1 Tuesday, 28 October 2008
2 [Open session]
3 [The accused entered court]
4 [The witness entered court]
5 --- Upon commencing at 9.00 a.m.
6 JUDGE ANTONETTI: [Interpretation] Mr. Registrar, could you call
7 the case.
8 THE REGISTRAR: Thank you, Your Honour. This is case number
9 IT-04-74-T, the Prosecutor versus Jadranko Prlic et al., thank you.
10 JUDGE ANTONETTI: [Interpretation] Thank you, Mr. Registrar.
11 Today is the 28th of October, 2008. Good morning to the accused, the
12 Defence counsel. Good morning to you, Mr. Scott and to your associate,
13 and good morning to all the people helping us. Good morning, Witness.
14 Mr. Registrar, you have an IC number, I believe.
15 THE REGISTRAR: Yes, Your Honour, thank you. Prlic Defence has
16 submitted objection to the OTP list of documents tendered through Witness
17 Simunovic Marinko which was previously given Exhibit number IC 00872.
18 The objection list submitted by 1D shall be given Exhibit number
19 IC 00875. Thank you, Your Honour.
20 JUDGE ANTONETTI: [Interpretation] Thank you, Mr. Registrar.
21 Again good morning, Mr. Karnavas. You may proceed.
22 WITNESS: NEVEN TOMIC [Resumed]
23 [Witness answered through interpreter]
24 MR. KARNAVAS: Good morning Mr. President, Your Honours, everyone
25 in and around the courtroom.
1 Examination by Mr. Karnavas: [Continued]
2 Q. Good morning again, Mr. Tomic.
3 MR. KARNAVAS: Before I begin, Your Honour, just to let you know,
4 we have provided you hard copies of 1D 00828. Yesterday the Bench was
5 interested in Article 38, and again we provided 1D 00897, Article 66 was
6 of interest, so we provide the hard copies in the eventuality you wish to
7 look at them and ask questions later on.
8 Q. Let's pick up where we left off, Mr. Tomic. Let's look at
9 1D 00031. We're still dealing with the issues of taxation. You'll see
10 that this is a decree on the level of interest to be applied to the
11 amounts of taxes, contributions, stamp, duty, and so on. Could you
12 please tell us what this is about?
13 THE INTERPRETER: Microphone for the witness, please.
14 MR. KARNAVAS:
15 Q. You can go ahead.
16 A. This is about a decision which defines the obligation to pay
17 interest in the case of belated payments of public revenue. This is
18 meant for the protection of the monies due to the inflation at the time.
19 The latest decision at republic level was 8 per cent from March till
20 August, and then we continued to set monthly penal interest.
21 Q. All right. Next document is 1D 00034. This is the decree on the
22 implementation of the law on customs and customs tariffs, and we can see
23 it's rather comprehensive. If you could please provide us a brief
25 A. This is a customs tariff which was taken over from the
1 ex-Yugoslav customs tariff. That was based on a decision made by
2 republic. It was published in the Official Gazette and became available
3 to all who needed the services of the customs administration. The
4 customs tariff is 1 to 2 points below that in Croatia. The intention was
5 to create a financial interest for the import of goods into the area of
6 HZ HB instead of buying goods in Croatia and a tax being paid in Croatia
8 Q. All right. 1D 00041. This is a decision on the application of
9 currency rates, and if you could provide us with a commentary on this, in
10 particular with respect to Articles 1 and 2.
11 A. This decision defines the manner of converting foreign currency
12 into the currency use by HZ HB. There was no communication with the
13 central bank of Bosnia-Herzegovina, and thus there was no official list
14 of exchange rates.
15 In the area of HZ HB there was no bank with its head office
16 there, so they wouldn't set exchange rates either. So this was a
17 decision to apply the list of exchange rates of the Privredna Banka
19 Hrvatska Banka Mostar.
20 Q. If we go on to the next document, P 00447, dated 22 September
21 1992. This is a decree on the regulation of payment transactions in
22 Croatian dinars, and if you could please provide us with an explanation
23 on this.
24 A. The situation on the ground was the following: The Croatian
25 dinar was already means of payment in all municipalities of HZ HB, and
1 this decree defines how the payment system in the area of HZ HB is to be
2 conducted -- or, rather, is to take place. All accounts with the SDK are
3 in BiH dinars, and this decree stipulates that subordinate accounts shall
4 be set up in Croatian dinars. So that technically if the account number
5 was 11800630128, the account number in Croatian dinars would be
6 118006301000128. It was a subordinate account of the main account opened
7 in BiH dinars.
8 Later, subordinate accounts in German marks were opened, too, and
9 the initial -- initial figure would be 2. Accounts in dollars would
10 start with 3, et cetera.
11 Q. Well, why was it necessary to pass a decree regulating the
12 payment transactions in Croatian dinars? Was this some sort of attempt
13 to Croatise the area by way of introducing the Croatian dinar?
14 A. The title of the decree is "Decree on the regulation ... " The
15 Croatian dinar was already present. Due to the situation it found its
16 way into the area of HZ HB. Now the question was how we can control the
17 money to avoid cash payment, because if payment is effected through the
18 SDK it is easier to levy taxes and contributions which is one of the main
19 tasks. So this has nothing to do with a rapprochement with Croatia
20 because the same was later done with the German mark.
21 Q. Well, maybe I failed to ask this question yesterday, but wasn't
22 there any way to impose the Bosnian dinar on everyone? In other words,
23 use that as the only means of transactions, monetary transactions, and
24 disallow the usage of any other currency such as the Deutschmark, the
25 Croatian dinar, the US dollar, the French franc?
1 A. At first there were such attempts, but as I said yesterday, there
2 was no demand for BiH dinars on the part of the companies that operated
3 at the time, because they couldn't do anything with those dinars in
5 currencies because in Croatia
6 exchange rates, and the same applies to other countries.
7 Q. All right. 1D 00038. This is a decree on the organisation and
8 functioning of the Public Accounting Service, and this is 29 September
9 1992. If you could comment on this, please.
10 A. This decree sets forth the organisation and functioning of the
11 Public Accounting Service, and it says here that it shall be organised
12 and function in accordance with the provision of the law on the SDK of
13 the Republic of BiH
14 same as that in Republic of BiH
15 Q. All right. Next I'm going to go through a series of documents
16 that are interconnected. I'll read them off first and then we'll go
17 through them one by one, but I'll read them off for everyone's
18 convenience. We're going to start off with 1D 01678, then we'll go to
19 1D 01350, 1D 02127, 1D 02128, and then finally P 01063. So if we could
20 look at the first one, 1D 01678. Could you please tell us what this is.
21 A. After the agreement with the government commissioner about one
22 truck with BiH dinars remaining in HZ HB, that truck stayed or was left
23 in Siroki Brijeg and Posusje, and in the offices of the SDK at Siroki
24 Brijeg and Posusje that money was stored. This is a report or protocol
25 on the acceptance of that money.
1 Q. All right. And this -- in the document we see your name, but we
2 also see Mr. Mate Erkapic. Could you please tell us who he was or is?
3 A. He was the government commissioner. I mean the government of BiH
4 from Sarajevo
5 printed in Celje, Slovenia
6 Q. All right. Now, yesterday during your narrative you did indicate
7 that that money could be used and in fact was used, I believe in Central
9 Could you please tell us what -- what this document is about?
10 A. This is a report of the SDK, and it was sent to the finance
11 department. This shows under which orders which quantity of BiH dinars
12 were issued. We're talking about a total of 13 orders, and the total
13 value of the BiH dinar as delivered is stated here also.
14 Q. All right. We go on to the next document 1D 02127. 1D 02127.
15 And here's -- this is a decision on the method of granting monetary
16 assistance to the municipal Croatian Defence Councils in Central Bosnia,
17 and if you could comment on this document.
18 A. The HVO HZ HB at its meeting on November the 27th, 1992, decided
19 that this quantity of BiH dinars is -- shall be given to the HVOs in
20 Central Bosnia
21 and that money shall be used for the provision of commodities and for
22 other needs of the HVOs.
23 Q. Thank you. And we can see from Article I where it talks about
24 the monetary assistance granted in BH dinars; right? That's in Article
1 A. Correct.
2 Q. All right. Let's about on to 1D 02128, 1D 02128. This is a
3 conclusion. If you could please comment on this document.
4 A. After the allocation of that money in -- a person with individual
5 protocol signed with each municipal HVO, a report was drafted on the
6 allocation of that money, and based on that the HVO HZ HB adopted this
7 conclusion about the distribution of BiH dinars and the assistance
8 granted to municipal HVOs in Bosnia
9 Q. All right. Thank you. And then finally if we go to P 01063.
10 MR. KARNAVAS: And we're going to focus on page 8, Your Honours.
11 Q. Please tell us what -- what is this document about, and if you
12 could give us -- provide us with a comment on page 8.
13 A. These are the minutes of the meeting where the conclusion was
14 adopted about the allocation of dinars to Central Bosnia, and based on
15 that, the conclusion was drafted and signed as we saw on -- in document
16 1D 02128.
17 Q. All right. The conclusion's on page 4 in your document, page 8
18 in the English document. Do you see it on page 4 of the B/C/S where it
19 makes reference to Zenica, Vitez, Travnik, Novi Travnik, Usora --
20 A. Yes.
21 Q. Okay. Thank you. And finally along with this package, I should
22 have also noted is 1D 02222, 2222. This is from 29 April 1993. This is
23 an article in Slobodna Dalmacija and subject introduction of BH dinar.
24 It's an article apparently authored by Dr. Jadranko Prlic. Are you
25 familiar with this article and if, so, can you please comment?
1 A. Yes, I'm familiar with it. This article was triggered by the
2 successless attempt to introduce the dinar as the currency of
3 Bosnia-Herzegovina, because in a very short time the exchange rate
4 dropped drastically, and it was mostly used for transactions in the black
5 market, if I may say that. And the exchange rate itself differed from
6 island to island, as it were, whether we're talking about Tuzla
7 other territory in Bosnia-Herzegovina.
8 Due to our allocation of aid to the Croatian municipalities in
9 Central Bosnia
10 dinars to a Deutschmark, and in December when the last shipment was made,
11 the last shipment of BH dinars to municipal HVOs in Central Bosnia, the
12 exchange rate was from 8.000 to even 10.000 BH dinars to a Deutschmark.
13 And this is an article written by Dr. Prlic. He wrote it as an expert,
14 and it's about confidence in currency. A currency should be able to make
15 people safe and avoid -- prevent them to -- to be afraid for their
17 Q. One last question concerning this article, concerning Dr. Prlic's
18 observations. Do you agree or disagree with them, and do they accurately
19 reflect the situation as it existed at the time?
20 A. I agree fully.
21 Q. Unless there are any questions from the bench, I'll -- concerning
22 this discrete issue, I'll move on, Your Honours. I see there are no
24 JUDGE ANTONETTI: [Interpretation] I do have a question.
25 Witness, earlier on we saw a series of documents showing that BiH
1 dinars that had been printed in Slovenia
2 HVOs in Zenica, Vares, and so forth. The amounts in BiH dinars that
3 would get to the Vares HVO, for instance, what would happen to that
4 money? What would become of it? Would that stay in safes? Was it
5 distributed? What happened to it?
6 THE WITNESS: [Interpretation] The HVOs in the municipalities in
7 Central Bosnia
8 in Travnik. They could pay for that coal in BiH dinars. In Zenica they
9 could buy iron, construction iron for BH dinars. So the HVOs were
10 turning that money into commodities immediately, or they would pay the
11 liabilities already incurred and thus they would protect themselves
12 against inflation.
13 JUDGE ANTONETTI: [Interpretation] If I understand properly,
14 initially the HVO did not oppose the BiH dinar to be circulated since the
15 BH dinar was used for the purchase of commodities. You give the example
16 for Travnik, but you might be able to give other examples.
17 Correct me if I'm wrong, but my impression is that based on the
18 documents and based on your statement, my impression is that the HVO used
19 the BH dinar and was not against it being used. Is this a possible
20 conclusion one can draw?
21 THE WITNESS: [Interpretation] Yes, that's correct. There is no
22 one decision of the HVO HZ HB that bans the use of BiH dinars for -- as a
23 means of payment. This has exclusively to do with the market at the time
24 and the demand for BH dinars on the one hand, and on the other hand it
25 has to do with the protection of public revenue and property, because the
1 inflation of the BiH dinar was too great, and also the quantity of the
2 money was limited. We later also had such problems with the Croatian
3 dinar. That's why subsequently the German mark was introduced into the
4 payment system, because in the area there simply was not enough cash.
5 JUDGE ANTONETTI: [Interpretation] If I read again what you have
6 just said about in -- oh, the inflation, if I link that to the article
7 written by Dr. Prlic that was published on the 29th of April, 1993
8 is several months later, in that article Dr. Prlic speaks about the
9 inflation, and towards the end of the article Dr. Prlic seems to indicate
10 that as far as he can assess the situation, the best solution to combat
11 this excessive inflation would be to have an agreement between the
12 Republic of Bosnia and Herzegovina and the Republic of Croatia
13 as it were, to regulate interstate regulations.
14 Is this the solutions -- the solution he advocates in order to
15 solve the problems that arise because of the war and the events, that is,
16 an agreement between the two republics, possibly to restore confidence?
17 THE WITNESS: [Interpretation] In the conclusion of this article
18 there is an explanation about the creation of the fiscal and financial
19 system in Herceg-Bosna, and there is this claim that it is the best of
20 all the bad solutions, because given the circumstances, given the chaos,
21 the fact that the state was not functioning, the institutions were not
22 functioning, there are no good solutions. All solutions are bad. All
23 solutions are makeshift solutions, but here it says that this solution,
24 in line with the legal system in the Republic of Bosnia-Herzegovina
25 the legal system in the Republic of Croatia
1 use of the Croatian dinar. In other words, we did not use the Croatian
2 dinar in contravention of the Croatian laws. We could not issue money.
