall be the Bank and Savings-Bank Rehabilitation Agency of the Republic of Slovenia.

The commercial activities of the new banks shall be as set out in section 2 of the Banks and Savings-Banks Act.

The status of the new banks shall be that of banks in rehabilitation. They shall be managed by interim managers to be appointed by the Bank and Savings-Bank Rehabilitation Agency of the Republic of Slovenia.

The managers of the new banks shall draw up a final statement of the assets and liabilities of the banks referred to in section 22(b) of this constitutional law as of the date on which it enters into force. The statement shall include liabilities to the National Bank of Yugoslavia and foreign creditors arising out of dealings with persons from the former SFRY, and the corresponding assets.

...

The Bank and Savings-Bank Rehabilitation Agency of the Republic of Slovenia shall retain ownership of the banks referred to in section 22(b) hereof and become the owner of the new banks in accordance with the financial situation existing on the date of enactment of this constitutional law.

... ”

Section 22(f)

“The Republic of Slovenia and the new banks shall not recognise debt due to foreign creditors to whom United Nations sanctions apply in accordance with UN Security Council Resolutions Nos. 757/1992 and 820/1993 [i.e. those in the Federal Republic of Yugoslavia (Serbia and Montenegro) and certain areas in Bosnia and Herzegovina and Croatia].

Even if the UN sanctions referred to in the preceding paragraph are lifted, until a full or partial agreement on the legal succession to the former SFRY has been signed and ratified, or an arrangement made with foreign creditors, no claims or legal or other proceedings brought with a view to seizing bank property shall have any legal effect or be recognized by the courts of the Republic of Slovenia.”

(e)Banks and Savings-Banks Act (Zakon o bankah in hranilnicah – Official Gazette no. 1/91)

Section 2

“Banks may perform the following banking operations:

1.  Receive all forms of monetary deposit from natural and juristic persons;

2.  Grant and take out loans;

3.  Perform transactions;

4.  Purchase cheques and letters of credit;

5.  Manage foreign currencies;

...”

(f)Discharge of Liability for Unpaid Foreign-Currency Deposits Act (Zakon o poravnavanju obveznosti iz neplačanih deviznih vlog – Official Gazette no. 7/93)

Section 1

“This Act governs the procedure for discharging liabilities arising out of unpaid foreign-currency deposits with banks on the territory of the Republic of Slovenia which the banks have deposited with the National Bank of Yugoslavia.”

Section 2

“The banks' liabilities arising out of foreign-currency deposits ... shall become debt of the Republic of Slovenia.

... ”

Section 3

“The banks' claims against the National Bank of Yugoslavia concerning the amount of unpaid foreign-currency deposits shall be transferred to the Republic of Slovenia.”

(g)Republic of Slovenia Succession Fund Act (Zakon o skladu RS za sukcesijo – Official Gazette no. 10/93)

Section 1

“In order to realise the claims and discharge the liabilities of the Republic of Slovenia and natural and juristic persons on the territory of the Republic of Slovenia as part of the process of division of the rights, assets and liabilities of the SFRY, the Republic of Slovenia Succession Fund to Establish Rights and Obligations in the Succession Process (hereafter 'the Fund') is hereby created.”

Section 15

“Natural and juristic persons who at the date this Act enters into force have unpaid claims against or liabilities to subjects of the former Federation may enter into an agreement with the Fund transferring their unpaid claims and liabilities to the Fund, or alternatively give the Fund authority to recover claims and to discharge liabilities in their name and on their behalf.”

(h)Republic of Slovenia Succession Fund (Amendment) Act (Zakon o skladu RS za sukcesijo – Official Gazette no. 40/97)

Section 15(č)

“If court proceedings or execution proceedings are pending against persons based or domiciled [on the territory] of the Republic of Slovenia and the claimant or the creditor is based or domiciled [on the territory] of the Republic of Slovenia, a former SFRY republic or a third country and the claim arises out of a legal transaction or enforceable judicial decision, the court shall stay the court proceedings or execution proceedings of its own motion.

Court proceedings commenced after this Act comes into force shall be stayed from the date of service of the claim on the defendant.

Execution commenced after this Act comes into force shall be stayed before a decision has been taken on the application for enforcement, with effect from the date of reception by the court of the notice referred to in section 15(g) of this Act.”

Section 15(d)

“The court shall also make an order under section 15(c) of this Act in cases in which natural or juristic persons have not acted, or were not entitled to act, in accordance with section 15, and the claim relates, directly or indirectly, to legal relations with entities of the former Federation or to status liability of entities of the former SFRY.”

Section 15(e)

“Proceedings that have been stayed under section 15(č) of this Act shall be reinstated by the court of its own motion once the Act referred to in section 15(c) has come into force.”

Section 15 (g)

“For the purpose of establishing whether the circumstances referred to in sections 15(č), 15(d) and 15(f) apply, the court shall obtain of its own motion the opinion of the Fund beforehand and base its decision on that opinion.

...”

(i)  Companies Act (Zakon o gospodarskih družbah – Official Gazette no. 30/93)

Section 6(1)

“Notwithstanding the provisions of the preceding section, members (družbeniki) shall also be liable for the liabilities of the company if:

(i)they have wrongly used the company's separate legal personality for a purpose they were prohibited from pursuing in their personal capacity;

(ii)in violation of the law they have treated the company's assets as their own, or

(iii)for their own or another's benefit they have reduced the company's assets when they knew or should have known that it would not be able to meet its liabilities to third persons.”

Section 169(3)

“Shareholders are not liable to creditors for the company's liabilities.”

(j)Courts Act (Zakon o sodiščih – Official Gazette no. 19 /94)

Section 3(1)

“When acting in their judicial capacity, judges are bound by the Constitution and the law. In accordance with the Constitution they are bound by principles of international law and by international agreements that have been ratified and published.”

3.Legislation of the Republic of Croatia

(a)Act on the Applicability to Croatia of the SFRY's Finance Regulations (Zakon o preuzimanju saveznih zakona iz oblasti financija koji se u Republici Hrvatskoj primjenjuju kao republički zakoni - Official Gazette no.71/91)

Section 1

“The following federal acts shall be adopted and applied as acts of the Republic:

(1)  the National Bank of Yugoslavia and Unitary Monetary Functioning of the National Banks of the Republics and Autonomous Provinces Act (Official Gazette of the SFRY, nos. 34/89, 88/98 and 61/90);

(2)  the Temporary Measures regarding the Goals and Tasks of the Unitary Monetary Policy in 1991 Act (Official Gazette of the SFRY no. 84/90)

(3)  the Banks and Other Financial Institutions Act (Official Gazette of the SFRY, nos. 10/89, 40/89, 87/89,18/90 and 72/90);

...

(13)  the Foreign-Exchange Transactions Act (Official Gazette of the SFRY, nos. 66/85, 71/86, 3/88, 59/88 and 82/90).”

Section 2

“All federal laws referring to the ratification of international agreements and treaties and the Federation's guarantees for loans obtained from international financial organisations, shall be taken over and applied as laws of the Republic in the Republic of Croatia.”

Section 4

“The following resolutions of the Federal Executive Council shall also remain in force and be implemented as regulations of the Republic:

(1)  The Decision on the method by which approved banks will make payments to domestic nationals from their foreign-currency ordinary and savings accounts (Official Gazette of the SFRY, nos. 28/91 and 34/91);

(2)  The Decision fixing the dinar exchange rate for 1991 (Official Gazette of the SFRY, no. 28/91);

(3)  The Decision on the specific conditions in which persons working on development projects abroad and receiving payment in kind may keep foreign currency in foreign-currency accounts (Official Gazette of the SFRY, no. 26/91);

(4)  The Decision on the method by which the Federation's obligations under its guarantee of foreign currencies deposited in foreign-currency ordinary and savings accounts of citizens, and domestic and foreign legal entities will be met (Official Gazette of the SFRY, no. 26/91);

(5)  The Decision on the method of using dollar remittances to make payments through liquidation accounts (Official Gazette of the SFRY, no. 17/91).”

