CEDH · CASELAW;DECISIONS;ADMISSIBILITY;ENG — 9 octobre 2003

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margin-left:14.2pt; margin-bottom:36pt } .sA5C4F8A9 { margin-top:36pt; margin-bottom:0pt; text-align:left; page-break-inside:avoid; page-break-after:avoid } .sE950BED4 { width:22.54pt; display:inline-block } .s93B30DFA { width:207.46pt; display:inline-block } .s7602FED2 { width:18.21pt; display:inline-block } .s60570E66 { width:233.81pt; display:inline-block } THIRD SECTION DECISION AS TO THE ADMISSIBILITY OF Application nos 44574/98, 45133/98 and 48316/99 by Ivo KOVAČI Ć, Marjan MRKONJIĆ and Dolores GOLUBOVIĆ against Slovenia   The European Court of Human Rights (Third Section), sitting on 9   October 2003 and 1 st April 2004 as a Chamber composed of:   Mr   G. Ress , President ,   Mr   I. Cabral Barreto ,   Mr   L. Caflisch ,   Mr   P. Kūris ,   Mr   B. Zupančič ,   Mr   J. Hedigan ,   Mrs   M. 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 1 st 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 1 st 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 1 st 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 1 st 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 1 st 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 1 st 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