3 We did not participate in the monetary policy. We did not influence it
4 in any way. We used the Croatian dinar in the same way in which citizens
5 of Slovenia
6 exchange rate lists could use it.
7 JUDGE ANTONETTI: [Interpretation] My last question. You seem to
8 be well-versed in your subject, a specialist as it were, as was
9 Mr. Prlic. These are rather technical and complex issues.
10 In light of inflation, in light of the fact that three currencies
11 were used, the Deutschmark, the Croatian dinar, and BH dinar, at any time
12 did you contemplate contacting the IMF, the World Bank, the large
13 international organisations that are competent in such matters? But
14 since it was a state of war, were you not able to get that kind of
15 support or find such a solution and turn to these institutions?
16 THE WITNESS: [Interpretation] In formal terms Bosnia
18 World Bank, the EBRD, or the European Bank. States are members of those
19 institutions, and we did not have any contacts, and we did not pursue any
20 activities in this regard.
21 JUDGE ANTONETTI: [Interpretation] We have seen some documents and
22 other witnesses have mentioned this already. Did the EU not take an
23 interest in what was happening in Bosnia-Herzegovina and was not
24 interested in your field of endeavour? Had studies not been carried out?
25 THE WITNESS: [Interpretation] There were no contacts with the
1 representatives of the European Union in this sphere. They mostly
2 focused on humanitarian work and military aspects.
3 JUDGE ANTONETTI: [Interpretation] Thank you very much for your
5 Mr. Karnavas.
6 MR. KARNAVAS: Thank you.
7 Q. Do you know whether the World Bank or the IMF sent
8 representatives at that time, we're talking 1992, 1993, to
9 Bosnia-Herzegovina to provide any technical assistance or any assistance
10 that they might have been able to provide?
11 A. I've already said that at that time Bosnia and Herzegovina
12 not a member of the World Bank and of the International Monetary Fund.
13 This issue was regulated only after the Washington agreements were
14 signed. The first contacts with the World Bank were established after
15 the Washington Agreement was signed.
16 Q. And when the World Bank eventually did come to BiH after the
17 Washington Agreement, were you involved in any way with their activities?
18 A. At that time, as the Minister of Finance, I together with the
19 governor of the central bank of Bosnia-Herzegovina led a mission to
20 Warsaw, Poland
21 of the financial system in Bosnia and Herzegovina.
22 Q. Now, when you say Minister of Finance, you're talking about being
23 the Minister of Finance for Bosnia-Herzegovina while at the same time you
24 were the minister of finance for the federation of Bosnia-Herzegovina; is
25 that correct?
1 A. Yes, that's correct. That was my title after the Washington
3 Q. All right. If we go on now to 1D 00032. This is a decree on the
4 conditions for organising an insurance organisations during the state of
5 war. If you could please look at this and give us a brief commentary.
6 We note in Article 1, for instance, references to republican laws. Could
7 you please give us a brief explanation?
8 A. Well, this decree regulates the -- the issue of organising the
9 organisations in the sphere of insurance in the area of the HZ HB. The
10 republican laws are adopted, and those laws in turn adopted the laws of
11 the former Yugoslavia
12 republican level. And since, as I've already indicated, in the area of
13 the HZ HB they were for the most part just the branch offices of those
14 insurance companies. This makes it possible for those branch offices to
15 establish legal entities in the area of the HZ HB and thus to continue
16 operating and providing services in the field of insurance. And as far
17 as the insurance companies from countries not in Bosnia and Herzegovina
18 they had to establish new legal entities in Bosnia and Herzegovina
19 HZ HB.
20 Q. All right. And I believe that was part of your narrative
21 yesterday with respect to the green card, and now we see the actual legal
22 instrument related to this -- this matter; right?
23 Did you hear my question?
24 A. [In English] Yes. [Interpretation] Yes, yes.
25 Q. Thank you. 1D 00035. This is a decree on the terms under which
1 legal and natural persons with headquarters outside the Republic of
2 Bosnia and Herzegovina may conduct business in HZ HB territory.
3 Could you please explain this -- this document for us.
4 A. Well, I've already said a number of times. Banks had their
5 branches there, and the branches continued to operate as part of those
6 companies that had seats in Croatia
8 Of course this created great problems from the point of view of
9 the payment of taxes and contributions, and we simply passed this decree
10 that by the 31st of October they had to, if they wanted to continue to
11 operate in the area of HZ HB in Bosnia and Herzegovina that they had to
12 register as legal entities. In other words, they had to have their
13 management there and they had to have their account opened with the SDK,
14 and that was one of the reasons -- the principal account. That was one
15 of the reasons why banks did found banks in Bosnia and Herzegovina
16 insurance companies founded the insurance companies in Bosnia and
18 companies in Bosnia and Herzegovina, and they were then compelled to pay
19 taxes and contributions in HZ HB.
20 Q. All right. 1D 00051. This is a decree on individual business
21 activity during the imminent threat of war. Just a very brief comment
22 looking at Article 2 in particular.
23 A. This decree adopts all the regulations enforced in Bosnia
25 transport companies, hauliers, because this was regulated by a special
1 law, and this decree in fact adopts the republican regulations and they
2 apply in the area of HZ HB.
3 Q. All right. 1D 00052.
4 JUDGE ANTONETTI: [Interpretation] Since this document on the
5 screen talks about those companies set up during the state of war, I
6 would like to thank Mr. Karnavas for having shown us document ID 00897
7 and Article 66. When I read Article 66 of this document, I realise the
8 following: I would like you to comment this for me since you were a
9 major player in the implementation of Article 66.
10 First of all, this law is a law that goes back to the 1980s since
11 this bill had been adopted in the time of the former Yugoslavia. As far
12 as I see, this general popular defence goes back to the 9th of February,
13 1984. This text must have been adopted in the event of an attack against
15 that during a wartime or during a state of imminent war, the -- the
16 Assembly is responsible for the municipality and may act.
17 On looking at this Article 66, I'm wondering whether in Mostar
18 the following was acknowledged: President Izetbegovic made a statement
19 and declared that it was an imminent state of war. The municipality
20 then, on the basis of this text, decided to take on some areas. For
21 instance, if we look at Articles -- the last Articles, 308 -- 389, for
22 instance, the municipal laws are there to finance the purchase of
24 Now, when these texts were adopted pursuant to Article 66, was
25 this because everybody felt that since there was a state of war, imminent
1 threat of war, that the municipalities had full powers as had been
2 enshrined in the law adopted in 1984?
3 THE WITNESS: [Interpretation] This article, Article 66, envisaged
4 the establishment of the Presidency of the municipality, and it's taking
5 over from the Assembly that could not be in session at the time. The
6 Presidency could take decisions in the sphere of the defence that had to
7 do at the municipal levels, because they were republican laws that
8 stipulated what the republican TO should do, and this was financed from
9 the budget of the republic, the organisation of the republican
10 Territorial Defence. And here the municipal -- the municipality has to
11 finance the needs in its area, and it passes decisions related to the
12 mobilisation, the procurement of whatever is needed for the civilian
13 protection, for the preparation of the reserve forces, because if you
14 look at Article 389, in paragraph 3 it says preparations of the reserve
15 militia except for the needs financed by the republic.
16 So the republic had its own jurisdiction and the municipality had
17 its own jurisdiction, but at the beginning of the war in Bosnia and
19 job, the municipalities took upon themselves to perform both the tasks
20 that were in their jurisdiction and also those tasks that under the
21 jurisdiction of the republic.
22 JUDGE ANTONETTI: [Interpretation] In other words, what the
23 municipalities were doing, well, they were doing this in line with the
24 law passed in 1984.
25 THE WITNESS: Partly in accordance with the law. Under the law
1 they had certain powers but they also assumed the powers of the republic
2 because the republic did not perform those tasks.
3 JUDGE ANTONETTI: [Interpretation] Thank you.
4 MR. KARNAVAS: And I believe on line 15 of the previous -- of
5 page 16 it should say republic and not municipality where he says
6 "because the municipality did not perform its job," it should say
7 "because the republic did not perform its job." That can be checked
8 later on.
9 Q. 1D 00052. This is a decree on placing in abeyance the process of
10 transformation of social capital, and yesterday, for instance, we did see
11 one document, I believe it was Apro Holding, where you did comment a
12 little bit on the privatisation process, as it were, that had -- had been
13 started by I think it was Markovic, but can you comment on this
14 particular decree? What does it set out to do? This is 14 October 1992
15 A. This decision was passed to protect property. At the time it was
16 still socially owned property which was in the process of being
17 privatised to protect it against wild privatisation, out of control
18 privatisation. There was not any institution at the republican level to
19 monitor the process of privatisation. Once the war broke out this
20 institution no longer functioned. The payment of salaries, that was the
21 way in which the workers were able to purchase shares in their companies.
22 The salaries were not paid out regularly in most companies.
23 And the third thing was to protect the property against
24 speculators, against those who wanted to buy shares and not actually pay
25 what they were worth in an illegal manner. And this whole process was
1 placed in abeyance, it was suspended, and the companies could continue
2 operating in accordance with the regulations.
3 Q. All right, thank you. 1D 00039. This is compensation of war
4 damages sustained in the Croatian Community of Herceg-Bosna. If you
5 could give us a brief explanation and of course please look at Article 1
6 because we see the date 20 October 1991
7 A. In the area of the HZ HB, there were companies that wanted to
8 resume operation, and they had sustained a lot of damage to their
9 property, buildings, facilities, equipment, and they wanted to be given
10 some privileges in order to be able to restore and reconstruct this
11 property. The same went for private property, houses, vehicles, things
12 of that sort.
13 The municipalities each issued their own decisions regulating
14 this, but this disrupted the financial system because they exempted
15 companies from paying taxes, contributions, and so on.
16 This decree tried to regulate this issue for the whole area of
17 Bosnia and Herzegovina and to establish single methodology, commissions,
18 the way in which they were to operate.
19 There is an addendum to this decree which defines the manner in
20 which damage is to be determined for each kind of facility and building.
21 The date, the 29th of September, 1992, it was -- or, rather, the 20th of
22 October, 1991, interpreter's correction, this had to do with the arrival
23 of the reservists to Mostar because this was the date when the damage
24 began to be inflicted because the tanks caused destruction in the street.
25 They destroyed some lamp posts, things of that sort, and then it
1 proceeded from there.
2 Q. All right. If we go on to the next document, 1D 00048. This is
3 a decree on the implementation of the law on stamp duties. Could you
4 just give us a very brief commentary on this. It's rather comprehensive,
5 but perhaps you can comment. We can see from the very first article that
6 it makes reference to the Republic of Bosnia and Herzegovina.
7 A. Here this is again the adoption of the republican law on stamp
8 duty, and its published in an Official Gazette so that it could apply.
9 The difference between this regulation and the republican regulation is
10 that the stamp duty is denominated of Croatian dinars and the organs of
11 the HZ HB are not treated as state organs, because in the republican
12 regulations there is always mention of state organs and this is yet
13 another indication of the fact that this is just a provisional decision.
14 Q. All right. 1D 00049. This is a decree on the budget of the
15 Croatian Community of Herceg-Bosna. If you could please comment on this.
16 And it might be of interest also at this point in time because we see
17 this quite often in other decrees, Article 2 says: "All provisions of
18 the Law on Financing Budgetary Expenditures in the Republic of Bosnia
20 be applied." We see similar language with other decrease and perhaps you
21 could comment why was it necessary to include this language which is not
22 contrary to provisions of this decree? Why was it necessary to have that
24 A. Because of the communications breakdown and because there was no
25 flow of information about legislative activity at the level of Bosnia
2 general circumstances, had to be adapted in some ways, and this is why,
3 for instance, the introduction of the Croatian dinar as the currency in
4 which the budget is denominated, in the process regulating the budget of
5 Bosnia and Herzegovina, it is denominated in BH dinars, but we used the
6 Croatian dinars although -- because we had decided to regulate the
7 payment transaction -- transactions in this manner, and we decided to
8 denominate the budget in the Croatian dinars because the Croatian dinars
9 were the prevalent currency in this area.
10 This decree is important because it was an attempt to lay
11 foundation for the adoption of the first budget, because the funds that
12 came in were used pursuant to individual decisions of the HVO HZ HB, but
13 in line with the practice it was necessary to have a budget, but the
14 budget has the revenues and the expenditures.
15 In the initial stage the budgetary revenues could not meet the
16 expenditure side, so technically the budget was in a deficit because we
17 could not cover the budgetary deficit by getting loans or with the
18 primary issue from the central bank because it was not -- it was simply
19 not possible to do that. And that is why the budget as a document that
20 should balance the revenues and expenditures was not adopted in 1992.
21 This was an attempt to lay foundations for the budget in 1993, but again
22 in 1993 it was not adopted as a document. The first budget was adopted
23 pursuant to this decree in 1994, not before that, and that is why Article
24 5 reads that each department of the Croatian Defence Council of the HZ HB
25 should state their needs for every three months. It is usually done
1 annually. And the draft budget should be made by the finance department
2 based on the materials put forward by the departments, other departments,
3 and then the HVO HZ HB should go through it, consolidate a draft which
4 would then be put before the Presidency of the HVO HZ HB for its
6 Q. All right. 1D 00130. This is a decree on establishing the
7 Chamber of Commerce. It says Chamber of economy, but as I understand it
8 we're talking about the Chamber of Commerce. And if you could explain to
9 us what the chamber of Commerce did, how it functioned, just very, very
10 briefly and of course perhaps give us an explanation of why we see Mate
11 Boban's name at the end of this particular decree.
12 A. The Chamber of the Economy before the war was a para-state
13 institution. It was founded pursuant to a state law, and all economic
14 operators had to be its members and pay membership dues. At the same
15 time, the state transferred some public powers on the Chamber so that the
16 Chamber dealt with some issues on behalf of a public body acting like a
17 public body, such as setting the number of workers to be sent abroad.