Section 5

“The Government of the Republic of Croatia is hereby authorised temporarily to regulate by decree issues relating to the financial operations and conditions of operation of companies, banks, insurance companies and other legal entities, as well as economic relations with foreign countries which are regulated by the laws listed in section 1 of this Act.”

Section 6

“Provided that they comply with the Constitution of the Republic of Croatia and the laws of the Republic, federal regulations adopted for the implementation of the laws referred to in sections 1 to 3 hereof shall be applied as regulations of the Republic until such time as new regulations of the Republic provide otherwise.”

Section 7

“The powers of the federal authorities to implement and enforce the laws referred to in sections 1 to 3 and the regulations referred to in section 60 hereof shall be vested in the authorities of the Republic, within the scope of their authority as provided by law.

In exceptional cases, (former) federal authorities shall also continue to have authority for the enforcement of federal laws in these fields until an independent credit-monetary, foreign-currency and customs system of the Republic of Croatia is established, together with corresponding authorities of the Republic.”

(b)Decree on the Conversion of Nationals' Foreign-Currency Bank Deposits into Croatian Public Debt (Uredba o pretvaranju deviznih depozita građana kod banaka u javni dug Republike Hrvatske – Official Gazette no. 71/91)

Article 1

“This decree shall govern the procedural arrangements and conditions for the conversion of nationals' foreign-currency deposits at banks established on the territory of the Republic of Croatia into public debt of the Republic of Croatia on 27 April 1991 and for access to such deposits.

For the purposes of this Decree 'nationals' foreign-currency deposits' shall include:

(i)  foreign-currency deposits of banks whose head office is situated on the territory of the Republic of Croatia that have been deposited with the National Bank of Yugoslavia as nationals' foreign-currency savings; and

(ii)  nationals' deposits in foreign-currency accounts or savings accounts with banks in Croatia that have been transferred by a national from a bank that is not based on the territory of the Republic of Croatia, in accordance with Articles 15 and 16 of this Decree.”

Article 2

“Foreign-currency deposits at banks in Croatia deposited with the National Bank of Yugoslavia as citizens' foreign-currency savings and foreign-currency deposits transferred to banks in Croatia under the provisions of Articles 15 and 16 of this Decree together with accrued interest for the year 1991 calculated according to the structure of the currency deposited shall be converted into public debt of the Republic of Croatia.”

Article 3

“Banks in Croatia shall assign their claims against the National Bank of Yugoslavia in respect of citizens' foreign-currency deposits to the Republic of Croatia.”

Article 4

“The Republic of Croatia shall issue bonds to banks in Croatia in accordance with the provisions of this Decree for the public debt referred to in Article 2 above.”

Article 5

“The bonds referred to in Article 4 above shall be issued to banks in Croatia to the value of the claims against the National Bank of Yugoslavia that have been assigned to the Republic of Croatia in accordance with Article 3 of this Decree.

In the event that claims assigned to a particular bank in Croatia in respect of foreign-currency savings deposited with the National Bank of Yugoslavia exceed the foreign-currency savings as at 27 April 1991 (including accrued interest, but less such amounts as shall have been converted into dinars by the date this Decree enters into force), the banks shall use the excess bonds to pay back loans granted to them by the National Bank of Croatia in the following order: loans issued on the strength of foreign-currency savings deposits and loans arising out of the decrease in foreign-currency savings. Repayment of these loans by bonds shall be made on the date this Decree enters into force, at the exchange rate applicable on 27 April 1991.”

Article 6

“The bonds referred to in Article 4 of this Decree shall be amortised in 20 half-yearly instalments, the first of which shall be due on 30 June 1995.

The bonds shall be negotiable, payable to bearer in DEM, and paid in domestic currency at the exchange rate applicable on the date of payment.

They shall be made out in values of 100, 500 or 1,000 DEM.

Annual interest rates on bonds shall be 5%, to be calculated and paid on 30 June and 31 December every year in domestic currency at the exchange rate applicable on the payment date; interest will start to run on 1 January 1992.”

Article 15

“Citizens who on 27 April 1991 had foreign-currency savings, that is, foreign-currency funds in a foreign-currency account with a bank based outside the territory of the Republic of Croatia but which carried on business in the territory of the Republic of Croatia may, within 30 days from the date this Decree enters into force, transfer the deposits to a bank in Croatia.

Citizens shall transfer the foreign-currency deposits referred to in the above paragraph by making a declaration concerning the transfer of such deposits to the bank in Croatia from the bank based outside the territory of the Republic of Croatia and by submitting appropriate documentation (such as savings books ) regarding the balance of the deposits transferred.

When transferring deposits to a bank in Croatia, citizens shall also make a declaration waiving their claims against the bank based outside the territory of the Republic of Croatia.”

Article 16

“Banks in Croatia shall be obliged to accept transfers of foreign-currency deposits made in accordance with Article 15 above and shall inform the bank concerned outside the territory of the Republic of Croatia that the transfers have been made.

After reconciling the deposits transferred from a bank outside the territory of the Republic of Croatia, the banks in Croatia shall assign to the Republic of Croatia their claims against those banks, that is, the claims that were assigned to them under the provisions of Article 15, paragraph 3 above, and inform the bank concerned outside the territory of the Republic of Croatia accordingly.”

(c)  Decree amending the Decree on the Conversion of Nationals' Foreign-Currency Bank Deposits into Croatian Public Debt (Uredba o pretvaranju deviznih depozita građana kod banaka u javni dug Republike Hrvatske – Official Gazette no. 3/92)

Article 1

“ In Article 15, paragraph 1, of the Decree on the Conversion of Nationals' Foreign-Currency Bank Deposits into Croatian Public Debt (Official Gazette No. 71/91) the words “within 30 days” shall be replaced by “within 120 days”.”

(d)  Transformation of Citizens' Foreign Exchange Deposits into Public Debt of the Republic of Croatia Act (Zakon o pretvaranju deviznih depozita građana u javni dug Republike Hrvatske - Official Gazette no. 106/93)

Section 1

“This Act shall regulate the terms, conditions and means of converting citizens' foreign-exchange deposits at banks operating in the territory of the Republic of Croatia as at 27 April 1991 into public debt of the Republic of Croatia, and the terms, conditions and means of using such foreign-exchange deposits.

For the purposes of this Act, citizens' foreign-exchange deposits shall have the following meaning:

(i)  foreign-exchange deposits at banks registered in the Republic of Croatia (hereafter 'banks in Croatia') deposited with the former National Bank of Yugoslavia originating from citizens' foreign-exchange savings; and

(ii)  citizens' deposits in foreign-exchange savings and ordinary accounts that have been transferred to banks in Croatia in accordance with the provisions of Articles 15 and 16 of the Decree on the Conversion of Nationals' Foreign-Currency Bank Deposits into Public Debt (Official Gazette of the Republic of Croatia no. 58/93 –hereafter 'the Decree').”

Section 7 § 1

“Citizens' foreign-exchange sight and term savings deposits and the balance of citizens' foreign-exchange accounts as at 27 April 1991 – together with accrued interest for 1991 – transferred under the agreements referred to in the second paragraph of section 3 hereof, shall be converted into term deposits repayable in twenty half-yearly instalments, the first being due on 30 June 1995.”

