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Report 20 / Europe & Central Asia

State Succession

With the ongoing reconstruction efforts in Bosnia and Herzegovina and plans for the imminent privatisation of a number of industrial enterprises, the question has arisen as to whether the Bosnia and Herzegovina central government or the sub-state entities – Republika Srpska and the Federation of Bosnia and Herzegovina – properly succeed to the immovable assets of the former Socialist Federal Republic of Yugoslavia located on the territory of Bosnia and Herzegovina. This memorandum seeks to answer this question.

Executive Summary

With the ongoing reconstruction efforts in Bosnia and Herzegovina and plans for the imminent privatisation of a number of industrial enterprises, the question has arisen as to whether the Bosnia and Herzegovina central government or the sub-state entities -- Republika Srpska and the Federation of Bosnia and Herzegovina -- properly succeed to the immovable assets of the former Socialist Federal Republic of Yugoslavia located on the territory of Bosnia and Herzegovina.  This memorandum seeks to answer this question.

After reviewing and evaluating the specific facts relating to the dissolution of the former Yugoslavia, the establishment of the state of Bosnia and Herzegovina, the creation of Bosnia’s internal political units, and the modification of those units by the Dayton Peace Accords in light of the public international law of state succession, including the law as represented by the traditional past practice of states, the 1983 Vienna Convention on Succession of States in Respect of State Property, Archives and Debts (1983 Vienna Convention), and recent state practice, this memorandum reaches the following conclusions:

  • Traditional state practice, the 1983 Vienna Convention, and the opinion of the Legal Advisers of the Council of Europe indicate only state entities possess the necessary capacity to succeed to the rights and obligations of the predecessor state.
     
  • Recent state practice in the case of the former Soviet Union, Czechoslovakia and Yugoslavia confirms that only state entities are considered to possess the necessary capacity to succeed to the rights and obligations of the predecessor state.
     
  • Throughout the course of the dissolution of Yugoslavia, the sub-state entities of the Republika Srpska, the Republic of Krajina, and the Bosnian Federation attempted without success to participate in public forums and diplomatic conferences addressing state succession issues.
     
  • The decisions of the European Union Arbitration Commission relating to matters of state succession support the assumption of territorial assets by states and not sub-state entities.
  • World Bank, International Monetary Fund and other lender institution practice supports the assumption of territorial assets by states and not sub-state entities.
     
  • The constitution of Bosnia and Herzegovina adopted as an annex to the Dayton Accords did not express sufficient specific intent to cause the transfer of ownership of territorial assets from the central government to the sub-state entities.

From 1992 until 1995/96 the Republic of Bosnia therefore may be considered to have held title to the territorial assets of the former Yugoslavia located on Bosnian territory.  Given the absence of the articulation of an express transfer of this title from the state of Bosnia to its sub-state entities in the Dayton Accords, title may properly be considered to continue to rest with the central government of Bosnia and Herzegovina.

Report 232 / Europe & Central Asia

Bosnia’s Future

While the physical scars of the 1992-1995 Bosnia war have healed, political agony and ethnic tension persist. Real peace requires a new constitution and bottom-up political change.

Executive Summary

Bosnia and Herzegovina (BiH, or Bosnia) poses little risk of deadly conflict, but after billions of dollars in foreign aid and intrusive international administration and despite a supportive European neighbourhood, it is slowly spiralling toward disintegration. Its three communities’ conflicting goals and interests are a permanent source of crisis, exacerbated by a constitution that meets no group’s needs. The political elite enjoys mastery over all government levels and much of the economy, with no practical way for voters to dislodge it. The European Union (EU) imposes tasks BiH cannot fulfil. A countrywide popular uprising torched government buildings and demanded urgent reforms in February 2014, but possible solutions are not politically feasible; those that might be politically feasible seem unlikely to work. Bosnia’s leaders, with international support, must begin an urgent search for a new constitutional foundation.