18 The former Yugoslavia
19 workers per year, who were allowed to go to Germany to work, and the
20 chamber would then identify the needs or the interest of individual
21 companies and then make a list of priority and make -- make allotments --
22 make allotment. So the state had to establish a chamber for that system
23 to continue operating.
24 Before the war, in the area of HZ HB, there was a regional
25 chamber in Mostar, and the people from that chamber had drafted this
1 decree which was adopted, and the chamber was to continue functioning
2 along -- in accordance with the regulations that were in force in Bosnia
3 and Herzegovina
4 Q. All right. If we go to 1D 00122, just very briefly. We see
5 these are the rules on the pass of a special emblem -- I mean 112.
6 1D 00112. Rules on the pass and special emblem of authorised officials,
7 and if you could focus primarily on Article 3 but very briefly tell us
8 what it is about.
9 A. For the identification of officers of the customs administration
10 of HZ HB we had to issue them IDs and badges, and this defines the
11 content of that ID card, just like memorandums and decisions had in the
12 letterhead the Republic of Bosnia-Herzegovina
13 So the same applied to official documents of the customs administration.
14 Q. Okay. I'm going to ask you to slow down just a little bit to
15 make sure that --
16 THE INTERPRETER: Microphone for the Prosecutor [sic].
17 MR. KARNAVAS:
18 Q. I'm going to ask you to slow down so that the interpreters can
19 keep up with you. If we go on to 1D 00106.
20 Yesterday we talked a little bit about the SDK. You told us how
21 it functioned. You also told us how at one point it wasn't functioning.
22 If you could look at this document, 1D 00106. Please tell us about this
24 A. That is decision on the appointment of the management of the SDK.
25 Mate Erkapic was appointed, who before the war was director of the
1 principal branch office, which was in Sarajevo before the war, and his
2 deputy is Jusuf Skoljic, who was a director of the principal branch
3 office in Mostar.
4 Q. All right. I'm going to ask you to please slow down a little
5 bit, because -- while you know the area, some of us do not.
6 Now, Erkapic worked at the -- in Sarajevo, so did he have any
7 specific knowledge in order to get -- in order for him to be appointed to
8 this particular position?
9 A. Yes. I said that he was the director of the central unit of the
10 SDK of Bosnia and Herzegovina, and its remit went as far as the main
11 branch offices. So he had the greatest knowledge of all persons
12 available. And Mr. Skoljic was the director of the branch office of
13 Mostar, which is the next lower level, and Mr. Skoljic was appointed
15 Q. All right. And the deputy, was he a Croat or was he a Muslim?
16 A. The deputy was a Muslim, and the director was a Croat.
17 Q. All right. P 00735. This is a decision on the import of goods
18 from the Republic of Croatia
19 explanation. Why was this decision necessary, and what does this
20 decision attempt to -- to do?
21 A. At that time activities are in progress to establish border
22 crossings and attempt to make possible the import of goods into the area
23 of HZ HB or, at the time, Bosnia-Herzegovina. There were dozens of
24 crossings, of course, between Croatia
25 footpaths, because previously there had been no border. Goods came in
1 from Croatia
2 As I said, it was our goal to have as many goods imported in
3 Bosnia-Herzegovina, the HZ HB, and to levy taxes there, but so -- but we
4 found out that if we implement the existing laws and regulations there
5 would be a price difference between goods produced in Croatia and
6 imported into the area of HZ HB and that difference would exceed 20 per
8 If you remember those customs tariffs, 7 per cent plus 7.5 per
9 cent plus 1 per cent, and if we add to that the rate, the applicable rate
10 from the tariff, the total is a difference of at least 20 per cent.
11 So what was happening, people were going to Croatia
12 buy goods there, and without any control they imported those goods into
13 the area of HZ HB. We could not control that. We had no data, and taxes
14 were not levied for the budget of HZ HB. That's why this decree was
15 passed under which for goods from Croatia
16 was paid for the process of clearing customs, and thus we wanted to
17 achieve that people stop going to Croatia and pay for fuel, et cetera,
18 because we wanted to make it more attractive for them to buy goods in the
19 area of HZ HB.
20 Article 4 reads that goods that transit the area of HZ HB and go
21 on to, say, Zenica or Tuzla
22 them although they are goods from Croatia
23 by customs, and the drivers of the vehicles would be given accompanying
24 documents which they would submit at their final destination as is
25 stipulated by the laws of Bosnia-Herzegovina.
1 Q. All right. Now, you mentioned that there was no border before.
2 What do you mean by that? I mean, just so the Judges understand what is
3 happening for the first time in this area.
4 A. Throughout history there was no physical border that you could
5 make out on the ground. The border wasn't marked. There were no ramps
6 or no structures. So this was a border that actually ran through
7 people's houses, because people had their houses on one side of the
8 border and their fields on the other. It was very common.
9 Likewise, it was very difficult to identify the borderline, so
10 that overnight the ramps would be moved a hundred or 200 metres to one or
11 the other side because the locals would say, "No, no. This isn't where
12 the border is. It's over there," et cetera. We didn't have detailed
13 maps based on exact surveys.
14 Q. All right. Well, let's look at 1D 00 --
15 JUDGE ANTONETTI: [Interpretation] One moment, please, before we
16 move to this document.
17 This issue of the border, as to this issue, if I understand
18 properly, during the former Yugoslavia
19 borders as they are currently understood. For instance, a border between
22 THE WITNESS: [Interpretation] It was an administrative border, so
23 it was known which plots of land were in Bosnia-Herzegovina or in
25 the ground.
1 JUDGE ANTONETTI: [Interpretation] If I understand properly, it
2 was you at the level of Herzegovina
4 customs control in order to fight the import of goods which would distort
5 or have economic or financial negative consequences in Bosnia
7 THE WITNESS: [Interpretation] That is correct. Initially we had
8 check-points, but when the customs service arrived there, ramps were set
9 up which were controlled by civilian and military police, and on the
10 other side Croatia
11 customs, et cetera.
12 JUDGE ANTONETTI: [Interpretation] So when crossing borders,
13 everybody here in this courtroom must have crossed a border at some point
14 in their lives. Sometimes you have flags, you have uniforms, and you
15 have people who man the borders.
16 On the side of Herzegovina
17 THE WITNESS: [Interpretation] After the emblems had been defined,
18 the flag was the flag of the HZ HB.
19 JUDGE ANTONETTI: [Interpretation] Was there anywhere any mention
20 of the Republic of Bosnia and Herzegovina?
21 THE WITNESS: [Interpretation] The authorised persons at those
22 border crossings, that is to say customs officers and police officers,
23 had ID cards that read Republic of Herzegovina HZ HB customs or police or
24 whichever service they belonged to.
25 JUDGE ANTONETTI: [Interpretation] Were stamps created for trucks
1 transporting goods? Would their papers be stamped, their manifestos,
2 their customs papers, would they be stamped?
3 THE WITNESS: [Interpretation] Yes. The stamp of the customs
4 administration of HZ HB was applied.
5 JUDGE ANTONETTI: [Interpretation] Would you find the words
6 "Republic of Bosnia-Herzegovina" on those stamps? Maybe I go too much
7 into detail, but if I raise the issue it's because it's important.
8 THE WITNESS: [Interpretation] The same -- the stamp looked just
9 the same as all other stamps used in HZ HB. I can't remember exactly,
10 but I know that all memorandums also read Republic of Bosnia-Herzegovina,
11 but I'm not sure now about the stamp.
12 JUDGE TRECHSEL: Witness, just to get things clear, do you know
13 whether an analogous border existed between Bosnia and Herzegovina
14 Muslim part of it, and probably Croatia and maybe other states?
15 THE WITNESS: [Interpretation] No such border was in existence,
16 because the area controlled by the army of BiH was in direct contact with
17 the Croatian border. The nearest such area was the area around Bihac,
18 but then on the other side of the border there was the area of the
19 Serbian Krajina in the Republic of Croatia
20 authorities were for the first time established there after the Storm
21 operation in Croatia
22 the first border crossing manned by the staff of the then border service
23 of Bosnia-Herzegovina.
24 JUDGE TRECHSEL: Thank you.
25 MR. SCOTT: Excuse me, Mr. Karnavas. Before we start, just a
1 clarification for the record, if I might suggest, and if I'm wrong then
2 I'll certainly be told so, but the witness said at line -- on page 27,
3 line 10, "No such border was in existence because the area controlled by
4 the army of BiH was in direct contact with the Croatian border." I
5 suppose he meant to say that it was not in contact with the Croatian
6 border. If that could be clarified, please.
7 JUDGE ANTONETTI: [Interpretation] Witness, could you clarify
9 THE WITNESS: [Interpretation] There was no area controlled by the
10 army of BiH which bordered on the Republic of Croatia
11 part of Croatia
12 and the customs of the Republic of Bosnia-Herzegovina had check-points
13 and would levy customs on goods at check-points --
14 THE INTERPRETER: Could the witness please repeat? We didn't get
15 the end.
16 MR. KARNAVAS:
17 Q. Please repeat your answer. Please repeat the last part of your
18 answer so -- because the interpreters have not understood it.
19 A. So the customs administration of the Republic of
20 Bosnia-Herzegovina had the first contact with the documentation about
21 goods entering Bosnia-Herzegovina or would receive such documentation
22 from check-points in areas under the control of the HVO or the BiH
23 army -- and the BiH army.
24 JUDGE ANTONETTI: [Interpretation] Yes, Mr. Kovacic?
25 MR. KOVACIC: [Interpretation] Your Honours, as there is an
1 interruption now, it may be good to clarify a possible error.
2 Page 26, line 16 and 17. You asked the witness whether the
3 authorised persons at border crossings, that is customs officers or
4 police officers -- sorry, that is actually the answer.
5 You asked whether anywhere on the border there was explicit
6 mention of the Republic of Bosnia-Herzegovina. The witness replied that
7 the authorised persons on the border, that is customs officers and police
8 officers, wore badges which read "The Republic of Bosnia-Herzegovina
9 HZ HB customs or police," et cetera, but the transcript reads that they
10 have ID cards.
11 Your question obviously referred to the symbols, what was -- what
12 anybody would be able to see, but ID cards are not clearly visible. They
13 are mostly carried in pockets.
14 JUDGE ANTONETTI: [Interpretation] Yes. This is extremely
15 relevant. Could you clarify this point, Witness?
16 THE WITNESS: [Interpretation] All right. The badge and the
17 official ID were two parts of a whole. The -- the ID card was under the
18 badge, and it read "Republic of Bosnia-Herzegovina HZ HB," the way it is
19 described in the document that we saw a short while ago. It was
20 document --
21 MR. KARNAVAS: 112.
22 THE WITNESS: [Interpretation] 112, yes.
23 JUDGE TRECHSEL: In order to get the full picture about borders,
24 was there or was there not a border between the HZ HB and the rest of
25 BiH, Bosnia and Herzegovina? Was there a border? Was there no border?
1 Was there something between a border and no border?
2 THE WITNESS: [Interpretation] In the interior of
3 Bosnia-Herzegovina there were check-points, and at those check-points
4 there were no staff of the customs administration of HZ HB, because to us
5 in practice, in the implementation and in the documents, these
6 check-points were never treated as border crossings. So goods coming
7 from Zenica, for example, such as the construction iron bought in Zenica
8 or iron bought from Grude, it was transported without levying customs
9 duties. It was treated as internal transport within Bosnia-Herzegovina.
10 Unfortunately, it didn't work the same way in the opposite
11 direction. The customs administration of the Republic of
12 Bosnia-Herzegovina would levy customs duties on goods that were
13 accompanied with invoices issued in Grude or other places in HZ HB. So
14 those goods were treated the same way as goods coming from Croatia,
16 And in this part about the import of goods from Croatia, in
17 Article 4 you can see that goods transiting the area of HZ HB, that is
18 goods travelling to areas controlled by the army of BiH, are -- on such
19 goods no customs duties were levied.
20 JUDGE TRECHSEL: Thank you very much.
21 JUDGE ANTONETTI: [Interpretation] Mr. Karnavas, I think that it's
22 time for a break. We're going to have a 20-minute break.
23 --- Recess taken at 10.29 a.m.
24 --- On resuming at 10.53 a.m.
25 JUDGE ANTONETTI: [Interpretation] I shall first give the floor to
1 our registrar, because we need an IC number.
2 THE REGISTRAR: Thank you, Your Honour. The Prosecution has
3 submitted an objection to Prlic Defence list of documents tendered
4 through Witness Simunovic Marinko, which was previously given Exhibit
5 number IC 00870. The objection list submitted by the OTP shall be given
6 Exhibit number IC 00876. Thank you, Your Honour.
7 JUDGE ANTONETTI: [Interpretation] Mr. Karnavas, you have the
8 floor. I would like to advise you of the fact that you have had so far
9 four hours and 41 minutes.
10 MR. KARNAVAS: Thank you, Mr. President. I should advise the
11 Bench that it may be necessary to go beyond the six hours that I had
12 anticipated. Of course it will be taken out of our overall scope of
13 time, and as you've indicated to the witness yesterday that there's a
14 high probability that we will go into next week. There is no witness
15 scheduled for next week precisely because of that reason, but I do think
16 that this is a very important witness and a complicated subject matter.
17 Q. Picking up where we left off at 1D 00108, we see this is a
18 decision on the border crossings with the Republic of Croatia
19 is dated 12 November 1992
21 Can you confirm that the border crossings are between the
22 republic of -- of Bosnia and Herzegovina and the Republic of Croatia
23 of these border crossings?
