Arbitration between Croatia and Slovenia

Published: 01 October 2017 Author: Stefan Talmon

Croatia and Slovenia have been engaged in a territorial and maritime dispute since 1991, when the two States seceded from the Socialist Federal Republic of Yugoslavia. On 4 November 2009, the governments of the two States signed an Arbitration Agreement by which they submitted their dispute to arbitration. As part of the agreement, Slovenia, which had been a member of the European Union since 1 May 2004, lifted its blockade of Croatia’s membership of the EU. Croatia joined the organization on 1 July 2013. The parties exchanged three rounds of written submissions and oral hearings were held in June 2014. During the deliberation stage of the proceedings it emerged that the arbitrator appointed by Slovenia and one of the two agents of Slovenia had colluded to influence the outcome of the arbitration. As a consequence, both the arbitrator appointed by Slovenia and the Slovenian agent resigned.

On 30 July 2015, Croatia notified Slovenia of the termination of the Arbitration Agreement in accordance with Article 60, paragraph 1, of the Vienna Convention on the Law of Treaties on the ground that Slovenia had engaged in one or more material breaches of the Arbitration Agreement. The next day, Croatia informed the Tribunal that it would no longer participate in the arbitration, as the arbitration process had been totally and irreversibly compromised. As a consequence, the arbitrator appointed by Croatia resigned.

Slovenia objected to the termination of the Arbitration Agreement and requested the Tribunal to continue the proceedings. The President of the Tribunal, in accordance with the Arbitration Agreement, appointed two new arbitrators as replacement of the party-appointed arbitrators. On 30 June 2016, the Tribunal issued a Partial Award in which it held unanimously that Slovenia had breached provisions of the Arbitration Agreement, but that these breaches did not render the continuation of the proceedings impossible.

In response to the Tribunal’s announcement to render its Final Award on 29 June 2017, Croatian Prime Minister Andrej Plenkovic reiterated on 23 June 2017 that Croatia’s position had not changed. He stated inter alia:

“The arbitration process is compromised and contaminated and we have withdrawn from it based on the unanimous resolution of the Croatian Parliament. We have made the relevant notifications and are no longer a party to it. Our position has been quite clear all along. We have no doubts about it, regardless of anyone else’s views. We have international law, the situation is clear and we’re not giving up or budging an inch.”

Slovenia, on the other hand, insisted that the Final Award would be binding on both sides. In the days immediately preceding the publication of the Final Award both Croatia and Slovenia lobbied fellow European Union member States and the European Commission to support their respective position.

While other States and the EU Commission refrained from any public comment on the arbitration, the German embassies in Zagreb and Ljubljana on 28 June 2017 issued identical press releases in the local language which read as follows:

“International arbitration is a valuable instrument of international law and plays an important role in resolving inter-State conflicts.

In the agreement of 4 November 2009, Slovenia and Croatia have jointly committed themselves to submit a bilateral issue to international arbitration proceedings.

From the Federal Government’s point of view, it is an important principle of international law that decisions of arbitral tribunals are to be respected and implemented by the parties, irrespective of the content of the decision. The preservation of the integrity of international jurisdiction is in the common interest of all States. The Member States of the European Union must set a good example here.

The Federal Government assumes that both partners in the European Union will implement the decision of the arbitral tribunal within six months, as determined in the agreement.”

In its final award rendered on 29 June 2017, the arbitral tribunal largely ruled in favour of Slovenia. In particular, the tribunal allocated most of the Bay of Piran to Slovenia and ruled that a corridor through the Croatian territorial sea, of approximate length and width of 12 nm and 2.5 nm respectively, must be established to provide Slovenia with access to the high seas.

While the Slovenian Prime Minister called the decision “historic” his Croatian counterpart said that Croatia did not consider itself obliged by the ruling and that Croatia did not intend to implement it. Referring, at least implicitly, to the press release of the German embassy in Zagreb, Croatian Prime Minister Plenkovic called upon all States, “primarily EU members, and international organizations to leave this border dispute to Croatia and Slovenia as an open border issue which should be dealt with and resolved bilaterally between the two countries, and two countries alone.”

On 30 June 2017, the German government reiterated its position on the arbitral award. The spokesperson for the Foreign Ministry in Berlin declared that the government had taken note of the arbitral award in the boundary dispute between Slovenia and Croatia and restated the content of the above press release, omitting however, the last paragraph.

Croatian Prime Minister Plenkovic took up Germany’s statements on the arbitral award with Chancellor Angela Merkel on the margins of the EU summit meeting in Tallinn on 29 September 2017. After the talks, Plenkovic stated that he had informed the Chancellor about Croatia’s stance on the issue and asked her to show understanding that this was a matter “regulated primarily by international law and should be dealt with through dialogue by the two neighbouring countries.”

Against the background of the positions taken by Croatia and Slovenia, Germany’s statement of 28 June 2017 must be considered not just as a neutral intervention in support of the integrity of the institution of international arbitration but as an expression of open support for Slovenia’s legal position. Considering that justice must not only be done but be seen to be done, and that there may well be good arguments supporting Croatia’s position that Slovenia engaged in one or more material breaches of the Arbitration Agreement, Germany’s one-sided positioning may not be conducive to the ultimate settlement of the boundary dispute between the two fellow EU member States.