Croatia Sued Over Pre-Independence Debt

     MANHATTAN (CN) – Unlike other Balkan nations, Croatia still owes roughly $45 million on debt from its past as Yugoslavia, UBS claims in Federal Court.
     The Swiss banking giant claims to have issued the former National Bank of Yugoslavia and other banks an “Alternative Participation Instruments” (API) agreement in late 1998, setting a 10-year deadline to repay some $80 million of refinanced debt.
     Roughly three years later, Croatia and Slovenia sounded the death knell for socialist Yugoslavia by becoming the first of its states to declare their independence on June 25, 1991. The Yugoslav Wars soon gripped the region for the better part of a decade, bringing ethnic conflict to Bosnia and Herzegovina, Kosovo, Macedonia, Montenegro, and Serbia.
     As Yugoslavia collapsed, Croatia and the other newly formed nations divided up its national bank’s assets, and Croatia assumed a portion of its liabilities, UBS says.
     “To date, the other successor states – Bosnia and Herzegovina, the republic of Macedonia, the republic of Slovenia, the republic of Montenegro and the republic of Serbia – have all resolved their portions of the debt owed to UBS under the API Instruments,” the 12-page complaint states. “Meanwhile, Croatia’s outstanding obligation, which amounts to roughly $45 million inclusive of principal and outstanding interest, remains due and owing.”
     UBS included the original 1988 agreement among 126 pages of exhibits attached to its complaint.
     Though UBS says three Croatian banks also have not paid back their API debt, the complaint filed Thursday names Croatia alone as a defendant.
     Croatia acknowledged owing money to UBS twice in writing in 2008, the bank says.
     Its state secretary, Zdravko Marie, reaffirmed that commitment in a May 27, 2011, email from the Croatian Ministry of Finance stating: “Please rest assured that we are fully aware of and accept our obligations under the API bonds,” the complaint states.
     UBS wants damages for breach of contract.
     It is represented by Robert Weigel of Gibson, Dunn & Crutcher.
     A representative from the Croatian embassy had no immediate comment.

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