24 A. Yes. These are the border crossings in the area of Herzegovina
25 between Croatia
1 are in fact still in existence today, and they're used for crossing of
2 goods and passengers.
3 Q. All right. If we go on to the next document, 1D 00114, and we'll
4 discuss this rather in detail. This is a decree on organising and
5 operation of the financial police, and I'm going to ask you a series of
6 questions. We'll go step-by-step. This is dated 12 -- 2 December 1992.
7 First and foremost, could you please tell us what the financial
8 police was, whether it existed prior to this decree in
9 Bosnia-Herzegovina, this institution?
10 A. This institution did not exist before. It is part of the
11 transition. After the Washington Agreement the financial police was set
12 up in Bosnia and Herzegovina too.
13 Why was financial police established at that time? For two
14 reasons. First of all, the republican public revenue department, an
15 organ that controlled the work of the municipal public revenue
16 departments, did not function. There were republican inspectors who came
17 from Sarajevo
18 revenue departments, for instance, I was a director of one of those
19 before the war, how we collect taxes to be paid into the budget of the
20 republic, of the SIZ
21 public revenue departments were still there, and under the laws they
22 still had the duty to collect taxes at the municipal level, but they did
23 not have any kind -- any way to exercise control above the municipal
25 The second reason was that the SDK also did not function at its
1 full capacity, and its inspectors did not function. And for this reason
2 and the situation in the field was such that the municipalities issued
3 their own regulations the way they saw fit and then violated the
4 regulations that we passed in order to make sure that they have as much
5 money as possible for their own municipality. They amended our
6 regulations, in fact. And this decree sets up a special institution
7 called the financial police that in effect replaced the republican
8 inspectors from the republican public revenue department and the
9 inspectors of the SDK that existed before the war. The fundamental task
10 was to control the implementation of the HZ HB regulations at the level
11 of the HZ HB in municipalities, public enterprises and other entities
12 that were duty-bound to implement those regulations.
13 Q. Again I'll ask you to --
14 THE INTERPRETER: Microphone, please.
15 MR. KARNAVAS:
16 Q. I'll ask you to go a little slower. Now, you indicated that
17 after the Washington Agreement, financial police were instituted
18 throughout the federation, and as I understand it today, it's throughout
19 Bosnia-Herzegovina. Is that correct?
20 A. No. It remained a federal institution, because
21 Bosnia-Herzegovina, in the next step of the transition, adopted the VAT
22 and an administration for indirect taxation was established, and at the
23 level of the state it actually controlled the implementation of the laws
24 covering that area.
25 Q. All right. But the federation, when it adopted or when it
1 implemented a financial police, was it based on a new methodology, new
2 functions, new responsibilities, or was it based essentially on what was
3 initiated by the HVO HZ HB?
4 A. The first law on financial police of the Federation of Bosnia and
6 the contents, the powers were all copied from this decree.
7 Q. All right. If we just go through this very quickly. Article 5
8 sets out essentially what are the duties and functions of the financial
9 police; correct? Inspect, monitor, supervise, check, prepare, undertake,
10 carry out.
11 A. That's correct.
12 Q. And if we look at Article 8, it would appear that the financial
13 police answer to your particular department, the HVO HZ HB financial
14 department. Is that right?
15 A. That's correct.
16 Q. Under Article 11 we see the requirements for somebody holding the
17 post or various posts within the financial police. And then we see in
18 Article 14 that the appointments and dismissals are actually published in
19 the Official Gazette. I take it through Article 14 there's -- it
20 provides for transparency, does it not?
21 A. That's correct.
22 Q. And just very quickly, if we look at Article 23, which may be of
23 assistance for other purposes, Article 23 reads: "At the proposal of the
24 head of the finance department the HVO HZ HB shall adopt a separate set
25 of rules," and it goes on.
1 If you could explain to us what is meant by proposal by the head
2 of the finance department?
3 A. This means that the finance department drafts some rules or other
4 regulations about uniforms, arms, and so on, and then that the head of
5 the department would submit this document to the HVO HZ HB so that it
6 could be put on the agenda. And then at its session the HVO HZ HB has a
7 discussion about the document and adopts it. Once it is adopted it is
8 signed by the authorised official. If the HVO HZ HB can adopt it, then
9 the president of the HVO HZ HB signs it and after that this regulation is
10 published in the Official Gazette.
11 Q. All right. Well, is a proposal automatically adopted? In other
12 words, are there proposals which are rejected or modified?
13 A. Well, there were proposals that had to be modified or returned to
14 the author for corrections because of some other elements that were
15 important, some information, input that was provided by other
17 For instance, if in our decree or a decision we stipulated that
18 the misdemeanour court would have jurisdiction over violations and then
19 the justice department indicates that it is not the misdemeanour court
20 but some higher court, then we had to amend the decision, and then after
21 that the decision would be adopted and published.
22 Q. All right. Do you know whether proposals that were presented
23 before the HVO HZ HB were rejected? Can we assume that once -- if it
24 says "proposal," automatically it would be adopted -- it would have been
25 adopted at some point?
1 A. The departments submitted documents and then there was the
2 debates at the session, and if there was a number of objections or
3 amendments, they would return to the author for modification, and then
4 they would be again subject of a discussion at the next session and then
5 finally they were adopted.
6 Q. All right. Thank you. If we look at Article 24, if you could
7 just comment very briefly, because it talks about: "In performing the
8 duties within their remit and under the circumstances specified by the
9 Law on Internal Affairs of the Socialist Republic
10 inspectors may bring in citizens into a competent organ." What is this
11 referring to?
12 A. I've already said that the municipal public revenue departments
13 were under the jurisdiction of the municipal HVO, HVOs, and they were in
14 charge of the implementation of the financial segments of the
15 regulations, but because of the needs of the municipal budgets and
16 because of the pressure exerted by the presidents of the municipal HVOs,
17 they often violated those provisions and implemented the municipal
18 regulations in order to ensure extra revenue. But when we wanted to hold
19 them responsible for that, the fact is that they were appointed by the
20 municipal HVO presidents and they were at the same time members of the
21 HVO Presidency and we were supposed to report to them. We were
22 responsible to them. So it was a weird situation where for all intents
23 and purposes our hands were tied. We could not really implement the --
24 we could not enforce the legislation. And the purpose of this
25 institution was to be an independent institution set up at the level of
1 the HZ HB who could then enforce the regulations. The problem was in the
2 field, because there were a lot of efforts to obstruct the work of the
3 inspectors. Sometimes the companies would summon members of the units to
4 intimidate the inspectors of the financial police to prevent them from
5 carrying out the inspection. Those units received donations from those
7 This decree stipulated that financial police could carry arms and
8 wear a uniform, and they had the power to act in accordance with the Law
9 On Internal Affairs of Bosnia-Herzegovina which was in force at the time.
10 What it meant was that they could bring in those people to the police or
11 whatever it was that this law stipulated.
12 Q. All right. Since this is a new institution, could you please
13 tell us, if you recall, how long it actually took to put this institution
14 in place, in other words, to advertise for the positions, make the
15 selections, do the training so that actually the financial police are
16 able to carry out the functions as envisaged.
17 A. First of all, it was very difficult to find competent people to
18 do this job and to do it for the HZ HB, because people felt much more
19 comfortable in their municipalities when it came to monitoring and
20 checking the revenues.
21 We appointed the director of the revenues -- revenue department
22 from Ljubuski, one of the municipalities. Before the war he was the
23 director of the revenue department. He had a lot of experience and
24 knowledge. He was a colleague of mine. And when I was a director of one
25 of the revenue departments he was appointed the chief inspector of the
1 revenue department.
2 It was difficult to find people. Some people were mobilised. We
3 had to get them to be demobilised. And we also hired some interns, young
4 people who did not have much experience but who had university degrees,
5 so they went out in the field with their more experienced colleagues.
6 But I think that at the end of 1993 the financial police had 11
7 employees, not more than that, but it operated throughout the area, and
8 it contributed significantly to the effort to locate and collect revenues
9 for the HZ HB budget.
10 Q. And I believe you said it was at the end of 1993, just to make
11 sure that it's accurately reflected in the record, that you had the 11
12 members of the financial police. We're talking about the end. Okay.
13 A. That's correct. At the end of the next year. They were
14 established in December 1992, and now we're talking about the end of
16 Q. All right. If we look at 1D 02103 --
17 JUDGE MINDUA: [Interpretation] Mr. Karnavas, I'm sorry. Before
18 moving on to another document, I'd like to spend a little bit more time
19 discussing this document on the special police.
20 In Article 14 it is stated that the appointments and dismissals
21 are being published in the Official Gazette. We said this was being done
22 for the system to be transparent. But in Article 13, let me translate,
23 the officers of the special police have exceptional powers and are hired
24 without vacancies being posted beforehand. How can one reconcile Article
25 13 with Article 14, Witness? Why are those vacancies not posted?
1 THE WITNESS: [Interpretation] In my document I don't have Article
2 13. I can't see it on the screen.
3 MR. KARNAVAS: Perhaps you could check the English version.
4 THE WITNESS: Okay.
5 MR. KARNAVAS: It perhaps might be of some assistance. It's a
6 bad scan.
7 THE WITNESS: Okay. [Interpretation] Yes. That's clear now.
8 In Article 13 it is stipulated that the financial police, the
9 financial police, officials with special powers shall be employed without
10 job vacancies being announced.
11 We felt there was no need for any job vacancies being announced
12 publicly because we knew all the people who met the requirements in HZ HB
13 more or less. We didn't have the time to go through this process because
14 we wanted to be operational as soon as possible, to have the system in
15 place, but to ensure transparency and to make it possible for people to
16 react after their appointment, we published the appointments in the
17 Official Gazette. So you could see from the Official Gazette who was
18 appointed, and then the Presidency of the HZ HB could ask questions if
19 they thought that somebody did not meet the requirements. It had the
20 power to do so. All the more so because the municipal authorities that
21 had representatives in the Presidency of the HVO HZ HB were not happy
22 with the fact that the HVO HZ HB actually passed this kind of a decree,
23 because if you look at Article 47, it says that if an inspector of the
24 financial police of this institution that we're talking about observes
25 any irregularities in the work of the inspectors of the municipal
1 administrations, at the municipal level, the financial police inspector
2 can submit a request to the head of the office in the municipality to
3 launch proceedings for the dismissal of the said inspector.
4 JUDGE MINDUA: [Interpretation] Thank you very much.
5 JUDGE ANTONETTI: [Interpretation] One small comment of a
6 technical nature. I saw a contradiction between Article 28 and 33.
7 Article 28 states that the inspectors are entitled to carry weapons in
8 the event of four situations. In Article 33, it is stated that the
9 inspector needs to refer to the local police.
10 Is there not a contradiction here, to provide an inspector with
11 weapons and then turn round and say, well, if he needs a problem, he has
12 to turn to the police for help?
13 THE WITNESS: [Interpretation] It says in this Article that if the
14 inspectors -- if the inspector is unable to deal with the situation with
15 his own sidearms. For instance, if he or she faces five armed people, of
16 course then the inspector cannot do anything and then they have to go to
17 the police and the police has to provide protection to the inspector.
18 JUDGE ANTONETTI: [Interpretation] You told us that there were 11
19 of them and this was operating until 1993. Was this department
20 efficient? Were you able to highlight violations of customs laws?
21 Unless these were the questions you were about to put,
22 Mr. Karnavas, I don't know.
23 MR. KARNAVAS: No, Your Honour. There may have been something
24 lost in translation. He indicated that it wasn't operational until 1993.
25 In other words, it began at the end of December 1993 for it to be
1 operational, and the question, at least in English, it appears that from
2 1992 to 1993 the question is what was able to be done.
3 JUDGE ANTONETTI: [Interpretation] So this department operated
4 after December 1993. And did you achieve any positive results?
5 THE WITNESS: [Interpretation] Yes. The department became
6 operational in December 1993, and in the first reports there is a column
7 about the revenues obtained through the work of the financial police, and
8 we're talking about substantial amounts. I have to say that the
9 financial police worked until the federal financial police was set up.
10 So that was in 1995, 1996, and at that time the director of the financial
11 police became the deputy director of the federal financial police and the
12 employees, the inspectors, became part of the federal financial police.
13 MR. KARNAVAS:
14 Q. You're speaking of the director. This would have been under the
15 Croatian Republic
16 a director and it's important for us to understand which director at
17 which period and from where. So the director and the employees, this
18 would have been under -- at that point the director would have been 1994,
19 at least would have been the Croatian Republic of Herceg-Bosna when the
20 financial police began to operate.
21 All right. Let me -- Mr. Tomic, let me ask the question again.
22 There's no need -- the answer's not in the documents. I just want to
23 clarify your answer here, because you said the director and the employees
24 became part of the federal system. Which director are we speaking of?
25 A. We're speaking of the chief inspector of the financial police,
1 the director of the financial police in the common parlance. The chief
2 inspector of the financial police, he was the chief of the financial
3 police of the HZ HB, and in the next stage of the HR HB, and then when
4 the federal institution was set up he became the deputy director because
5 that was the agreement, that the Muslim should be the director and a
6 Croat his deputy.
7 Q. All right. That's what I wanted to clarify. And the employees
8 who had been working with the financial police that had started under the
9 Croatian Community of Herceg-Bosna, later on the Croatian Republic
10 Herceg-Bosna, they were also employed or continued to be employed in
11 their capacity but now for the federal financial police; is that correct?
