Croatia Exits Border Arbitration With Slovenia, Defying EU

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Croatian lawmakers unanimously backed pulling out of an arbitration process with neighboring Slovenia, defying a European Union plea to continue seeking a resolution to a 22-year-old border dispute.

Lawmakers in Zagreb agreed to ditch the process Wednesday after Premier Zoran Milanovic accused Slovenia of violating the proceedings because of alleged recordings of a Slovenian judge and ministry official allegedly discussing strategy that breached arbitration rules. The two nations have been at odds over the maritime and coastal border at Piran Bay on the northern Adriatic Sea since 1993, two years after Yugoslavia’s began to disintegrate.

The European Commission, the EU’s executive arm, urged the two members to stay in the arbitration. Croatian Economy Minister Ivan Vrdoljak said Marathon Oil Corp. and OMV AG dropped investment plans at a time the country is trying to end a six-year recession and rebuild trust in the economy.

The dispute “convinced them that problems with solving borders are painful and protracted,” Vrdoljak said by phone on Wednesday before the vote. “On our side, we also didn’t want to enter an agreement where it wouldn’t be clear when the investors could start exploring.”

Phone Transcripts

Croatian government spokesman Nikola Jelic said the commission has “no authority” over issues related to arbitration processes. “The agreement is a bilateral contract between two equal EU members,” Jelic said in a phone message.

Croatian media last week published transcripts of alleged phone conversations between a Slovenian judge on the international court and a Foreign Ministry official discussing how to submit documents against the arbitration orders. Slovenian Premier Miro Cerar sought to soothe tensions Monday by appointing a new court representative, while the ministry official quit.

Marathon and OMV were awarded seven of 10 exploration blocks in the Adriatic sea earlier this year, a project in which Croatia expected an initial investment of about 500 million euros ($553 million). Eni SpA, INA Industrija Nafte and Medoil Plc were awarded the rest. Production-sharing agreements were expected to be completed this month or in August.

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