Section 14

“The provisions of sections 4 to 13 hereof shall apply in full to those foreign-exchange savings and/or ordinary deposits transferred by citizens of the Republic of Croatia in accordance with the Decree from branches of banks registered outside the Republic of Croatia to banks in the Republic of Croatia before 6 July 1992.

The Minister of Finance is hereby authorised to prescribe the means by which, and terms and conditions on which, citizens who have failed to transfer their foreign-exchange savings and/or ordinary deposits from branches of banks registered outside the Republic of Croatia to a bank in the Republic of Croatia within the time referred to in the first paragraph hereof may now do so.”

(e)  Decree Prohibiting Transfers of Property situated on the Territory of the Republic of Croatia (Uredba o zabrani raspolaganja nekretninama na teritoriju Republike Hrvatske – Official Gazette no. 36/91)

Article 1

“1.  The transfer of or the creation of an encumbrance (whether by sale, exchange, gift, transfer of the right of use or possession, assignment of a lease, grant of a temporary licence or mortgage) over immovable property situated on the territory of the Republic of Croatia belonging to or in the possession, use or control of an organ or body of the Federal Republic, the republics or the provinces of Kosovo and Vojvodina is prohibited.

The prohibition set out in paragraph 1 of this Article shall also apply to enterprises and other juristic persons whose head office is situated outside the Republic of Croatia.

The land registry of the relevant district court shall of its own motion enter notice of the prohibition referred to in paragraph 1 of this Article in the land registers.”

Article 2

“The Government of the Republic of Croatia may, on request by an interested body or persons, direct that the prohibition referred to in Article 1 of this Decree shall not apply to a particular property.”

Article 4

“This Decree is provisional and shall remain in force until the process of dividing the SFRY has ended.”

(f)Civil Procedure Act (Zakon o parničnom postupku, Official Gazette no. 36/91)

Section 60

“In disputes against natural or juristic persons based abroad concerning obligations created in the Republic of Croatia or to be performed there, a claim may be lodged with a court in the Republic of Croatia with jurisdiction for the area in which the permanent representative office or head office of the body authorised to carry on its activities is located.”

4.  International law

(a)Agreement on the Regulation of Property Rights between the Republic of Croatia and the Republic of Slovenia (Pogodba med Republiko Slovenijo in Republiko Hrvaško o ureditvi premoženjskopravnih razmerij, Official Gazette of Slovenia no. 31/99; Ugovor između Republike Hrvatske i Republike Slovenije o uređenju imovinskopravnih odnosa, Official Gazette of Croatia – International agreements no. 15/99)

Article 1

“This Agreement shall deal with the resolution of property relations established before and after the State Contracting Parties gained independence.

The independence date for the Republic of Slovenia shall be 25 June 1991 and for the Republic of Croatia 8 October 1991.

The resolution of relations relating to the Krško Nuclear Power Plants and the Ljubljana Bank, Zagreb Main Branch shall not be the subject of this Agreement, but shall be regulated by separate agreement.”

The Agreement entered into force on 23 February 2000.

(b)  Agreement on Succession Issues signed in Vienna on 29 June 2001

Article 12

“This Agreement shall enter into force thirty days after the deposit of the fifth instrument of ratification. The Depositary shall notify the successor States, and the Office of the High Representative, of the date of entry into force.

... ”

Annex C, Article 2

“...

(3)  Other financial liabilities include:

(a)  guarantees by the SFRY or its National Bank of Yugoslavia of hard currency savings deposited in a commercial bank and any of its branches in any successor State before the date on which it proclaimed independence; and

(b)  guarantees by the SFRY of savings deposited before certain dates with the Post Office Savings Bank at its branches in any of the Republics of the SFRY.”

Annex C, Article 7

“Guarantees by the SFRY or its NBY of hard currency savings deposited in a commercial bank and any of its branches in any successor State before the date on which it proclaimed its independence shall be negotiated without delay taking into account in particular the necessity of protecting the hard currency savings of individuals. This negotiation shall take place under the auspices of the Bank for International Settlements.”

All Successor States have ratified the Agreement, Croatia being the last country to do so, on 3 March 2004.

5.  Case-law of the Slovenian courts

(a) Constitutional Court

After finding that he was unable to withdraw his savings from the Ljubljana Bank – Zagreb Main Branch, a Croatian savings-account holder, Mr Vukasinović, brought proceedings in the Slovenian Constitutional Court challenging the constitutionality of section 22(b) and (f) of the 1994 Constitutional Law amending the 1991 Constitutional Law relating to the Basic Constitutional Charter on the Sovereignty and Independence of the Republic of Slovenia (Official Gazette no. 45/94). Under that provision, the former Ljubljana Bank was to retain its claims against and liabilities to the SFRY, and, in particular, liabilities arising under the foreign-currency accounts that were not guaranteed by the Slovenian State, that is to say, those contracted outside Slovenian territory.

On 11 April 1996 the Constitutional Court dismissed the proceedings, holding that it had no jurisdiction, as the impugned statute was constitutional in nature and thus fell outside the court's jurisdiction as determined by Article 160 of the Slovenian Constitution. It added that one of the features of communal life in the SFRY was foreign-currency deposits, which were guaranteed by the NBY. It emphasised that the issue before it therefore concerned the transition towards a new constitutional order in Slovenia that was also one of the areas of discussion over the succession to former Yugoslavia.

On 31 August 1999, a Croatian saver, Mr Perković, lodged a constitutional initiative challenging the constitutionality of section 15(č) and (d) of the amended Republic of Slovenia Succession Fund Act. On 8 March 2001 it ruled that Mr. Perković had standing and declared his initiative admissible. The proceedings are still pending.

In March 2000, another Croatian saver, Ms Gaković, lodged a constitutional appeal against a decision by the Ljubljana Regional Court (Okrajno sodišče) to stay the proceedings pursuant to section 15(č), paragraph 3 of the amended Republic of Slovenia Succession Fund Act and a decision of the Ljubljana Higher Court upholding the stay. On 30 May 2000 the Constitutional Court ruled that Ms Gaković had standing and declared her constitutional appeal admissible.

On 20 February 2003 it set aside the stay and remitted the proceedings to the Regional Court. It held that Ms Gaković's right to a fair trial had been violated, as the stay had been ordered solely on the basis of an opinion issued by the Republic of Slovenia Succession Fund, without her being afforded an opportunity to comment on it.

(b)  Supreme Court

On 1st April 1998, in a case concerning “Croatian savings accounts”, the Slovenian Supreme Court allowed an appeal on points of law against an appellate-court decision upholding a judgment of first instance holding that a main branch of the Ljubljana Bank, located outside Slovenian territory, did not have legal standing since it had become part of the Ljubljana Bank. The lower courts had also held that, since a deposit with the branch had the same effect as a deposit with the Ljubljana Bank, the foreign currency had to be regarded as having been deposited on Slovenian territory. Moreover, by virtue of section 19 of the 1991 Constitutional Law Slovenia had assumed the guarantee obligations for such deposits.

In overturning that decision, the Supreme Court held that for the purposes of section 22(b) of the 1994 Constitutional Law, the place of deposit of the savings meant the actual place where payment was made.

Deposits with non-Slovenian branches had acquired a different legal status, since they were not guaranteed by the Republic of Slovenia. It was for that reason that the Discharge of Liability for Unpaid Foreign-Currency Deposits Act did not apply to them.

The Supreme Court ordered the court of first instance to stay the proceedings in accordance with section 15 of the Republic of Slovenia Succession Fund (Amendment) Act, until the issue of the succession of the States formed out of the SFRY had been resolved.

