Study Says Croatia Responsible for Savings Deposits in LB Zagreb

The territorial principle applies in the case of savings deposits in the Zagreb branch of the defunct Slovenian bank Ljubljanska banka, which means that Croatia, having adopted monetary legislation of the former Yugoslavia upon independence, is responsible for guaranteeing its citizens' foreign exchange deposits. This is the opinion stated in a study published on Thursday, 21 August.

The study had been drafted more than six months ago by an expert group of the Institute for European Law headed by Miha Pogacnik. So far labelled as confidential, the study appeared in the magazine Pravna Praksa (Legal Practice).

As Croatia adopted the law with which it assumed finance legislation of the former federation, after gaining its independence in 1991, the country also took over the responsibility to vouch for foreign exchange savings deposits. The Yugoslav law on foreign exchange transactions of 1990 clearly stipulated guarantees for foreign exchange deposits, the study points out.

The fact that Croatia's law on assuming federal finance legislation was passed on 26 June 1991, and only became effective as of 8 October of the same year, after the end of the moratorium stipulated by the Briuni Declaration, does not affect the federal guarantee, the Slovenian legal experts believe. They warn that if it did, it could be inferred that in the period after the country gained its independence through 8 October, there was no effective legislation in the field in Croatia. That was not the case as it would prevent any legal dealings.

The decree on the Croatian National Bank of December 1991 stipulates that Croatia guarantees the liabilities of the central bank. The Croatian National Bank was in addition recognized as a successor to the former national bank of the republic.

Given that Croatia recognized its central bank as a successor to the old republic central bank and at the same time confirmed the validity of former finance legislation, the experts of the Institute for European Law were led to the conclusion that Croatia included the federal principle of guarantee in its own legislation.

At the end of 1991, Croatia adopted a decree that transformed foreign exchange deposits of citizens in banks into Croatia's public debt. This decree listed the conditions and the manner of transformation into public debt of the foreign-currency deposits in banks operating on the Croatian territory on 27 April 1991. Croatia thus indicated that it considered itself in charge of dealing with the issue of foreign-currency deposits on its territory.

The study goes on to underscore that according to international law, the territorial principle is always applied in a change of sovereignty over a territory. The same principle was applied in the case of dinar (former Yugoslav currency) deposits and should therefore also apply to foreign-currency deposits. The territorial principle is also supported by the fact

that during the time of the former common state, all financial dealings between the LB subsidiaries in Croatia and the National Bank of Yugoslavia were conducted through the Croatian National Bank, and that the national bank's supervision over commercial banks was also based on the territorial principle.

As Slovenia's high representative for succession issues Rudolf Gabrovec pointed out yesterday, the legal facts do not allow for a compromise on the issue of Croatian depositors of Ljubljanska banka, but only for "steps".

Moreover, he explained that a possible scenario for resolving the matter could involve the LB using funds that Croatian companies owe the LB branch in Zagreb - some EUR 270m - to compensate the savers who claim some EUR 170m.

Slovenia is said to have proposed to Croatia when Croatian President Stipe Mesic visited Slovenia last spring that such compensation could be carried out by opening some interim account since the Croatian National Bank closed the account of the Zagreb LB subsidiary in 2000.

Source: Slovene Press Agency STA