12 A. That's correct.
13 Q. All right. If we go on to the next document 1D 02103. This is
14 dated 2 December 1992
15 export customs documentation. Could you please explain what this is
17 A. This is one of the conclusions that had to assist the
18 strengthening of the financial system and the collection of customs duty
19 and taxes. Up until that time, humanitarian aid was declared -- was
20 cleared through the customs when the truck came to the border crossing,
21 and there was this option that people availed themselves of, and this is
22 why this conclusion was passed, that somebody buys a truck full of
23 underwear to be sold on in HZ HB, but on the arrival at the border
24 crossing this person states to the border control service that this is
25 humanitarian aid and this person then has a piece of paper indicating
1 that it is humanitarian aid. And this conclusion stipulates that once
2 the goods come to the border crossing in HZ HB, it must have regular
3 export documentation originating from the country where the goods were
5 If it comes from Croatia
6 the municipality where the relevant customs office is, for instance, in
8 This made is easier for us to distinguish between humanitarian
9 aid and commercial goods, because in the customs offices in Slovenia
11 get the -- asked for the original documents indicating where the goods
12 were from.
13 So this is not about imposing customs duty on the goods but just
14 on the classification of the goods. They had to be classified as
15 humanitarian aid at the time of their arrival at the border crossing.
16 Q. All right. 1D 02744. This is dated 3 December 1992, and here we
17 have an example of a sales contract. If you could explain what is this
18 about. If you just briefly look at it.
19 A. This is a contract about the purchase of salt for -- for the
20 roads in the wintertime. And these goods were bought by the HZ HB at
21 Ceste, which is a public company for road maintenance. And this salt was
22 intended for the maintenance of the Road of Salvation, which at the time
23 was the only link between Herzegovina
24 further on to Croatia
25 This contract shows that HVO Ceste had bought salt from a company
1 in Tuzla
2 maintenance company along the road. And the manner of delivery is also
3 stated, and there is also an additional remark that if the buyer wants
4 the seller to transport, to deliver the goods, then the buyer must also
5 pay for the fuel, the reason being that there wasn't enough fuel
6 available for commercial activities.
7 Means of payment with regard to this, you can see that the
8 company from Tuzla
9 Zagrebacka Banka and the payment was to be made to that account, 30 per
10 cent in -- in dinars and the rest as compensation by way of barter.
11 There is also mention of the UNHCR, who they turned to for the
12 maintenance of this road, which was, as I said, the only link between
13 these areas in Bosnia-Herzegovina.
14 Q. All right. Thank you for that -- for that. Now I want to go
15 step-by-step and go back a little bit. First you indicated that this was
16 a company in Tuzla
17 controlled under the ABiH?
18 A. Yes.
19 Q. Now, looking at the payment method, again just if we go
20 step-by-step, we see that it makes reference to Croatian dinars. So this
21 is a Muslim municipality under ABiH control. It makes reference to
22 Croatian dinars, and also we see a non-residential account. Would this
23 be -- is this account in BiH or is it in the Republic of Croatia
24 A. That account was in the Republic of Croatia
25 based on an agreement between Croatia
1 non-resident accounts, but this company we're talking about before the
2 war delivered salt for roads throughout Yugoslavia, and they had their
3 warehouses in Croatia
4 summertime they would deliver salt which in the wintertime was used for
5 the roads.
6 When war activities started, this company, like others that had
7 similar warehouses opened, a non-resident account under the agreement I
8 mentioned, and the goods they sold off their warehouses in Croatia
9 paid to those non-resident accounts. And using the money on that
10 account, they purchased goods that they distributed to their employees or
11 to the municipality to survive at that time.
12 Q. All right. And I -- I only mentioned that because we have heard
13 testimony concerning the use of non-residential accounts and whether they
14 were legal or illegal at the time.
15 If we go on to the next item we see now that about -- about 50
16 per cent is to be paid in what appeared Bosnian dinar, but then there's
17 some reference to the Deutschmark medium rate at the Tuzla bank,
18 Tuzlanska Banka. Could you explain what this is about in a very concrete
20 A. This is a contract based on a template, a standard template, and
21 50 per cent of the price was to be paid in BH dinars to the account
22 stated, but the prices in the contract are in Deutschmarks. And this is
23 about setting the exchange rate, and the exchange rate was that of the
24 Tuzlanska Banka. Through the Zenica branch office of the SDK or another
25 branch office conducting domestic payment transactions the Republic of
1 BiH with the SDK Tuzla branch office, which means that there was no
2 communication between Herzegovina
3 possibility for payment to be effected in Zenica. So that somebody
4 brings cash and pay it into the account in Zenica, and Zenica will then
5 transfer it to Tuzla
6 means that there was communication between Tuzla and Zenica. So payment
7 had to be done at a branch office that was connected with Tuzla, be it
8 Zenica or a place around Tuzla
9 of the Tuzlanska Banka, Tuzla
10 Q. All right. Just one question with respect to communications.
11 You said that from Herzegovina
12 Zenica with Tuzla
13 why wasn't it possible to have direct communications from Herzegovina
14 the way to Tuzla
15 A. Well, we spoke about that yesterday. Telecommunications had been
16 disrupted and could not be used. We couldn't transfer the monies in the
17 usual way. Zenica is -- was mentioned as the chief branch office that is
18 closest to Herzegovina
19 communication. There were payment orders brought in written form or
20 carried in written form from Zenica to Tuzla. They had to go over a
21 mountain. And then Zenica would -- would effect payment based on those
22 orders on behalf of Tuzla
23 Q. Zenica was under the control of the ABiH. Was it not?
24 A. Correct.
25 Q. Okay.
1 JUDGE ANTONETTI: [Interpretation] Witness, let me take this
2 example of a company selling salt, which was in an ABiH-controlled area.
3 We're now talking about 1992, 1993. Back then did the Republic of Bosnia
4 and Herzegovina
5 companies that kept exporting manufactured goods, goods that were
6 manufactured in the Republic of Bosnia and Herzegovina, as far as you
8 THE WITNESS: [Interpretation] Yes, there were companies which
9 sold such goods throughout that time, goods that they had in their
10 warehouses and that were produced in Croatia.
11 JUDGE ANTONETTI: [Interpretation] My question relates to the
12 conflict. During the conflict were there companies that kept producing
13 and exporting?
14 THE WITNESS: [Interpretation] Produce, no, or very little, but
15 they exported the stocks of merchandise that they had. So the salt had
16 been produced before the war, and it was put into warehouses. A half of
17 those companies were not really operational due to most of the employees
18 being drafted. So they only were able to dispose of their stock. So the
19 steel plant of Zenica had a huge stock of construction iron, and this
20 salt mine had a stock of salt. And after the conflict broke out, they
21 sold those goods to Croatia
23 JUDGE ANTONETTI: [Interpretation] Very well. Let me take the
24 example of Zenica. You said that there was a company in Zenica that
25 manufactured iron. There is indeed a well-known steel plant in Zenica.
1 During the conflict, if I understood you properly, there was
2 export to Croatia
3 by the HVO, how did these companies transit their goods through
5 pay export taxes?
6 THE WITNESS: [Interpretation] In Bosnia-Herzegovina there were no
7 export taxes. There were none in HZ HB either. If a company had sold
8 goods to a firm in Split, Croatia
9 office in Mostar or any other customs office in HZ HB that were
10 operational, let's say Tomislavgrad, and there, based on the invoice they
11 had and other documents, the export customs declaration would be made.
12 They -- the exporter had to find a forwarding agent to make that
13 declaration for the exportation of goods, and that documentation had to
14 be stamped by the customs administration of the HZ HB. Then they could
15 go on to Croatia
17 JUDGE ANTONETTI: [Interpretation] Very well. Thank you.
18 MR. KARNAVAS: Very well. Thank you very much.
19 Q. And maybe I wasn't quite complete in my earlier questioning. You
20 said that there was communications between Herzegovina and Zenica. Was
21 there a linkage between the SDK of the two? In other words, if you
22 understand my question, from Mostar was there -- was there a direct link
23 to Zenica at the time?
24 A. No. There was no -- not even a link between Mostar and the
25 municipalities and areas belonging to the HZ HB in Central Bosnia. So
1 there was no communication with Central Bosnia at all. This applies to
2 Zenica also. So there was no -- no way of effecting payment from Mostar
3 to Zenica or from Mostar to Vitez.
4 Q. But when you indicated earlier, because this is -- and it may be
5 something that's being lost in translation because as I understand,
6 "communication" in your language, you know, has various meanings.
7 Earlier you indicated there was communication between Herzegovina and
8 Zenica. What exactly did you mean by that? Are we talking about road
9 communication, telecommunication, radio communication? So please explain
10 to us what did you mean by that.
11 A. When I speak about the payment system, I always mean
12 telecommunications. That is telecommunication lines used by the SDK to
13 effect payment.
14 A road is a communication too. It was possible to go to Zenica
15 physically. A truck could drive to Zenica. But payment could
16 exclusively be made either in cash or through non-resident accounts, but
17 direct payment between the SDK and Mostar and Zenica was not possible.
18 Q. All right. I think I cleared that point up. I'm clear. I don't
19 know if anybody else is un-clear.
20 And then finally I think the last part of this document we see 20
21 per cent looks like it's going to be paid in some sort of a bartering
22 system, exchange of commodities. Am I correct?
23 A. Yes. As I said, this contract was based on a template, and
24 companies were partly paid in kind in order to be able to distribute,
25 say, flour, sugar, and other commodities to their employees.
1 Q. All right. Let's look at 1D 00140. 1D 00140. This is December
2 1992. This is a decree on payment transactions via accounts and
3 subaccounts with the SDK. If we could look at this. And a brief
4 explanation. I'm going to ask you to look at Article 1, 2, and perhaps
5 even comment on Article 11. That may be of some assistance.
6 A. We're speaking about a decree that defines how payments through
7 giro accounts are to be made, giro accounts and subaccounts. In Croatian
8 dinars and BH dinars and any other currencies that we used as official
9 currencies in -- for payment. First of all, the Deutschmark.
10 I must first point to Article 11. It is customary in the banking
11 world but also in the SDK of the former Yugoslavia to distinguish between
12 cash and money on accounts, I mean the amounts on accounts because money
13 on accounts is not always -- does not always have cash coverage. That is
14 normal in countries that have a Central Bank, primary mission, et cetera.
15 Article 11 says, in simplified terms, the -- at the SDK HZ HB, at
16 the end of each working day the balance of each giro account and
17 subaccount on the one hand and the cash balance must be equal. What does
18 that mean? That all money that goes through the SDK must have cash
19 coverage. We only used Croatian dinars and Deutschmarks, but we didn't
20 have any power over those currencies.
21 One of the great problems in the former Yugoslavia was when
22 pressurised by politics, the SDK allowed some accounts, that payment is
23 effected from some accounts although there was no money on those
24 accounts. This is like -- this is as if the Central Bank had issued a
25 new quantity of money, if I can explain it that way, and that eroded the
1 confidence in those services, et cetera.
2 Now, we mostly used Croatian and German currencies. We could not
3 allow anything similar to happen, and that's why we introduced this
4 obligation to check the balances on a daily basis and report about that
5 because we wanted to show that money flows through the SDK only for the
6 purpose of controlling the payment of taxes, contributions and other
7 payments that were prescribed at the time.
8 THE INTERPRETER: The interpreters would be grateful if such
9 complex matters could be expressed and explained more slowly.
10 Microphone, please.
11 MR. KARNAVAS:
12 Q. I'm told that while you're eloquent in your explanations, you
13 need to be rather slower in articulating your thoughts, because these are
14 rather complex matters that some of us who are less acquainted with this
15 system are having a difficulty following, let alone translating.
16 If I could just ask you to comment on Article 12, because Article
17 12 makes reference to a law on financial operations of the federative
18 republic -- the Socialist Federative Republic Of Yugoslavia, and could
19 you please tell us, because this is now 17 December 1992. Why is it
20 making reference to this particular law, and what is this law about, if
21 you recall?
22 A. This was one of the basic laws for the functioning of the payment
23 system, for the opening of accounts for effecting payment inside the
24 country and so on. It was a large piece of legislation. And this decree
25 mostly regulates the segment I spoke about, and the rest -- to all the
1 rest the provisions of this Yugoslav law had to be applied.
3 other mechanisms to exert control over the currency. This law was also
4 adopted or taken over by the Republic of Bosnia-Herzegovina.
5 Q. All right. Thank you. Unless there are any questions concerning
6 this particular document, I'll move on.
7 JUDGE ANTONETTI: [Interpretation] Witness, this is a question
8 that doesn't relate specifically to this document, but I'm trying to
9 understand the intricate mechanisms that prevailed at the time. Several
10 currencies were in circulation at the time, the Deutschmark, the BH
11 dinar, the Croatian dinar.
12 Now, in Mostar did you not circulate coupons?
13 THE WITNESS: [Interpretation] No. The BH dinar was called coupon
14 for a while. It was called that because it wasn't real money. It was
15 printed based on decision of the Ministry of Finance rather than the
16 Central Bank. That's why colloquially it was -- it was occasionally
17 called a coupon. What's meant was the BH dinar. We never issued
18 coupons. In other words, we never printed money.
19 JUDGE ANTONETTI: [Interpretation] In statistical terms, according
20 to you in the field, in the percentage terms as far as these various
21 currencies are concerned, how many Deutschmark, how many Croatian dinars,
22 BH dinars or perhaps US dollars were there circulated? Do you have -- do
23 you have some empirical data you could give us concerning the circulation
24 of these currencies? I assume that there was a black market. And on the
25 black market transactions were carried out in various currencies, I
2 THE WITNESS: [Interpretation] Let me first say that in the era of
3 HZ HB there was no black market. As is stated in Article 11, there was
4 no need for the conversion of one currency into the other -- into
5 another, because all currencies that were present at the time could be
6 used for payment if so desired. So you have no need to convert dinars
7 into Deutschmarks because you could pay in Deutschmarks. Or you could
8 also pay in dollars. I'm mentioning these because these were the most
9 common currencies.
10 About the quantity of money in terms of value, I can say that the
11 greatest quality was in Deutschmarks, then in Croatian dinars, then
12 dollars, and then BH dinars in terms of value, I say. In terms of
13 quantity, I cannot say anything off the top of my head now.