COMPLAINTS

1.  The applicants complain under Article 1 of Protocol No. 1 of a violation of their right to the peaceful enjoyment of their possessions in that they have not been able to withdraw foreign currency which they deposited before the dissolution of the SFRY from the “Ljubljana Bank – Zagreb Main Branch”.

They allege that the National Assembly of the Republic of Slovenia passed legislation in order to release the Ljubljana Bank from obligations imposed by the Croatian courts towards foreign-currency account holders.

They claim that the Ljubljana Bank or Slovenia, as a Successor State which assumed the SFRY's guarantee obligations for foreign-currency savings on the break-up of Yugoslavia, should repay them the money deposited with accrued interest.

2.  One of the applicants, Mr Kovačić, also complains that he has been discriminated against on the grounds of nationality, contrary to Article 14 of the Convention. He alleges that Slovenian account holders of the Zagreb branch have been allowed to withdraw their savings. Their “old savings accounts” have allegedly been converted into “new savings accounts”.

THE LAW

The applicants complain of a violation of Article 1 of Protocol No. 1, which reads:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.”

One of the applicants, Mr Kovačić, also complains under Article 14 of the Convention taken together with the above Article.

Article 14 provides as follows:

“The enjoyment of the rights and freedoms set forth in [the] Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.”

The respondent Government disputed the admissibility of the present cases on several grounds.

1. Jurisdiction ratione temporis

(a)  The respondent Government

The applicants' complaints did not come within the Court's jurisdiction ratione temporis, as they related to events which took place before 28 June 1994, the date on which the Convention entered into force in respect of Slovenia.

In particular, the restrictions on the withdrawal of the applicants' deposits had been imposed by the SFRY and were entirely the result of its monetary and financial crisis. They were in no way due to alleged interference in the exercise of the applicants' rights by Slovenia which declared itself independent on 25 June 1991.

Moreover, Slovenia had not automatically inherited the SFRY's guarantee for foreign-currency deposits; nor had it received funds on the division of the SFRY's financial assets for the reimbursement of claims arising from the former SFRY's guarantee for hard-currency savings. Rather, that was the subject of Article 7 of Annex C of the Agreement on Succession Issues signed by the Successor States to the SFRY (see above).

(b)  The applicants and the Croatian Government

It was necessary to distinguish between facts relating to the background of these complaints and those relating to the complaints themselves. The facts relating to the background, such as the dissolution of the SFRY, the declaration of independence of the former constituent Republics and the freezing of the applicants' foreign-currency savings, occurred prior to the entry into force of the Convention in respect of Slovenia. However, the facts to which the complaints relate were the measures taken by the Slovenian authorities after independence, in order to save the Ljubljana Bank from bankruptcy.

The Slovenian authorities enacted several statutes to achieve that aim. Both parties referred in particular to the 1991 Constitutional Law relating to the Fundamental Constitutional Charter on the Sovereignty and Independence of the Republic of Slovenia, by which Slovenia became guarantor of all foreign-currency savings deposited with banks on Slovenian territory at that date, but not of savings deposited in other former Republics of the SFRY. Subsequently, in 1993, the Slovenian National Assembly enacted the Discharge of Liability for Unpaid Foreign-Currency Deposits Act, by which foreign-currency deposits in banks on Slovenian territory became part of the Slovenian public debt. Finally, on 27 July 1994, when the Convention was already in force in respect of Slovenia, the National Assembly enacted the amendments to the 1991 Constitutional Law, which restructured the Ljubljana Bank as two separate legal entities: the New Ljubljana Bank and the Ljubljana Bank. This latter Act was in the view of both parties the most controversial and brought the cases within the Court's jurisdiction ratione temporis. The most important consequence of that Act was the nationalisation of the assets of the Ljubljana Bank and their transfer by the State to a new legal entity. The old Ljubljana Bank, which remained liable to foreign customers and creditors and retained its corresponding claims against the NBY, was left in effect without any assets.

Moreover, between 1991 and the enactment of the 1994 amending Constitutional Law, a number of actions were brought in Slovenia for the recovery of the savings. Some ended with judgments in favour of the account-holders, who obtained payment.

These statutes had created a continuing violation of the Convention in respect of the applicants.

(c)  The Court's assessment

The Court's jurisdiction ratione temporis covers only the period after the ratification of the Convention or its Protocols by the respondent State. From the ratification date onwards, all the State's alleged acts and omissions must conform to the Convention or its Protocols and subsequent facts fall within the Court's jurisdiction even where they are merely extensions of an already existing situation (see, for example, Yağcı and Sargın v. Turkey, judgment of 8 June 1995, Series A no. 319-A, p. 16, § 40, Almeida Garrett, Mascarenhas Falcão and Others v. Portugal, nos. 29813/96 and 30229/96, § 43, ECHR 2000-I, and Trajkovski v. the Former Yugoslav Republic of Macedonia (dec.), no. 53320/99, ECHR 2002‑IV).

Accordingly, the Court has jurisdiction to examine the facts of the present cases for their compatibility with the Convention and Protocol No. 1 only in so far as they occurred after 28 June 1994, the date of ratification of the Convention and Protocol No. 1 by Slovenia. It may, however, have regard to facts prior to ratification inasmuch as they could be considered to have created a situation extending beyond that date or may be relevant for the understanding of facts occurring after that date (see Broniowski v. Poland (dec.) [GC], no. 31443/96, ECHR 2002-...).

The respondent Government argued that the acts, decisions and events that affected the applicants' situation had occurred before 28 June 1994, the date of ratification of the Convention and Protocol No. 1 by Slovenia. Moreover, their inability to gain access to their foreign-currency deposits with the Zagreb Main Branch was due to the restrictions on withdrawal imposed by the SFRY following its monetary and financial crisis in the 1990s, and not to the Slovenia's alleged interference in the exercise of the applicants' rights.

The Court observes that although, generally, the withdrawal of money from the foreign-currency savings accounts was increasingly restricted in the 1980s and in the early 1990s by the SFRY, the authorities of Slovenia, after its accession to independence on 25 June 1991, also legislated on the matter. The National Assembly of the Republic of Slovenia continued to do so after 28 June 1994, when the Convention and Protocol No. 1 entered into force in respect of Slovenia, notably by introducing amendments to the 1991 Constitutional Law on 27 July 1994 (Official Gazette no. 45/94).

The Court notes that that Act restructured the Ljubljana Bank as two separate legal entities, the Ljubljana Bank and the New Ljubljana Bank. The latter took over the Ljubljana Bank's entire assets and liabilities on Slovenian territory. Section 22(b) of that Act specifically provided that the Ljubljana Bank should retain, inter alia, full liability in respect of the foreign-currency ordinary and savings accounts that were not guaranteed by the Republic of Slovenia under section 19 of the 1991 Constitutional Law, that is, those not held with the banks on Slovenian territory. Moreover, it specified that the Ljubljana Bank was to maintain its links with its branches and subsidiaries based in the other Republics of the SFRY, while retaining the corresponding share of claims against the NBY. That provision related therefore to foreign-currency accounts such as those held by the three applicants. As a result, the Ljubljana Bank was left practically devoid of assets; the eventual satisfaction of the applicants' claims was linked to the definitive conclusion of the succession negotiations.

The Court also observes in this respect that, when ruling on a constitutional initiative challenging, inter alia, section 22(b) of the Constitutional Law, the Constitutional Court of the Republic of Slovenia ruled on 11 April 1996 that it had no jurisdiction to review the provisions of that Law, as the impugned statute was constitutional in nature and thus fell outside its jurisdiction.