The international project to rebuild Bosnia has had success: war’s physical scars are largely gone, and the country is peaceful. The political agonies, however, show the intervention’s limits. Years of well-intentioned reforms, imposed or urged, have left a governing structure leaders circumvent, ignore or despise. May’s floods left scores dead and thousands homeless, exposing the price of poor governance. With growing frequency, Bosnians ask the questions that preceded the 1992-1995 war: shall it be one country, two, or even three; if one country, shall it have one, two or three constituent entities, and how shall it be governed?

The heart of the problem is in Annex 4 to the Dayton Peace Agreement, known as the constitution (and in several changes imposed by courts and international officials). It defines BiH as a state of two entities, in effect but not explicitly federal, but also the state of three constituent peoples (Bosniaks, Croats, Serbs), and yet, simultaneously, of all citizens. A suffocating layer of ethnic quotas has been added, providing sinecures for officials increasingly remote from the communities they represent. The tensions created by constitutional schizophrenia are pushing BiH to the breaking point. A new design is needed: a normal federation, territorially defined, without a special role for constituent peoples, but responsive to the interests of its three communities and the rights of all citizens.

The state administration’s need to reform is made acute by a 2009 decision of the European Court of Human Rights (ECtHR) that in effect requires BiH to change the ethnicity-based way it chooses its chief executive and part of its legislature. Existing proposals try to squeeze the constituent peoples into an ostensibly ethnicity-blind structure on top of which a complicated network of indirect elections would allow party leaders to choose the executive with as little democratic input as possible. The EU and the outside world support this tinkering with Dayton to satisfy the decision, though such proposals have manifestly failed. Bosnians need to rebuild their political structure from the bottom up.

There is no consensus on where to start, but Bosnia may have to break from its political system based on constituent peoples and their rights. Crisis Group has not reached this conclusion lightly. It reflects long experience and observation that no one has been able to frame a broadly attractive vision on the existing flawed basis. With stresses and frustrations accumulating in all communities, Bosnia must conceive new foundations to survive. Agreement may take years and much experimentation and debate, but the search should begin.

BiH is home to three political communities: those primarily loyal to the Bosnian state, usually but not always Bosniaks; those loyal to Republika Srpska (RS), usually Serbs; and those desirous of Croat self-government, usually Croats. Giving the Croats what they want, their own entity to make a three-entity Bosnia, is absolutely rejected by Bosniaks. Building virtual representative units for the three communities, possibly with new emphasis on municipalities as basic building blocks, is intellectually plausible but requires a leap of faith few seem ready to take. A purely civic state is inconceivable to Serbs and Croats.

Neither leaders nor civil society have deeply explored alternatives to three constituent peoples in two entities; any consensus would take time. Nevertheless, the goal should be clear. The head of state should reflect Bosnia’s diversity, something a collective does better than an individual. The same body could be the executive government. Some decisions should require consensus, others a majority. All three communities should be represented, not necessarily in equal numbers. There should be no ethnic quotas; representation should reflect self-defined regions and all their voters. Poorly performing, unnecessary state agencies and ministries should be slimmed or abolished, with powers reverting to the entities; but the state would need new ministries and agencies required for EU membership. The ten cantons in the larger of BiH’s two entities, the Federation (FBiH), are an underperforming, superfluous layer. They could be abolished, their powers divided between the municipalities and the entity government.

Political culture is part of the problem; an informal “Sextet” of party leaders in effect controls government and much of the economy. A multi-ethnic coalition persists, election to election, with only minor adjustments. Membership is earned by winning opaque intra-party competitions in which voters have little say. Change in this system can only come from within: Bosnians should join parties and participate in genuine leadership contests. Sextet power is further buttressed by control of hiring, investment and commercial decisions at state-owned firms, a situation that chokes private investment and growth.

Bosnia is unimaginable without the work of international officials who did much to shape political institutions and implement peace, but the international community has become more obstacle than help. BiH is trapped in a cycle of poorly thought-out, internationally-imposed tasks designed to show leaders’ readiness to take responsibility but that put that moment forever out of reach. The only way to encourage leaders to take responsibility is to treat the country normally, without extraneous tests or High Representatives. The EU could signal a new start by stating it will receive a membership application – the first of many steps on the long accession road. It should then be an engaged, not over-didactic partner in Bosnia’s search for a way to disentangle the constitutional knot.