14 When in 1996 we took the decision at federation level about the
15 unification of the payment system, in other words, the linking up of the
16 HZ HB SDK with the SDK in the areas controlled by the army of BiH, then
17 all currencies were practically accepted and payments between these two
18 systems were first -- at first effected in Deutschmarks, and when the
19 system started functioning as one, the German mark was the only currency
20 left, and later it was the convertible mark, the currency of
22 At the moment when these two systems were -- were turned into
23 one, when a closing balance had to be made, and we did that together with
24 people from the World Bank and people from the International Monetary
25 Fund, it was established that in the area of the HZ HB and its SDK, there
1 was no difference between money -- the money on accounts and the cash
2 in -- in the safes, whereas in areas controlled by the army of BiH, the
3 difference established was 24 million Deutschmarks. That is the
4 difference between the money printed and the cash -- and the cash at hand
5 under this difference had to be compensated to regain confidence.
6 JUDGE ANTONETTI: [Interpretation] Since international officials
7 were present, the Spanish battalion and the EU representatives, how did
8 they pay? Did they use US dollars, DEM, Croatian dinars, or BH dinars?
9 How -- or what currency did they use?
10 THE WITNESS: [Interpretation] For the most part in German marks.
11 The sales contract for the salt was paid in cash in German marks by the
13 JUDGE ANTONETTI: [Interpretation] The international organisations
14 had cash, did they? They hadn't opened an account somewhere, had they?
15 Everything was being paid in cash. Is that how it happened?
16 THE WITNESS: [Interpretation] Yes.
17 MR. KARNAVAS: Thank you.
18 Q. We'll move on to the next document, P 01579. And we can see that
19 is decree on border crossings and traffic. Now, this is I believe March
20 1993. It's actually signed in February, published in March, February 26,
22 If you could focus first on Article 2. Please tell us what is
23 this decree about and why was it necessary since we already have a border
24 crossing from the previous legal instrument that we saw?
25 A. Well, this is a decree that is within the purview of the
1 department of the interior, so it is mostly regulated by the jurisdiction
2 that is managed by the police, and it becomes necessary when the system
3 is being built in order to define the border belt which is under the
4 control of the border police, the police controlling the border, and this
5 is an area where the border police can intervene. This law was adopted,
6 the law on the crossing of the state border and movement in the border
7 belt. The Republic of Bosnia and Herzegovina in turn adopted the federal
8 law, the Yugoslav law, and this pertains only to a segment of the border
9 belt of the Republic of Bosnia and Herzegovina that is in the area of the
10 HZ HB. The area facing the area controlled by the BH army was not
11 treated as a border area to which the provisions of this law would apply.
12 Q. All right. And -- and I believe that was an earlier question
13 that was posed by Judge Trechsel concerning whether there were those
14 sorts of borders on that site. If we look at Article 3 it says that:
15 "The proposal of the head of the HVO HZ HB defence department or the HVO
16 HZ HB department of interior, the Croatian Defence Council may determine
17 that the border area shall be more than 100 metres wide."
18 So again we see a proposal, this is a proposal, and of course the
19 HZ HB -- the HVO HZ HB may, it's discretionary, determine that it may be
20 wider than a hundred metres. Why was this necessary, if you recall, if
21 you know?
22 A. Well, first of all, this is in order to control illegal border
23 crossings, illegal crossing of goods, weapons, individuals, and it is
24 usual practice to have an area that is 100 metres deep. This is a belt
25 where the border services can respond to a situation and demand that the
1 persons crossing the border undergo the appropriate procedure. But if,
2 geographically speaking if the terrain is rugged, it's inaccessible, it
3 is impossible to go into this 100-metre wide belt to effect any kind of
4 control and if this area is important for security or defence reasons,
5 then at the proposal of the defence department or the department of the
6 interior this belt can be extended to include some other points where
7 this kind of control can be effected, where illegal crossings can be
9 Q. You see Article 6, maybe you can help us out, because you see it
10 makes reference to an international border crossing and then local border
11 crossings, and it speaks of citizens of the Republic of
12 Bosnia-Herzegovina in order for them to sojourn into certain zones of the
13 neighbouring state. Can you please explain to us the difference between
14 an international border crossing and a local border crossing, what is
15 meant by this?
16 A. International borders crossings are crossings used by persons and
17 goods, and in the decision that we saw before, those are international
18 border crossings. At the international border crossings goods can be
19 cleared through the customs and cars, trucks, and so on can cross the
21 Local border crossings cannot be used by trucks transporting
22 goods because goods cannot be cleared through the customs, cannot be
23 exported, cannot be imported. They can be used only by the residents of
24 the municipality where those crossings are situated, enabling them to
25 cross into the neighbouring municipality where they either work or they
1 have fields where they have to do some farm work.
2 So for instance people from Mostar cannot use those crossings.
3 They cannot even cross them as persons even if they don't have any goods
4 in their possession. They have to go to the international border
5 crossings. But residents of Ljubuski, a municipality that borders
7 do whatever work they have to do. There is the police, there is a
8 customs office at the local border crossings, but they're only there to
9 check the identity of the persons crossing. These still the case today,
10 and we refer to shows border crossings as local border crossings.
11 Q. All right. 1D 02187. 1D 02187. This is a report and it's from
12 the Ljubuski Public Auditing Service, SDK. Perhaps you can explain this
13 to us.
14 A. This is a typical report from the SDK where a branch office in
15 the Ljubuski municipality submits a report about the collection of sales
16 tax and other taxes, and as you can see from this document, the sales tax
17 on the sales of goods emptied by the Mostar HVO, so we're talking about
18 the 75 per cent of the sales tax collected in Ljubuski by the 1st of
19 April it was taken out for the HZ HB budget, and the 25 per cent, the
20 39.000 -- or 39 million, that would be the 25 per cent that was taken out
21 by the Ljubuski municipality.
22 So this is just a report on the current situation indicating how
23 it functioned between the municipalities and the HZ HB.
24 Q. Unless there are any questions on this document, I'll move on.
25 1D 01679. If we could look at this particular document. And
1 again this is just as an example. Could you tell us first of all whether
2 you're familiar with the document and whether you can identify what it is
3 to start with.
4 A. I am familiar with this document. I saw it in the course of the
5 proofing. This is a document from the Elektroprivreda public company.
6 It's actually the payroll for the employees where you can see the taxes,
7 contributions and wartime tax that was levied on the salaries in
8 accordance with the regulations valid in HZ HB.
9 Q. Okay. Now this is May 1993. Or actually the -- this is the
10 wages for May 1993. The document was generated, it would appear, 12 June
11 1993 and of course we see the levy on wages is 90 per cent and then we
12 have another 10 percent is the war taxes, is that correct, on the first
14 A. 10 per cent, that's correct.
15 Q. If we go to the page 2, again this is for other purposes. We can
16 see that the head of the directorate Zulfo Robovic, is he a Croat or is
17 he a Muslim?
18 A. A Muslim.
19 Q. All right. Now I'm going to go through the rest and I'll ask
20 you, then I'll point to various numbers, and again it's for other
21 purposes, but on page 3, for instance, number 5 and number 16, are they
22 Croat or Muslim?
23 A. What page? What page?
24 Q. This would be 3 in English. It's -- and it may be easier if you
25 just look at the English version.
1 A. [In English] Okay.
2 Q. It's on the screen.
3 A. Okay.
4 Q. Number 5 and number 16.
5 A. [Interpretation] Number 5, Ruso Begovic [phoen], well, they are
6 Muslims, and Jugo, and number 16 as well.
7 Q. And 16 as well?
8 A. Right, 5 and 16.
9 Q. And going to page 4, number 17, number 18, number 20, number 24,
10 number 26, number 27. Can you please tell us whether they're Muslim or
12 A. Muslims.
13 Q. Going to page 5, number 6, number 13, number 14, number 15.
14 Croat or Muslim?
15 A. 6, 13, 14, 15, Muslims.
16 Q. All right. Page 6, number 1, number 3, number 4, number 9,
17 number 10, number 12, number 13, number 15. Croat or Muslim?
18 A. Muslims.
19 Q. Page 7. Number 16, number 18?
20 A. Muslims.
21 Q. Page 8. Number 4 and number 7. Croat or Muslim?
22 A. 4, 5, 7 --
23 Q. 4 and 7.
24 A. Muslims. Muslims.
25 Q. Page 9. These are wages for May 1993. This is number 3, number
1 11, number 12, number 14.
2 A. Muslims.
3 Q. Page 10, number 3, number 4 number 8.
4 A. Muslims.
5 Q. All right. If we go on to the next document, 1D 02136, and this
6 is a conclusion, and it's dated 5 July 1993, and it says here under point
7 1: "The finance department is obliged in relation to defence financing
8 to make the estimate of inflow of funds into the budget of HZ HB for the
9 month of July 1993."
10 Now, first I'm going to ask you to comment about this document,
11 this conclusion, what is it; and number two and more importantly, I
12 wanted to ask you about this word "obliged." Is this an instruction?
13 Are you being instructed? Are you be ordered? What does the word
14 "obliged" mean in the context with the way the HVO HZ HB operated under
15 the statutory decisions and other regulations?
16 A. So after the conflict in Mostar broke out, the finance department
17 was no longer functioning, and it was relocated to the municipality of
18 Siroki Brijeg for a while, and in that period the SDK in Mostar no longer
19 functioned, and the central unit was temporarily related to Siroki
20 Brijeg, and again the municipalities exploited the situation and failed
21 to implement, to enforce the Herceg-Bosna regulations.
22 After the situation was analysed at the -- at a session of the
23 HVO HZ HB, this conclusion reaffirmed our obligation to determine the
24 monthly and quarterly budgetary revenues as indicated in the decree on
25 the budget, because that decree stipulated that the departments had to
1 plan their needs on a monthly and quarterly basis.
2 So this conclusion reaffirms our obligation to do so, because it
3 was necessary to get the system functioning again as soon as possible.
4 Q. All right. If you look at --
5 JUDGE TRECHSEL: If -- thank you, Mr. Karnavas.
6 Speaking from -- from a simple mind of a non-financial expert, is
7 this to be understood in the sense that the government, Mr. Prlic and his
8 colleagues, want to know how much money will be available in -- for July
9 so that they can plan how much they can spend for defence purposes? Is
10 that the idea behind it?
11 THE WITNESS: [Interpretation] Yes. My department had to say how
12 much we could expect in terms of real revenue in July, for the month of
13 July, and this was actually the result of the situation that I was
14 telling you about, because we were unable to do that in June and in May
15 because of the situation as it was.
16 JUDGE TRECHSEL: Thank you. Thank you.
17 MR. KARNAVAS:
18 Q. And just a point of precision. This is a conclusion. We could
19 see that this is signed by Dr. Jadranko Prlic, but whose conclusion is
21 A. This is the conclusion reached at the session of the HVO HZ HB.
22 Q. Okay. So it's the collective body that's making this conclusion
23 and not Dr. Jadranko Prlic, because we see his signature there?
24 A. Yes.
25 Q. All right. Now, if we go to the next document, 1D 01934. This
1 is 12 August 1993
2 prepared as the head of the finance department. It's -- we see all this
3 lovely legislation and instruments that are passed for the financial
4 institutions to function. Now, if you could comment, please, on this
5 report, especially if we look at, for instance, in the second paragraph
6 towards the bottom half you seem to be indicating that all things are not
7 operating as envisaged by the legal instruments that were drafted and
8 adopted by the Croatian Community of Herceg-Bosna, the HVO HZ HB.
9 A. This is a memo that I sent to the Croatian Defence Council and
10 the presidents of the municipal HVOs about the functioning of the
11 financial system. As I say here, after the regulations were passed and
12 after efforts were made for them to be enforced, in the first six months
13 of 1993 this appeared to be functioning with the application of all the
14 mechanisms that we had put in place.
15 After the conflicts broke out, particularly the conflicts in
16 Mostar, and after there was a disruption in the functioning of the SDK
17 and other institutions that had to be relocated to other places because
18 of combat operations, the municipalities again exploited the situation to
19 channel the revenue meant for the HZ HB budget to their own accounts.
20 And in this context, on the 4th of August, I had a meeting with the heads
21 of the municipal finance offices. And on the 5th, in Siroki Brijeg,
22 there was a meeting with the presidents of the municipalities where we
23 warned them that this kind of conduct was not acceptable and that they
24 could cause great problems for the functioning of the HZ HB in terms of
25 the defence and the functioning of civilian -- civilians' lives.
1 At those meetings we concluded that in fact we had to comply with
2 the existing regulations and reinforce the control and collection and
3 that the municipal HVOs had to adopt their own budgets because they did
4 not have their budgets, although there was no reason for that to be so.
5 Of course here we again see this conflict. We talked to the
6 presidents of the municipal HVOs, and at the same time they're members of
7 the Presidency of the HZ HB, and they are the persons who are in fact
8 responsible for the functioning of the system.
9 Q. And that's what I was going to be asking you, that essentially in
10 Siroki Brijeg on 5th August when you're warning the representatives of
11 the municipalities, which are the presidents as you've told us,
12 essentially you have the Presidency there, albeit it's not a Presidency
13 meeting. They're sitting there individually and collectively. Do I have
14 it right?
15 A. Yes.
16 Q. All right. And collectively, at least from yesterday as I
17 understood you correctly, they're the legislative body that sits above
18 the executive HVO HZ HB?
19 A. Yes, and they are there as the Presidency of the HZ HB and as
20 such they had to in fact warn me that regulations had to be enforced and
21 not the other way around. In reality I was there to warn them in their
22 capacity as the presidents of the municipal HVOs that they had to enforce
23 the regulations.
24 JUDGE ANTONETTI: [Interpretation] Mr. Karnavas, we need to have a
25 break, a 20-minute break.