Regard being had to the content of the 1994 Constitutional Law, the Court considers that the Slovenian Government's plea of inadmissibility on the ground of lack of jurisdiction ratione temporis must be dismissed.

2. Exhaustion of domestic remedies

(a)  The respondent Government

The applicants had failed to exhaust domestic legal remedies as required by Article 35 § 1 of the Convention. The rights to equal treatment and property were protected by the Slovenian Constitution (in its Articles 22 and 33, respectively). Furthermore, by virtue of Articles 8 § 2 and 153 § 2 of the Constitution, ratified and published international treaties as well as customary international law formed an integral part of Slovenian law. Self-executing treaty provisions were directly applicable and individuals could rely in the Slovenian courts on the rights conferred on them by ratified international treaties. Moreover, international treaties prevailed over statutory provisions other than constitutional norms.

In particular, the applicants had failed to bring a civil action in the Slovenian courts for the recovery of their foreign-currency deposits. They could have alleged in such an action that the SFRY guarantee for their deposits had been transferred to Slovenia as a result of the dissolution of SFRY if they believed that to be the case. Only Mr Kovačić had sought (and obtained) from the Ljubljana District Court an authority recognising and entitling him to enforce a judgment handed down by a Croatian court, but he had failed to initiate the proceedings required for its execution.

After having exhausted all other legal remedies at their disposal, the applicants could have lodged a constitutional appeal with the Slovenian Constitutional Court under section 50 § 1 of the Constitutional Court Act. Had any civil proceedings they commenced been stayed by the civil courts on the basis of sections 15(č) and (d) of the Succession Fund Act as amended in 1997, they could then have pursued further legal avenues including a constitutional appeal. The applicants could also have presented a constitutional initiative, on the basis of section 24 of the Constitutional Court Act, particularly with a view to challenging the constitutionality of the Succession Fund Act, as amended in 1997, and its conformity with the Constitution and the Convention. There was no case-law to suggest that these remedies would not have provided redress for the applicants' complaints.

Moreover, any person who had sustained injury as a result of a general act that was subsequently set aside by the Constitutional Court was entitled to seek restitutio in integrum and/or damages. The respondent Government asserted that these legal avenues constituted adequate and effective legal remedies under Article 35 § 1 of the Convention.

In this respect, the respondent Government drew attention to the fact that other Croatian savings account holders at the Zagreb Main Branch, namely Mr Perković and Ms Gaković, had in fact challenged the Succession Fund Act, as amended in 1997, by means of a constitutional initiative and an appeal, both of which were declared admissible by the Constitutional Court. In February 2003, the Constitutional Court had quashed the stay in Ms Gaković's case, which it had remitted to the court of first instance for a rehearing. Moreover, other Croatian account holders, namely Ms Kata Trbojević and Ms Anka Perić, had successfully invoked the jurisdiction of the Ljubljana District Court with respect to monies deposited with the Zagreb Main Branch. In the respondent Government's view, had the applicants taken similar action, they could have exhausted domestic remedies as required by Article 35 § 1 of the Convention.

They further noted that the first two applicants, Mr Kovačić and Mr Mrkonjić, had commenced proceedings in Croatia. Such proceedings were, in their view, irrelevant as regards the requirement to exhaust domestic remedies, because they were not directed against Slovenia and did not seek to redress an alleged violation of a right protected by Slovenia. In any event, the applicants had failed to pursue or had delayed in pursuing their claims against the Zagreb Main Branch in the Croatian courts. Only recently had the first two applicants obtained a warrant of execution ordering the registration of a charge over land in Osijek, Croatia, belonging to the Zagreb Main Branch. Furthermore, other Croatian savers such as Mr Djerek had executed their claims over the Zagreb Main Branch's movable property, including its claims against its own Croatian debtor companies. The third applicant, Ms Golubović, had not initiated any proceedings in relation to her foreign-currency savings either in Croatia or in Slovenia.

An effective remedy before the courts of a non-respondent Party would be unlikely to qualify as a domestic remedy to be exhausted under Article 35 of the Convention. However, the fact that the applicants had effective remedies in Croatia to protect their possessions should certainly be taken into account by the Court, firstly to determine whether or not they could qualify as “victims” of the alleged interference by Slovenia and, secondly, when assessing the proportionality of any interference.

(b)  The applicants and the Croatian Government

There were no effective Slovenian remedies. No existing remedy could be regarded as effective against Article 22(f) of the 1994 Constitutional Law, which in their view was crucial to the instant cases, because the Constitutional Court had no jurisdiction to review constitutional statutes. By virtue of that Act, the Ljubljana Bank had been granted a special status that made it impossible to bring any proceedings against it.

Moreover, relying on Van Oosterwijck v. Belgium, judgment of 6 November 1980 (Series A no. 40, § 35), and Akdivar and Others v. Turkey, judgment of 16 September 1996 (Reports of Judgments and Decisions 1996‑IV, § 69), the applicants and the Croatian Government argued that the rule of exhaustion of domestic remedies was neither absolute nor capable of being applied automatically; in examining whether the rule had been observed, it was essential to have regard to the particular circumstances of the individual case. This meant, among other things, that the Court had to take realistic account not only of the existence of formal remedies in the legal system of the Contracting Party concerned but also of the general legal and political context in which they operated as well as the personal circumstances of the applicants.

(c)  The Court's assessment

The Court reiterates that according to the Convention organs' consistent case-law under Article 35 of the Convention, normal recourse should be had by an applicant to remedies which are available and sufficient to afford redress in respect of the breaches alleged. The existence of the remedies in question must be sufficiently certain not only in theory but also in practice, failing which they will lack the requisite accessibility and effectiveness (see, as a recent authority, Belinger v. Slovenia (dec.), no. 42320/98, 2 October 2001).

The Court notes at the outset that section 22(b) of the 1994 Constitutional Law (Official Gazette no. 45/94) restructured the Ljubljana Bank as two separate legal entities and transferred the majority of its assets to the New Ljubljana Bank, while subordinating the eventual satisfaction of the applicants' claims to the outcome of the succession negotiations. The Court also notes that the Constitutional Court ruled on 11 April 1996 that it had no jurisdiction to review the provisions of that Act. It therefore appears that the 1994 Constitutional Law cannot be challenged as such in the Slovenian courts, owing to its constitutional nature.

A further question the Court has to determine is whether or not recourse by the applicants to a constitutional appeal lodged in connection with civil proceedings for the recovery of their savings or to a constitutional initiative, both challenging the Succession Fund Act, as amended in 1997, can be regarded as adequate and effective domestic remedies that were available both in theory and practice at the relevant time.

The Succession Fund Act provides for a stay of any proceedings that directly or indirectly affect legal relations with the other former constituent republics of the SFRY. Moreover, by virtue of its section 15(č), its provisions are binding on the Slovenian courts. The Court observes in this respect that the respondent Government cited three decisions handed down by the Constitutional Court in two different sets of proceedings brought by Croatian savers at the Zagreb Main Branch in 1999 and 2000 respectively, the first concerning a constitutional initiative and the second the constitutional appeal. In both sets of proceedings the Constitutional Court decided that the Croatian savers had locus standi.

However, the respondent Government has failed to inform the Court whether or not a decision as to compliance with the Constitution of the Republic of Slovenia has already been delivered in the first set of proceedings. As to the second set of proceedings, the Court notes that the Constitutional Court did indeed set aside a stay of proceedings that had previously been ordered by the courts below under section 15(č) of that Act and remitted the case to the Ljubljana Regional Court. Its initial decision in the matter, like that of the Ljubljana Higher Court, was quashed on the ground that the applicant's right to a fair trial guaranteed by the Constitution had been breached, as the stay had been ordered solely on the basis of an opinion issued by the Succession Fund, without her being afforded an opportunity to comment on it.

