Arbitration between Croatia and Slovenia: Leaks, Wiretaps, Scandal

The Arbitration between Croatia and Slovenia, brokered by the European Commission, conducted under the auspices of the Permanent Court of Arbitration and concerning delimitation of the maritime and land boundary between the two States, has been ongoing over the past three years. By the Tribunal’s estimation, it has featured nearly 1,500 documentary exhibits and legal authorities and 250 figures and maps. Following the conclusion of the oral phase of proceedings in June 2014, the Tribunal issued a press release on 10 July of this year in which it announced that the award would be promulgated in mid-December.

All of this progress towards the peaceful settlement of the dispute was thrown into sudden doubt by the revelation that the arbitrator of Slovenian nationality, Dr Jernej Sekolec, was secretly in contact with the Slovenian agent, Simona Drenik. These contacts, which allegedly took place during two secret telephone conversations on 15 November 2014 and 11 January 2015, included discussions of how to best influence the other arbitrators to rule in Slovenia’s favour, the sharing of Slovenian submissions directly with Dr Sekolec (who stated that he would present them to the other arbitrators as his own ‘notes’ on the case), and the advance leaking of the deliberations of the Tribunal to Ms Drenik, including the tip that the Tribunal would award to Slovenia at least two thirds of the disputed waters it had claimed.

The story was broken on Wednesday 22 July by the Croatian daily newspaper Večernji list (acting on information first leaked in the Serbian tabloid Kurir), which published transcripts and audio recordings of the conversations between the two on its website. For a description in English, see this story by the reputable NGO Balkan Insight.

Following the revelation, matters have moved at a brisk clip: on Thursday the 23^rd, Croatian President Kolinda Grabar-Kitarović was quoted as saying that the scandal had shaken faith in international law and Foreign Minister Vesna Pusić stated that Croatia was considering its options, including withdrawing from the arbitration if it felt that ‘the process had been corrupted’. On Friday the 24^th, the Slovenian Prime Minister, Miro Cerar, announced that he had demanded and received the resignations of both individuals from the arbitration and announced that the Slovenian Government had not been aware of their communications. This was confirmed by a press release issued by the PCA and dated Thursday the 23^rd, in which the PCA announced the resignation of Dr Sekolec and cited Article 2(3) of the Arbitration Agreement, providing that a vacancy caused by the resignation of an arbitrator triggers a fifteen-day deadline for the appointment of a replacement. Slovenia, acting quickly, appointed French national Judge Ronny Abraham, President of the International Court of Justice, as Dr Sekolec’s replacement on Tuesday the 28^th.

Events have continued at breakneck speed with the Croatian Prime Minister Zoran Milanović announcing in a press conference (link to the video here) on Monday the 27^th that, after talks with the leaders of all the major political parties represented in the Croatian Parliament, it had been decided that, in his words: ‘Croatia cannot be a party to this agreement to arbitrate, it has to withdraw from it, terminate it, immediately suspend it, while abiding by the general rules of the international law.’ (‘Hrvatska ne može ostati u ovom ugovoru o arbitraži, mora izaći iz njega, mora ga raskinuti, trenutno suspendirati, držeći se općih pravila međunarodnog prava.’). The Prime Minister went on to state that the Government would issue a request to the Croatian Parliament to this effect on Wednesday the 29^th.

The PCA responded to the Croatian Prime Minister by stating that they wanted to hold a hearing in a next few days with both sides as soon as possible regarding the revelations. The European Commission, which helped originally set up the arbitration between Croatia and Slovenia in the first place, also responded to the Croatian Prime Minister (through their spokeswoman Mina Andreeva) by stating that, while they understood Croatia’s concerns about these recent revelations, these these concerns could, in their view, be overcome. The Slovenian Prime Minister has reacted to these moves on the Croatian side by stating (in a letter to the Croatian Prime Minister) that, in the Slovenian Government’s view, Croatia has no basis to unilaterally withdraw from the arbitration process.

We shall follow up with a longer, detailed post next week analysing these events – by which point all parties’ positions should be fully articulated – but we summarily indicate a few important issues for consideration:

1. Does the conduct of the Slovenian agent give rise to a ‘material breach’ due to ‘the violation of a provision essential to the accomplishment of the object or purpose’ of the arbitration agreement per Article 60(3)(b) VCLT?
2. What of the conduct of Croatia in seemingly employing espionage to discover the procedural misconduct at issue?
3. What procedural mechanisms, if any, can be employed by inter-state courts and tribunals to remedy judgments or awards that are based on serious procedural misconduct? In other words, what if this misconduct had been discovered after the promulgation of the award rather than beforehand?
4. How can the independence of judges/arbitrators from their country of nationality be strengthened through practicable reforms to the inter-state systems of judicial/arbitral appointment or election? The systems of appointment/election differ for judges versus arbitrators, as does potentially the strictness of their respective duties of independence, yet it is doubtful that anyone would seek to credibly justify or excuse Dr Sekolec’s
5. How can the practical ability of inter-state courts and tribunals to detect such misconduct on its part be strengthened, in light of the Tribunal’s ineffective internal investigation?