1 --- Recess taken at 12.25 p.m.
2 --- On resuming at 12.51 p.m.
3 JUDGE ANTONETTI: [Interpretation] The court is back in session.
4 MR. KARNAVAS: May I proceed, Your Honour?
5 JUDGE ANTONETTI: [Interpretation] Yes, you may proceed.
6 MR. KARNAVAS:
7 Q. Okay. Let's go on to 1D 02135 and we're going to have to speed
8 it up just a little bit. No, I'm sorry, I believe we covered this. No?
9 Oh, we didn't.
10 This is another conclusion where under 1 it says: "All bodies,
11 offices, commissions, and services are obliged to present their needs for
12 the period of October-December, so that the draft budget of the HR HB
13 could be defined."
14 Just very briefly again, I think I understand this but could you
15 please comment on it?
16 A. After the establishment Croatian Republic of Herceg-Bosna, at one
17 of the meetings in September the conclusion is adopted to update the
18 implementation of the law on the budget of the HZ HB which says that
19 revenues are planned on a quarterly basis, revenues and expenditures.
20 Q. All right. Thank you. Now we're going to look at a series of
21 documents to sort of put things into perspective.
22 THE INTERPRETER: Your microphone, please.
23 MR. KARNAVAS:
24 Q. We're going to look at a series of documents that put things into
25 perspective and shows how things were supposed to operate or did operate
1 at least in part. And we'll start off with 1D 02132. That is a decision
2 on the allocation of funds for the needs of the Department of Justice,
3 and if you could please tell us exactly -- explain this document for us.
4 A. At the time when this was adopted in December 1992 there was no
5 budget of the HZ HB, but the monies were spent in accordance with the
6 decisions of the HVO HZ HB. A -- the relevant department, in this case
7 the justice department, would make a relevant submission. This was, I
8 believe, that they needed money for the renewal of buildings, et cetera.
9 And based on their submission, the finance department stated how much
10 money there was in the budget, and then the HVO decided about the
11 allocation of that money for the needs of individual departments and the
13 Q. All right.
14 JUDGE TRECHSEL: I'm sorry. I'm dreadfully sorry, Mr. Karnavas,
15 because I am disrupting you and I'm going a step back.
16 MR. KARNAVAS: It's okay.
17 JUDGE TRECHSEL: Because we had this interesting document, number
18 1943 just before the break where you told off to some extent, told
19 municipalities what their duty was and asked them to comply, and I would
20 like to know whether there was any effect to that, whether you were
21 successful with that letter.
22 THE WITNESS: [Interpretation] That letter was sent to all
23 municipalities; to the president of the HZ HB, Mr. Boban; the president
24 of the HVO, that is, the president of the HVO HZ HB, to be precise, and
25 after that things started improving. Of course the municipalities always
1 requested a transitional period of a month or two to pay for some
2 liabilities they had incurred, but as of September or October, the
3 situation had -- was significantly better.
4 JUDGE TRECHSEL: Thank you very much. Excuse me, Mr. Karnavas.
5 MR. KARNAVAS: No problem. And, Your Honours, just so you know,
6 coming attractions, after this particular chapter which I'm about to
7 finish, we're going to go back and look at some municipal decisions
8 during this period when now they have the legislation, see how it's being
9 actually implemented on the ground. So hopefully that may generate more
10 questions, perhaps even provide an answer or two on occasion.
11 Q. All right. If you look at 1D 02131. This is a decision on
12 granting funds for the needs of the subdepartment of education. The
13 previous document was in December, I believe. This is now January 17,
14 1993. Could you please comment on this.
15 A. This is also a decision on the allocation of funds, this time for
16 the needs of the education, culture, and sports department.
17 In late 1992 and early 1993, the HZ HB started accumulating some
18 funds which put us into the position to effect such payments.
19 Q. All right. We go to 1D 02133. This is 17 January 1993. This is
20 a decision on the allocation of funds to the HVO Kotar Varos. Maybe you
21 could tell us what is this Kotar Varos, and what is this money or this
22 allocation all about?
23 A. Kotar Varos is a municipality in Bosnia. Today that area belongs
24 to the Republika Srpska entity.
25 Under the decision on the establishment of the HZ HB, taking into
1 consideration that this area was populated by Croats and it was our duty
2 to take care of all areas populated by Croats, since they were in an
3 extremely difficult situation this aid was granted to that HVO.
4 Q. Okay. And we're talking about an area within a municipality or
5 are we talking about an entire municipality? Which of the two, just to
6 make sure I understand.
7 A. I think this is an area within the municipality of Kotar Varos
8 Q. All right. If we look at the next document, 1D 02114. This is a
9 decision on monetary assistance to be granted to the HVO municipality of
11 could please explain this.
12 A. This is practically the same approach as in the case of Kotar
13 Varos. This is an allocation to the HVO that was operating in Sarajevo
14 This is assistance to Croat -- the Croats in Sarajevo to procure food, et
16 Q. 1D 02306. We're now in April 1993, 9 April 1993. This is a
17 decision on allocating funds for the needs of the subdepartment, it says
18 subdivision but I believe it should be subdepartment, for education,
19 culture and sports. Could you please look at that and give us a quick
20 commentary on it.
21 A. This decision was taken at a time when there was no budget for
22 the needs of the of institutions mentioned here. I must say these are
23 some institutions that could not be funded because the budget of the
24 republic was not functional. Normally the university would have gotten
25 money from the higher education fund, which is in Sarajevo. The
1 institute of education was a regional institution, but the regional sees
2 had disappeared and these other cultural institutions were co-financed by
3 the republic, but at this time they were left without money, and the
4 people there had been without salaries for quite some time, and this is
5 aid which was proposed by the subdepartment for education, culture, and
7 Q. All right. And if I understand you correctly, had this not been
8 a war period, in other words, if we were normal times and things were
9 functioning, many of these institutions would have been paid out of the
10 republican budget?
11 A. Correct.
12 Q. 1D 021 --
13 JUDGE ANTONETTI: [Interpretation] Witness, I'm curious about one
14 minor thing. I can see the symphony orchestra and the national theatre
15 that are going to receive 1 million Croatian dinars and 1.800.000
16 Croatian dinars respectively. Did they both operate or was it only to
17 pay the wages?
18 THE WITNESS: [Interpretation] This is about the maintenance of
19 the institutions that had been in existence from former times. The
20 building of the symphony orchestra was destroyed due to the shelling by
21 the JNA. It was -- it burnt down. And the national theatre was also
22 damaged. There were no conditions for performances or concerts to be
23 held, but some people stayed and this was meant for their salaries.
24 Later, a string quartet was formed from what remained of the symphony
25 orchestra and other smaller ensembles, and the actors from the national
1 theatre joined the HVO's war theatre, wartime theatre, after conflict
2 broke out in Mostar.
3 JUDGE ANTONETTI: [Interpretation] As a former Finance Minister,
4 you know that certain amounts are earmarked for operational or
5 maintenance purposes or at times for investment purposes. Is any such
6 distinction to be found here in these amounts or is everything put
7 together, which is the amount that is going to be dedicated to rebuilding
8 buildings, which is the amount earmarked for paying salaries, between the
9 operational budget and the investment budget? Is there any difference?
10 THE WITNESS: [Interpretation] I said that the budget was not
11 operational. If there had been a budget it would have been clear what
12 was to go for salaries, what for other expenditures, and what for special
13 purposes such as reconstruction, et cetera.
14 This is the first money granted to these institutions and upon
15 the proposal of the subdepartment of education, culture and sports. So
16 for -- this is -- the proposal contains individual items, but this is
17 only a summary in this decision. The individual items are contained in
18 the proposal submitted to the HVO HZ HB.
19 As we did not have a budget with the relevant analyses, the
20 decision only mentions this lump sum.
21 JUDGE ANTONETTI: [Interpretation] I guess that in the symphony
22 orchestra there were Croats and Muslims as well as Serbs. Is that
24 THE WITNESS: [Interpretation] Yes, and there were also Russians
25 and Romanians.
1 JUDGE ANTONETTI: [Interpretation] Thank you.
2 MR. KARNAVAS: Thank you.
3 Q. All right. If we look at the next document which is 1D 02165,
4 1D 02165. This is a decision, as we can see, approving to the social
5 welfare centres of the municipal HVO, and we can see the various amounts,
6 dated 29 July 1993
7 A. Upon the proposal of the subdepartment of social welfare issues,
8 this decision was adopted about a one-off aid to social welfare centres
9 and the individual municipalities due to the new humanitarian situation.
10 This is a -- practically a one-off aid to these institutions that were
11 active in social welfare in the municipalities.
12 Q. Thank you. If we look at the --
13 JUDGE TRECHSEL: Excuse me, Mr. Karnavas. A simple question.
14 Mr. Tomic, we see these papers. Can we assume -- can you say
15 that these sums were then actually paid to the recipients that we have
16 here, or is there a step in between where maybe the end is not quite like
17 the starting point?
18 THE WITNESS: [Interpretation] All decisions taken by the HVO
19 HZ HB about payment have been implemented.
20 JUDGE TRECHSEL: Thank you.
21 MR. KARNAVAS:
22 Q. Okay. If we look at the next document, 1D 02134. This is about
23 the allocation of funds to the HVO Sarajevo with its head office in
24 Kiseljak, and we can see the amount. Could you please explain this
1 A. The HVO office Sarajevo
2 the circumstances, applied for -- applied for aid because they were
3 unable to organise activities that would generate revenue, and in that
4 context this decision was taken.
5 Q. And finally by way of example if we look at 1D 02137, we see
6 another conclusion. This is now August 9, 1994. And if we look at Roman
7 numeral I, it's for the needs of the HVO of the Hrasnica, in the amount
8 of a thousand Deutschmarks. Do you know what this is about?
9 A. An HVO was established in Hrasnica too. That is a place in the
10 outskirts of Sarajevo
11 Q. Okay. To that area where Croats are living outside of Sarajevo
12 A. [In English] Yes. [Interpretation] Yes.
13 Q. All right. Thank you. Now very quickly we'll go through those
14 other four documents. We can conclude this chapter, and the first one is
15 1D 01896. This is now 10 December 1993
16 plan for the judicial bodies for 1994. We see that it's signed by the
17 Minister of Justice, the then Minister of Justice, Kresimir Zubak. And
18 now if you could look -- if you could go through this very quickly with
19 us it might be -- it might be of some assistance to some of the previous
20 questions asked of you concerning budgetary matters.
21 A. When the HR HB was established and its government, Mr. Martinovic
22 became minister and all departments were required to make budget
23 proposals for all of 1994. It was considered that the conditions allow
24 the creation of a -- of an inclusive budget of Herceg-Bosna. So this is
25 a -- this is in connection with the financial plan of the judiciary
1 bodies and similar plans had been to be drafted by other ministries as
3 Q. And Mr. Martinovic was the minister of finance under the Croatian
4 Republic of Herceg-Bosna?
5 A. [In English] yeah.
6 Q. And at that time what position did you hold?
7 A. I was his deputy.
8 Q. Okay. So you were still within the -- now you went from being
9 the head of the department of finance under the -- from the Croatian
10 Community of Herceg-Bosna to being the deputy minister within the
11 Croatian Republic
12 A. Correct.
13 Q. All right. Now, before we leave this document there maybe some
14 matters of interest. On page 15, under items -- that would be in the
15 English, but it's item 67, 68, 69, 70. If I could draw your attention
16 to -- to that segment of the document. We see that it makes reference
17 under 67 to the District Prison in Mostar; 68, the District Prison in
18 Busovaca; 69, the District Prison in Gabela; and number 70, the District
19 Prison in Orasje. Could you please explain to us what -- what prisons
20 are we referring to here, if you know, that is, and I assume you do
21 because of your position.
22 A. As far as I know, this refers to civilian prisons, that is
23 prisons for criminals. They are prisons that used to be called District
25 Q. All right. And at the very end of this document, right before we
1 see Mr. Zubak's name, and he was at the time Minister of Justice. Would
2 you confirm that, that he was the Minister of Justice for the Croatian
3 Republic of Herceg-Bosna?
4 A. Yes.
5 Q. All right. We see here he says: "Minimal assets are budgeted
6 for the existing prisons, i.e., penal organs." By any chance do you know
7 what he means by that?
8 A. Probably greater funds had been requested, but the ministry had
9 to abide by a certain frame -- framework amount, so they had to be
10 realistic with regard to the budget, and all ministries in their planning
11 documents would always state that the funds requested are minimal anyway
12 so as to avoid their demands being further reduced in the process of
14 Q. All right. 1D 0 --
15 JUDGE ANTONETTI: [Interpretation] One moment, sir. This is a
16 budget proposal for 1994 stemming from the Ministry of Justice. I looked
17 at this project. The -- this amounts in total to 3 million Deutschmark,
18 and this is addressed to the Ministry of Finance.
19 What happens after that? What kind of procedure is applied? Is
20 it the minister of defence who then adopts these projects -- this project
21 and determines which should be allocated where? What happens after that?
22 Can you tell us?
23 THE WITNESS: [Interpretation] Once the ministries submit their
24 proposals, these proposals are further treated by the Ministry of
25 Finance. Most often the ministry would establish that the costs are much
1 greater than the revenue that can be provided by the Ministry of Finance.
2 Then the Ministry of Finance returns the documents for corrections and
3 adaptation to whatever is possible.
4 It isn't up to the Ministry of Finance to decide what does not
5 need to be funded or what -- what is to be reduced. That's up to the
6 line ministries to decide.
7 The salaries were easily assessable because the sums were fixed,
8 and other -- the other costs were then set in relation to the total --
9 the sum total of the salaries.
10 What we could not easily assess were other expenses such as the
11 procurement of equipment, et cetera, but that was left to the line
12 ministries to adapt these items.