The Court finds that the case-law of the Constitutional Court of the Republic of Slovenia on which the respondent Government rely to support their argument does not, as it presently stands, suffice to establish that the legal remedies available under Slovenian law satisfy in practice the requirement of effectiveness as far as the question of the compatibility of the amended Succession Fund Act with the Constitution or the Convention is concerned.

Furthermore, since the present applications are directed against the Republic of Slovenia, the question of exhaustion of domestic legal remedies in the Republic of Croatia is of no relevance here.

Having regard to the above, the Court cannot find it established that in Slovenian law there are adequate and effective remedies available both in theory and in practice which the applicants should be required to exhaust. In these circumstances, the applicants' failure to bring proceedings before any or all levels of jurisdiction in Slovenia does not preclude the Court from examining their applications. The respondent Government's plea of a failure to exhaust domestic remedies must therefore be dismissed.

3. Compliance with the six-month rule

(a)  The respondent Government

Should the Court consider that the existing remedies were neither adequate nor effective and that there was thus no need to exhaust them, it might wish to note that the potentially relevant legislative measures for the determination of the point at which time started to run for the purposes of the six-month rule under Article 35 of the Convention were, at latest, the amendments to the 1991 Constitutional Law and to the Succession Fund Act. The amendments to the 1991 Constitutional Law were enacted on 27 July 1994 and entered into force on the same day. The amendments to the Succession Fund Act were enacted on 26 June 1997 and came into force on 5 July 1997.

Mr Kovačić filed his complaint on 17 July 1998, Mr Mrkonjić on 2 June 1997 and Mrs Golubović on 24 December 1998. Since the relevant measures entered into force on or before 5 July 1997, the respondent Government argued that Mr Kovačić and Mrs Golubović had failed to comply with the six-month rule. Although Mr Mrkonjić lodged his application on 2 June 1997, before the entry into force of the amendment to the Succession Fund Act, the latter amendment did not affect his legal position. Therefore, Mr Mrkonjić had also failed to file his application within the six-month time-limit.

(b)  The applicants and the Croatian Government

The effects of the legislative measures taken by Slovenia led to continuing violations of the applicants' Convention rights. The present cases concerned a situation in which the applicants had no effective legal remedy at their disposal with which to challenge the offending statute, and in any event the violation was a continuing one (see De Becker v. Belgium, judgment of 27 March 1962, Series A no. 4, p. 25, § 8, and Ječius v. Lithuania, no. 34578/97, § 44, ECHR 2000‑IX). When a situation was continuing, time started to run only when the situation ended and did not run at all for so long as it persisted (see, inter alia, application no. 11660/85, X v. Portugal, DR 59, p. 85).

In addition, when applying Article 35 § 1 of the Convention, the Court often looked behind mere appearances, without excessive regard for matters of form (see, among other authorities, Guzzardi v. Italy, judgment of 6 November 1980, Series A no. 39, pp. 26-27, § 72). For those reasons, the respondent Government's objection was unfounded.

(c)  The Court's assessment

In the Court's view, the question as to whether or not the applicants lodged their application within the six-month time-limit set by Article 35 is closely linked to the merits of their complaint under Article 1 of Protocol No. 1 to the Convention. Hence, to avoid prejudging the latter issue, both questions should be examined together. Accordingly, the Court joins the question of compliance with the six-month rule to the merits and reserves it for later consideration.

4. Jurisdiction ratione loci

(a)  The respondent Government

Under Article 1 of the Convention read in conjunction with Article 5 of Protocol No. 1, Slovenia's obligation to secure the property rights under Article 1 of Protocol No. 1 was confined to property within its own jurisdiction. In Banković and Others v. Belgium and 16 Other Contracting States (dec.) [GC], no. 52207/99, § 61, ECHR 2001‑XII, the Court held that the term “within their jurisdiction” in Article 1 of the Convention had to be interpreted to reflect an essentially territorial notion of jurisdiction.

Recent State practice in applying the Convention confirmed that interpretation, notably the English Court of Appeal in R. (Abbasi and Juma) v. Secretary of State for the Foreign and Commonwealth Office and Secretary of State for the Home Department, ([2002] EWHC Admin 651, 15 March 2002, ILR 123 p. 600 at p. 610) took the view that the Convention did not apply to the questioning by British officials of the British citizens detained by the United States at Guantanamo Bay Naval Base.

None of the recognised instances of extra-territorial exercise of jurisdiction which could engage the State's responsibility under the Convention, such as the effective control of the relevant territory and its inhabitants abroad, was applicable in the present case. It was uncontested that the applicants' deposits had been made with the Ljubljana Bank Basic Bank Zagreb in the territory of the former Socialist Republic of Croatia. As their deposits were now situated on Croatian territory, they were subject to Croatian and not to Slovenian jurisdiction. They maintained that different measures adopted by Croatia interfered with the exercise of their rights.

(b)  The applicants and the Croatian Government

The applications were compatible ratione loci with the provisions of the Convention.

It was incorrect to assert that the banking system in the SFRY was fundamentally different from those in the Western European countries or that the term filijala (branch) could not be equated with the corresponding term in Western Europe. The SFRY's legislation regulating the establishment and legal status of branches was clear and transparent. Secondly, when the Ljubljana Bank's Zagreb office became its Main Branch, it became subject to the National Bank of Slovenia's authority, since the Ljubljana Bank Head Office was located in Slovenia. As the Croatian savers had opened accounts with a Slovenian bank on Croatian territory, the measures taken by the Slovenian State concerning either the bank's liabilities or its restructuring had an impact on savings in accounts outside Slovenian territory.

(c)  The Court's assessment

As already noted above, Article 22(b) of the 1994 Constitutional Law provided that the Ljubljana Bank should retain, inter alia, liability in respect of the foreign-currency accounts that were not guaranteed by the Republic of Slovenia under section 19 of the 1991 Constitutional Law, that is those not held with the banks on Slovenian territory. Moreover, it specified that the Ljubljana Bank was to maintain its links with its branches and subsidiaries based in the other Republics of the SFRY, while retaining the corresponding share of claims against the NBY. That provision thus related to foreign-currency accounts opened with the Ljubljana Bank's branches situated outside Slovenian territory, such as those held by the three applicants.

Therefore, without prejudice to its ultimate findings on the merits, the Court finds that the Slovenian Government's plea of inadmissibility on the ground of lack of jurisdiction ratione loci must be dismissed.

5. Jurisdiction ratione personae

(a)  The respondent Government

The Republic of Slovenia could not be held responsible for possible violations in the present cases, as the applicants' inability to withdraw their foreign-currency deposits stemmed from the collapse of the SFRY's protection of their deposits through the SFRY's statutory guarantee and the “redepositing system”. Slovenia had neither nullified the applicants' existing claims, nor restricted them in any way. The applicants' deposits had already evaporated prior to the dissolution of the SFRY. It behove the Successor States to set up new financial systems, rehabilitate the banking sector, and introduce effective deposit protection in their territories.

In the absence of a controlling treaty, the question of whether and how protection of deposits should be introduced came under the jurisdiction of the Successor State where the debtor bank was located. The Zagreb Main Branch was subject to the jurisdiction of Croatia and operated under its regulatory regime. It therefore fell to Croatia to enact appropriate legislation for the protection of domestic deposits and to create the conditions enabling the Zagreb Main Branch to operate and generate funds in order to satisfy the applicants' claims.

Croatia had failed to establish generally applied, transparent, and objective conditions concerning the taking up and pursuance of banking business in general and a non-discriminatory deposit scheme in particular. For instance, Croatia had stifled attempts by the Zagreb Main Branch to be integrated into the Croatian banking system.

Unlike Slovenia, Croatia had failed to guarantee all domestic deposits by restricting its statutory guarantee of deposits to domiciled banks. As regards non-domiciled banks, it allowed depositors to assign their claims to Croatian banks, but only if they were Croatian nationals. Although they also made a positive contribution to the Croatian economy, foreign depositors were deprived of any protection, which was clearly at variance with European standards governing the protection of deposits. Therefore, the applicants' inability to withdraw their foreign-currency deposits resulted not from conduct attributable to Slovenia, but from the acts and omissions of Croatia, as illustrated by the organisation of its banking system.

Finally, under the applicable rules of customary law governing State liability, the acts and omissions of a corporation did not engage the State's liability under the Convention. Public international law enshrined the general principle of separation of corporate entities from the State. The International Court of Justice had made this clear in the case of Barcelona Traction, Light and Power Company, Limited (Belgium v. Spain), ICJ Reports 1970, pp. 38 and 39, §§ 56-58. A company's acts and omissions did not involve State liability, unless the company met both the structural test of State ownership and control and the functional test of performing activities which were governmental in nature.

Therefore, the Republic of Slovenia could not be held liable for the Ljubljana Bank's alleged acts and omissions complained of by the applicants, since it was a joint stock company that had been founded in 1989 pursuant to the SFRY Banks and Other Financial Institutions Act and was now subject to the Slovenian Companies Act. Under the Companies Act, Slovenia has no liability for any obligations the Ljubljana Bank might have incurred for the applicants' deposits with the Zagreb Main Branch. The Ljubljana Bank was engaged in commercial, banking and financial activities and did not discharge any governmental function. Moreover, the relations between the applicants and the Zagreb Main Branch were exclusively private-law relationships based on their deposit contracts with the Zagreb Main Branch.

(b)  The applicants and the Croatian Government

When the actions of a national authority produced effects outside the national frontiers, whether or not they were performed within them, they might engage the responsibility of the State Party to the Convention.

None of the Slovenian Government's allegations were true, especially those to the effect that Croatia had failed to ensure transparent and universally applicable conditions for banking operations and had treated foreign savers in a discriminatory manner. In any event, they did not affect the applicants, who could have transferred their claims against the Ljubljana Bank to Croatian-domiciled banks, as many others had done. To that extent, they had enjoyed the same level of protection as account holders at domestic banks. However, as they had had confidence in the Ljubljana Bank, some savers, such as the applicants, had not availed themselves of that opportunity. They could also have brought civil proceedings against the Ljubljana Bank in Croatia under the Civil Procedure Act.

Although not initially responsible for the Ljubljana Bank's acts, Slovenia had chosen to interfere in its private-law relationship to the detriment of non-Slovenian savers. It was there that her responsibility lay.

The Ljubljana Bank had equal responsibility towards savers who had deposited their foreign savings on Slovenian territory and those who had done so abroad. In order to save the Ljubljana Bank from difficulties, Slovenia had decided after its independence to assume liability for claims, but only for foreign-currency deposits in Slovenia. Slovenia had no right to resort to such differential treatment, because the NBY was under an obligation to the Ljubljana Bank for the total amount of deposited foreign savings, regardless of where the deposits were made. Despite that differential treatment, Slovenia had continued to claim the funds from the NBY on the basis of the total amount of the nominally deposited foreign-currency savings, including those deposited outside Slovenian territory. That was the first act of State interference in the private-law relationship between the bank and its savings-account holders.

However, the part of the savings for which liability had not been assumed by Slovenia remained the subject of the private-law relationship between the bank and its savings-account holders until the second Slovenian State intervention – the introduction of amending legislation through the 1994 Constitutional Law. By virtue of that Act, it became impossible for foreign savers to enforce claims against either the Ljubljana Bank or the New Ljubljana Bank.

Where a State through its legislation made it impossible for savers to collect their claims against a debtor bank and afforded the bank constitutional protection, putting it beyond the reach of the law, responsibility for the acts complained of should be laid at the door of the State and not of the bank concerned.

(c)  The Court's assessment

The Court first acknowledges that, as the Croatian Government and the applicants have submitted, the responsibility of the High Contracting Parties may be engaged by acts of their authorities that produce effects outside their own territory (see, mutatis mutandis, Drozd and Janousek v. France and Spain, judgment of 26 June 1992, Series A no. 240, p. 29, § 91).

The Court reiterates that the Slovenian National Assembly introduced legislation addressing the issue of foreign-currency savings deposited with branches of Slovenian banks outside Slovenian territory including, in particular, the Constitutional Law of 27 July 1994, which is not amenable to judicial review by the Slovenian courts due to its constitutional nature. The applicants' position as regards their foreign-currency savings deposited with the Zagreb Main Branch was and continues to be affected by that legislative measure. This being so, the Court finds that the acts of the Slovenian authorities continue to produce effects, albeit outside Slovenian territory, such that Slovenia's responsibility under the Convention could be engaged.

Therefore, the respondent Government's objection of incompatibility ratione personae of the applications with the provisions of the Convention must likewise be dismissed.

6. Whether the applicants were “victims”

(a)  The respondent Government

Firstly, in any event, for a complaint to be admissible, the applicant must claim to be a victim of an alleged violation of the Convention by a High Contracting Party under Article 34 of the Convention. The applicants were not directly affected by the acts and omissions complained of. They referred, inter alia, to the case of Agrotexim and Others v. Greece, judgment of 24 October 1995, Series A no. 330‑A, § 66, where the Court held that, in the absence of special circumstances, company shareholders did not qualify as victims of acts or omissions prejudicial to a company. Similarly, the respondent Government stated that, since Ms Golubović was not directly and personally affected by the restructuring of the Ljubljana Bank in 1994, she could not claim to be a “victim” within the meaning of Article 34 of the Convention.

Secondly, the applicants had erred in seeking reimbursement of their deposits from Slovenia, since they could have converted their deposits into Croatian public debt pursuant to Articles 15 and 16 of the Decree on the Conversion of Nationals' Foreign-Currency Bank Deposits into Croatian Public Debt and Article 14 of the Transformation of Citizens' Foreign Exchange Deposits into Public Debt of the Republic of Croatia Act. Slovenia had not assumed liability for the applicants' deposits located on Croatian territory. The applicants could hardly have expected with any confidence that the Zagreb Main Branch would be in a position to service their foreign-currency deposits, because the SFRY's monetary and financial crisis had already led the Zagreb Main Branch to default on its obligations towards its foreign-currency depositors before the dissolution of the SFRY. Neither could the applicants have had any legitimate expectation that Slovenia would assume liability for their deposits or inject funds into the Zagreb Main Branch.

Thirdly, the fact that the applicants had failed to pursue or had delayed in pursuing their claims against the Zagreb Main Branch under Croatian law should be taken into account by the Court when determining whether or not the applicants qualified as “victims” of the alleged interference by Slovenia.

(b)  The applicants and the Croatian Government

The Croatian Government and the applicants have made no observations on this point.

(c)  The Court's assessment

The Court observes that, under its case-law, for the purposes of Article 34, the word “victim” means the person directly affected by the act or omission in issue (see Balmer-Schafroth and Others v. Switzerland, judgment of 26 August 1997, Reports of Judgments and Decisions 1997‑IV, § 26).

The Court considers that since, as noted above, the applicants' position as regards their foreign-currency savings deposited with the Zagreb Main Branch was and continues to be affected by the enactment of the amendments to the 1991 Constitutional Law on 27 July 1994, the applicants may claim to be “victims” for the purposes of Article 34 of the Convention.