13 So the requested funds and the planned revenues for that year
14 were -- were balanced in a way, and a proposal was formulated which was
15 sent to the HVO. This proposal would then be forwarded to the chamber of
16 representatives of the HR HB, and then -- only then can the budget become
17 a legally binding document.
18 JUDGE ANTONETTI: [Interpretation] In light of the events and the
19 war, you did not have imbalanced budgets, did you?
20 Let me repeat my question. In light of the war and the events at
21 the time, weren't you tempted to have imbalances on the budget?
22 THE WITNESS: [Interpretation] That was the reason why the budget
23 for 1992 and 1993 was not adopted at all, because the demands of the
24 users were far greater than the realistically possible revenues that
25 could come into the budget.
1 When the Croatian Community of Herceg-Bosna was established, when
2 Mr. Martinovic came in, a procedure was initiated to get the budget and
3 to get the revenues into the budget, the revenues that did not go through
4 the budget of the Croatian Community of Herceg-Bosna. So we're talking
5 about the amounts that the Croatian emigre community from Bosnia and
7 the budget, and in order to balance the 1994 budget a loan was obtained
8 from the Hrvatska Banka bank in Mostar, because Mr. Martinovic had this
9 idea, and he was willing -- he wanted the budget to become operational on
10 the 1st of January regardless of the price, because we had to pay
11 interest on this loan. This was a commercial loan. It was not financed
12 from the primary issue, which is an option for countries which do have a
13 central bank. And in the planning of the budget we were able to remove
14 this deficit.
15 JUDGE ANTONETTI: [Interpretation] The Croatian bank in Mostar
16 gave you a loan for what amount?
17 THE WITNESS: [Interpretation] I think that -- well, I can't
18 really tell you. I think it was 5 million German marks. This item was
19 planned in the 1994 budget.
20 JUDGE ANTONETTI: [Interpretation] What was the interest rate?
21 THE WITNESS: [Interpretation] Well, I couldn't tell you off the
22 top of my head.
23 JUDGE ANTONETTI: [Interpretation] Mr. Karnavas.
24 MR. KARNAVAS: Thank you.
25 Q. And just for point of clarification, Mr. Martinovic came into the
1 picture not with the Croatian Community of Herceg-Bosna as is reflected
2 on line 8 of page 74 but the Croatian Republic of Herceg-Bosna.
3 A. That's correct.
4 Q. All right. Now, if we look at the next document, and this may
5 assist -- assist us with some of the previous questions, 1D 02740. This
6 is 10 February 1994
7 this document is.
8 A. This is a document. It is a report to the chamber of
9 representatives about the revenues. The intent was to report once a
10 month to the chamber of representatives, which is where the heads of the
11 municipal HVOs were now, about -- to inform them about the enforcement of
12 laws from the sphere of finance. This is why there are two categories in
13 this report.
14 First of all is the classic report about the revenues that had
15 come in through the accounts, and then in the second part the report
16 deals with the territorial aspect, how the revenue was collected from
17 each municipality. So the representatives, including the presidents of
18 the municipalities, were able to see that their municipalities paid
19 disproportionately less than the others although the economic situation
20 in their municipalities was better or the same as in others.
21 Q. All right. If we -- if we just stick with this document just for
22 a couple of minutes, and we can turn to page 8 on the English side,
23 English version, and I believe this would be the second part of the
24 document. It says "Public revenue realised in the period of 1 January to
25 5 February 1994
1 income. There's a customs revenue column, and then there are some other
2 columns. And then if we go down, there are other areas that appear not
3 to be making any sorts of contributions or there's no data for them.
4 Do you see that?
5 A. In the category "Municipalities" you can see all the areas where
6 Croats lived in accordance with the decision to establish the HZ HB, and
7 this document was made like this on purpose, to show the representatives
8 that precious few municipalities actually took part in financing a large
9 number of people and needs that existed in the Croatian Republic
10 Herceg-Bosna, and there are areas, municipalities that never actually
11 started functioning as municipalities or as locations that could
12 contribute some revenue to the budget of the Croatian Republic
14 Q. All right. Thank you. And I trust this may have answered your
15 question, Judge Trechsel. It must have been of some assistance.
16 1D 02741. Very quickly, what is this? This is dated 7 March
17 1994. Again we see it's Jozo Martinovic as the Minister of Finance, and
18 could you please explain what this document is?
19 A. This is the report for two months' period. It is sent to the
20 same address, and you can see the progress report, an element -- well,
21 this report -- this monthly report was not required in accordance with
22 the law on budget. It was submitted, in fact, in order to exert pressure
23 on the municipalities to enforce the laws. It is also important to note
24 here that in this period the synthetic attacks and contribution rates
25 ceased to exist and the pension fund was re-established as was the health
1 insurance fund. So it is no longer a case where all the monies went into
2 the same account in the budget but now they were allocated to specific
3 purposes, health care, pension insurance, and so on.
4 Q. And that's how it existed prior to the break-up of the war.
5 A. That's correct.
6 Q. All right. And finally 1D 02742. Just very briefly. We can see
7 it's a similar document, but what is this document about?
8 A. It's the same thing. It's for the first quarter of 1993.
9 Q. All right. Thank you. Now, we see a lot of -- a lot of legal
10 instruments being passed through in a very short period of time. Can you
11 tell us whether you as finance -- the head of the finance department,
12 whether you were assisted by any other members of the HVO HZ HB in, for
13 lack of a better word, designing this system and drafting these -- these
15 A. Apart from a small team, there were at the beginning 4 or 5 of
16 us, and at the end I think there were 9 or 11 employees in the department
17 itself, the finance department. For the most part I communicated -- I
18 was in contact with Mr. Prlic, who had experience working in the
19 republican government and various state organs, and he was really best
20 acquainted with how budget functioned. He knew about public finances and
21 I could share with him some of my doubts about some solution and then
22 incorporate that into the proposals for various decisions.
23 Other colleagues also contributed in their various spheres of
24 expertise, whether the legal wording was correct, whether some other
25 elements should or should not be included depending on the actual sphere.
1 And once the legislation office was set up, it actually did most of the
2 work in that sphere.
3 MR. SCOTT: Excuse me, Mr. Karnavas, just before it leaves the
4 page, just a correction I believe on page 77, line 15. It says that it's
5 for the first quarter of 1993, and I think the document indicates we're
6 talking about the first quarter of 1994. Thank you.
7 MR. KARNAVAS:
8 Q. All right. Now, were you acquainted with Dr. Prlic prior to
9 getting involved in the Special Purpose Council, for instance?
10 A. When I was the president of the youth organisation in Mostar,
11 Mr. Prlic was the secretary of the socialist league, one of the seven
12 institutions that were part of the political system, in the former
13 political system, and we worked together on many projects in this area
14 where we both worked at the time, and later on we worked together when he
15 was the president of the Executive Board in the town, and then when he
16 left for Sarajevo
17 mostly worked together with some major projects that Sarajevo
18 co-financed, infrastructure, water supply. At any rate, projects that
19 were co-financed by the state.
20 Q. All right. Do you recall by any chance in what field he did his
21 Ph.D. dissertation in economics, what specific topic? If you recall.
22 A. I think it was something about exchange rates. I can't really
23 recall. He is younger than I am, so ...
24 Q. All right. Now let's look at concretely what's happening at the
25 municipal level during this period, and by way of examples we'll start
1 off with Livno. And so I'm going to now turn your attention to 1D 00362,
2 and we're going to go sort of -- these are in chronological order by way
3 of municipality, so we can just look at one perhaps as a vignette and
4 then if necessary we'll look at a couple others.
5 This is 1 October 1992
6 financing of the municipal HVO by the citizens receiving pensions. If
7 you look at Article 2, if you could please comment on this.
8 A. Livno is one of the municipalities where there were many old-age
9 pensioners who had earned their pensions working abroad, in Germany
11 Banka Sarajevo bank, through their main branch in Livno, and now an order
12 is issued that when those salaries are paid out a tax is levied, a 10
13 percent tax, for the purpose of financing the HVO of the Livno
14 municipality, and in Article 2 the bank is ordered that whenever those
15 monies come in every month the bank has to take 10 per cent of those
16 amounts and pay it into the account of the Livno municipality and then to
17 transfer the rest of the monies into the accounts of the citizens.
18 First of all, it is not within the jurisdiction of the municipal
19 HVO and it indeed cannot issue any such orders to the bank, and if any
20 kind of war tax is to be imposed then it must be paid by the end users
21 after they already receive the money.
22 Q. Thank you. And for the record, we can see it was sent to the HDZ
23 and SDA party -- political parties. That's at the end of the document.
24 1D 00315. This is a rather interesting decision on the
25 conditions for buying and selling foreign currency, and we see that this
1 is by the Livno municipality, but then when we look at Article 2, it
2 talks about Livno and Tomislavgrad municipal HVOs. And then we can see
3 Article 5 as well. It talks about foreign currency or foreign exchange.
4 Can you comment on this very briefly?
5 A. If I can go back to the previous decision for a moment. You can
6 see that this was sent to the main branch of Privredna Banka Sarajevo in
7 Livno, the Splitska Banka bank, a Croatian bank that had its branch in
8 Livno, and to the Privredna Banka Zagreb, its branch office in Livno.
9 And now the Livno municipality in this decision authorises the Privredna
10 Banka Sarajevo to buy foreign exchange with Livno and Tomislavgrad
11 municipalities as the end beneficiaries, and this is not within its
12 purview at all, and this does not have any foundation in anything. So
13 this is just an effort to make do in the chaotic situation that reigned,
14 but this is in violation of the regulations that were being passed by the
15 HZ HB, because at that time there was already an order in place
16 stipulating that the branch offices of the banks domiciled in
17 Bosnia-Herzegovina, in this case the Privredna Banka of Sarajevo, that a
18 bank should be established with a seat in HZ HB which could then perform
19 all the tasks that a bank usually deals with.
20 Q. All right. 1D 0 --
21 THE INTERPRETER: Microphone, please.
22 MR. KARNAVAS:
23 Q. 1D 00316. This is a decision on municipal administrative charges
24 for the registration of motor vehicles and we can see this is October
1 A. At that time the decree and the tariff for turnover tax was
2 already in place. It stipulated how turnover tax and stamp duty is to be
3 paid, the latter when vehicles are being registered. But in Herzegovina
4 cars are more than just a means of transport. There is a large number of
5 cars, and they are potentially a great source of revenue for the budget.
6 And in this context the municipality, by imposing this administrative
7 decision on imposing municipal stamp duty, in effect introduced a new
8 form of tax valid only in the Livno municipality, which is in
9 contravention of the regulations that the HZ HB had already passed.
10 Q. 1D 00 --
11 JUDGE ANTONETTI: [Interpretation] We will have to stop now
12 because it is just about a quarter to 2.00. The registrar has told me
13 that you have had six hours and 22 minutes, to be precise.
14 MR. KARNAVAS: Thank you, Your Honour. I have, I think, some
15 time to go on this, but I hope to finish within 45 minutes more.
16 JUDGE ANTONETTI: [Interpretation] Mr. Scott.
17 MR. SCOTT: Thank you, Your Honour. That was the reason for
18 rising to my feet. It would be helpful, I think perhaps for everyone,
19 certainly for the Prosecution, if there was some indication of where we
20 are in terms of scheduling. I appreciate Mr. Karnavas has said
21 approximately another 45 minutes. I wonder about the co-accused. It
22 would just be helpful to know, Your Honour, if we might get some
23 estimates at this time.
24 JUDGE ANTONETTI: [Interpretation] Mrs. Nozica.
25 MS. NOZICA: [Interpretation] Thank you. Good afternoon, Your
1 Honours. As far as I know, the Defence would use all the time allotted
2 to it for the cross-examination. Now, as to how we're going to allocate
3 this time, we don't know. We suppose that Praljak, Petkovic, and Stojic
4 Defence would certainly cross-examine, and we will inform you tomorrow if
5 any other Defence teams have any intention of cross-examining.
6 JUDGE ANTONETTI: [Interpretation] Mrs. Nozica, how much time will
7 you need?
8 MS. NOZICA: [Interpretation] I said all the time that the Defence
9 is allotted, and that would depend on the time taken by my learned friend
10 Mr. Karnavas. As far as I know, it's supposed to be three hours or
11 perhaps a bit more, because he took more. So this is the only thing, the
12 only reason why I can't tell you how much we intend to use until he has
13 completed his examination-in-chief.
14 JUDGE ANTONETTI: [Interpretation] Mr. Kovacic?
15 MS. PINTER: [Interpretation] Your Honours, as indicated by our
16 learned friend Mrs. Nozica, we have an internal arrangement about the
17 allocation of the time allotted to us, three hours, three hours 20 or 40
18 minutes, and then we will probably divide that time amongst us.
19 MS. ALABURIC: [Interpretation] Your Honours, I really don't have
20 anything to add to what my colleagues have said, but I can just conclude
21 that as things are now, the Prosecution would not get to cross-examine
22 the witness tomorrow.
23 MS. TOMASEGOVIC TOMIC: [Interpretation] Your Honours, the Coric
24 Defence has not yet decided to cross-examine or not, but we will consult
25 our colleagues and then we'll see.
1 JUDGE ANTONETTI: [Interpretation] Mr. Ibrisimovic.
2 MR. IBRISIMOVIC: [Interpretation] Mr. President, as things are we
3 will not be cross-examining this witness. Thank you.
4 JUDGE ANTONETTI: [Interpretation] Very well. Mr. Scott, you will
5 undoubtedly not start tomorrow. That seems pretty clear.
6 I wish everyone a pleasant afternoon, and we shall meet again
7 tomorrow morning at 9.00.
8 --- Whereupon the hearing adjourned at 1.46 p.m.
9 to be reconvened on Wednesday, the 29th day of
10 October, 2008, at 9.00 a.m.