Therefore, the respondent Government's objection of inadmissibility ratione personae on the grounds that the applicants cannot claim to be victims of the alleged violations must be dismissed.

7. Application substantially the same as a matter already before another body

(a)  The respondent Government

The applications were substantially the same as the matter submitted to the International Monetary Fund (“IMF”) for arbitration and the Bank for International Settlement (“BIS”) for mediation.

The applicants' claims against the Zagreb Main Branch were unaffected by the dissolution of the SFRY. Slovenia had not repudiated or cancelled those claims. However, the collapse of the SFRY's monetary system had left the Zagreb Main Branch without resources to satisfy them. Thus, as a result of the former redepositing system and the SFRY statutory guarantee for foreign-currency savings, liability for the applicants' deposits had become a succession issue. Satisfaction of the applicants' claims was linked to the distribution of the succession assets and the SFRY liabilities for foreign-currency savings. They referred in this respect to an appeal by Croatia of 31 March 2000 in civil proceedings brought by savers against the Zagrebačka Banka - Pomorska Banka d.d. Split and the Republic of Croatia, where Croatia stated “foreign-currency deposits, i.e. savings, were subject to the succession of the former SFRY”, thus sharing the Slovenian Government's view.

As far as the IMF was concerned, Slovenia was still waiting for Croatia's reply to the IMF, which in June 1999 had confirmed its readiness to act as honest broker in response to the Slovenian Government's request. The latter had formulated its request further to a bilateral meeting held on 25 August 1998, at which Slovenia and Croatia had agreed that the dispute over the distribution of the former SFRY's liability for foreign-currency savings should be submitted to the IMF or the World Bank if no solution could be reached within three months.

Subsequently, Slovenia, Croatia and other former Republics of the SFRY had bound themselves by Article 7 of Annex C to the Agreement on Succession Issues signed on 29 June 2001 to submit the dispute to the BIS for mediation as a matter of urgency, taking into account in particular the necessity of protecting the “hard-currency savings” of individuals. The respondent Government argued that the apportionment of the SFRY liabilities for foreign-currency savings was essential to protect individual savers.

The negotiations had begun but had come to a standstill. Slovenia, the Former Yugoslav Republic of Macedonia and Bosnia and Herzegovina had intimated in writing to the BIS their willingness to continue those negotiations, a position to which, however, Croatia had made it clear that it was unwilling to subscribe for the time being. The respondent Government also argued that Croatia's violation of its obligation to negotiate in good faith could not be a basis for imposing the full guarantee obligations on Slovenia.

Were the Court to find the applicants' claims admissible, the Court would then have to undertake a lengthy and complex analysis as to the manner in which the assets and liabilities of the former SFRY were to be distributed between the former SFRY successors. Courts were institutionally unqualified to decide such issues. An effective solution to the problem of the Successor States' responsibility for the SFRY's guarantee for foreign-currency deposits required an inter-State settlement rather than a case-by-case analysis of individual claims to foreign-currency deposits.

(b)  The applicants and the Croatian Government

According to the information available to the Croatian Government, the dispute was not under consideration by any international court or body other than the Parliamentary Assembly of the Council of Europe.

Talks on arbitration by the IMF had been held between the Croatian and Slovenian Governments in 1998 but no agreement to refer the dispute to arbitration had been reached.

It was necessary to distinguish clearly between a bank's liabilities under its private-law relations on the one hand and the public-law relations and liabilities of a State on the other. Liabilities of the State were considered to be within the scope of the negotiations on the succession of the SFRY. They pointed out that the parties to the Agreement on Succession Issues were five Successor States and the parties to the cases before the Court were natural persons and Slovenia, the latter being one of the Successor States. Thus, there existed a formal difference between the parties to the present proceedings and those to the succession negotiations.

It was true that Article 2 § 3(a) of Annex C to the agreement provided that the SFRY's financial liabilities included “guarantees by the SFRY or its NBY of hard-currency savings deposited in a commercial bank and any of its branches in any successor State before the date on which it proclaimed independence” and that Article 7 of Annex C provided for negotiations under the auspices of the BIS about such guarantees by the SFRY or its NBY.

However, neither banks' liabilities towards savers under private law in general nor those of the Ljubljana Bank towards Croatian savers (including the three applicants to the Court) in particular were mentioned in the Agreement on Succession Issues. The agreement made no reference to rights which savers, mentioned only in very general terms, would enjoy once it had been signed and ratified. There was no identity of the parties to the mediation procedure and those before the Court or of the legal issues arising in the corresponding proceedings.

For these reasons, mediation by the IBS could not be subsumed under Article 35 § 2 (b). At all events, that procedure had failed to achieve a result and the Croatian Government was unable to predict what the future pattern of events would be.

Contrary to Slovenia's submissions, the Court's decision did not require a lengthy and complex analysis as to the manner in which the assets and liabilities of the former SFRY were to be distributed between the former SFRY successors. All the Court had to decide was whether or not the specific measures taken by Slovenia constituted violations of the applicants' rights under the Convention.

The applicant Mr Kovačić stated that the president of the Zagreb Main Branch had told him that the question of liability for foreign-savings deposits was not only a legal issue, but primarily a political one, to be resolved within the framework of other pending bilateral issues. The bank's president had also stressed that the Slovenian and Croatian delegations had continually postponed negotiations on the foreign-currency deposits and were seeking a solution through arbitration or succession. The postponements worked in Slovenia's favour.              There was also disagreement about the question of liability for these deposits between Croatian and Slovenian politicians.

(c)  The Court's assessment

The Court notes that, under Article 35 § 2 (b) of the Convention, it “shall not deal with any application submitted under Article 34 that is substantially the same as a matter that has already been examined by the Court or has already been submitted to another procedure of international investigation or settlement and contains no relevant new information”.

It acknowledges that, as the Croatian Government and the applicants have submitted, the Convention institutions have interpreted the concept of “substantially the same application” very restrictively. They have found themselves prevented from dealing with an application if the applicant in the other international procedure was the same as the applicant who lodged the application to the Commission or to the Court (see, among other authorities, application no. 11603/85, Council of Civil Service Unions and others v. the United Kingdom, decision of 20 January 1987, DR 50, p. 228 at pp. 236-237).

Even assuming that arbitration proceedings before the International Monetary Fund and mediation proceedings under the auspices of the Bank for International Settlement in the framework of succession negotiations are pending and that their subject-matter were the same as that in the present cases, the Court notes that the parties to the IMF and BIS procedures are not the same as those to the proceedings before the Court.

It follows that it has not been shown that an application identical to, or substantially the same, as those before the Court in the present cases has already been submitted to another procedure of international investigation or settlement. This objection is accordingly rejected.

8. Whether the applications are manifestly ill-founded

As to the matter of compliance with Article 1 of Protocol No. 1 raised by all three applicants and with Article 14 of the Convention taken together with Article 1 of Protocol No. 1 raised solely by Mr Kovačić, the Court considers, in the light of the parties' submissions, that the complaints raise serious issues of fact and law under the Convention, the determination of which requires an examination of the merits. The Court concludes therefore that this complaint is not manifestly ill-founded within the meaning of Article 3 § 3 of the Convention.

No other ground for declaring the application inadmissible has been established.

For these reasons, the Court unanimously

Joins the question of compliance with the six-month rule to the merits;

Declares admissible, without prejudging the merits, the applicants' complaints concerning Article 1 of Protocol No. 1 and Mr Kovačić's complaint under Article 14 of the Convention taken together with Article 1 of Protocol No. 1.

Vincent BergerGeorg Ress
RegistrarPresident

Full & Egal Universal Law Academy