Slovenia says it is ready to up the ante in a dispute with Croatia over fishing rights that also has major ramifications for EU enlargement plans in the Balkans.

Slovenia and Croatia have been locked in a fight over their mutual border, including the boundary in the Bay of Piran in the Adriatic Sea, since the fall of Yugoslavia. Now, frustrated that Croatia will not accept an international arbitration ruling, Ljubljana is threatening to open up new legal and diplomatic fronts.

Two diplomats said Slovenia plans to take the case to adjudication in Brussels by filing an Article 259 infringement proceeding against its neighbor.

Resorting to Article 259 is a big step as the measure is used to confront a nation for acting outside EU treaty obligations. An EU legal expert said it was an extreme step that could lead to a ruling from Brussels or the European Court of Justice (ECJ). It could ultimately result in fines or even restrictions on EU voting rights if Croatia ignores a decision from the Commission or the ECJ.

Few EU officials expect the Slovenian-Croatian dispute to spiral to such a dramatic endgame, and the Slovenians are focusing much of their efforts on a parallel legal offensive that could restrict the millions of euros that Croatia receives from an EU fisheries fund.

Ljubljana argues that a 2017 ruling at The Hague is valid, while Zagreb says it doesn't recognize the decision.

"If Croatia does not change its position on implementation in the short term, Slovenia will be forced to use legal means at the EU level," Slovene Prime Minister Miro Cerar told POLITICO, when asked about whether Ljubljana would trigger an Article 259 procedure over the border.

Under Article 259 of the Lisbon Treaty, Slovenia would file a complaint with the European Commission, which will then determine whether to investigate. If Brussels declines to intervene within three months, Slovenia can take the matter to the ECJ.

The Adriatic dispute has cast a shadow over the EU's plans to bring in new members from the Western Balkans, possibly by 2025. Alarmed by the failure of Zagreb and Ljubljana to settle their differences, the European Commission stated in its new strategy for the region, released this month, that countries must resolve bilateral disputes before they can join the bloc.

That will be a tall order for many would-be members.

In an interview with POLITICO, Croatian Prime Minister Andrej Plenković said that the problems in the Bay of Piran should be resolved bilaterally, not in Brussels.

“We hope that the solution can be found and the situation de-dramatized because it’s not a major issue and because that should never have never been moved from a state-to-state level ... We should calm down the situation so that ordinary citizens don’t feel any negative consequences. This is key,” he said.

Anger in the Adriatic

At its heart, the Bay of Piran dispute boils down to where fishermen are allowed to work. Both the Slovenians and Croats issue fines for straying into each other's waters.

Ljubljana argues that a 2017 ruling by the Permanent Court of Arbitration in The Hague — which gives Slovenia 80 percent of the water — is valid. Meanwhile, Zagreb says it doesn't recognize the decision, and instead follows the U.N. Convention on the Law of the Seas, which it says gives it 50 percent of the bay.

Slovenia accuses Croatia of violating the EU Common Fisheries Policy, specifically its regulation on illegal, unreported and unregulated (IUU) fishing. It complains Croatia helps illegal fishing by sending police escorts with its fishermen into contested waters and then prevents Slovene inspectors from boarding the vessels. It also complains that Zagreb does not provide data on catches in the area.

Slovene officials are concerned that Brussels will not take action, and that any subsequent court proceedings could drag on for years.

A spokesperson for the Croatian government said: "They are not Slovenian waters ... Croatian police have been patrolling these Croatian waters as they have done in past decades."

"This campaign against Croatian fishermen and the heightening of tensions is both unacceptable and counterproductive and goes against the basic common European values and principles," the official added.

If Slovenia can prove its case, Croatia could be forced to pay back between 5 percent and 50 percent of its €252.6 million allocation under the European Maritime and Fisheries Fund as a penalty for IUU fishing.

That could be a more practical approach than triggering Article 259. Slovene officials are concerned that Brussels will not take action over an Article 259 complaint, and that any subsequent court proceedings could drag on for years.

"It is unacceptable that Slovenian and Croatian fishermen have become the hostages of incompetent politics, which is unable to implement a court ruling and determine the sea border and fishing regime," said Franc Bogovič, a Slovene member of the European Parliament from the center-right European People's Party group.

Croatia argues that the ruling from the PCA in The Hague is invalid because Slovenia's arbitrator was forced to step down in 2015 after his neutrality was questioned because he had been in contact with a Slovene official. Croatia's then-Prime Minister Zoran Milanović wrote to his Slovene counterpart Cerar that “the credibility and integrity of the arbitration process as a whole have been to such an extent compromised that, unfortunately, Croatia is not of the opinion that the arbitration process can continue in this or a similar form.”

After the furor over Slovenia's arbitrator, the tribunal continued without arbitrators from either Slovenia or Croatia. The PCA ruled on the Bay of Piran on June 29, 2017, giving both countries six months to implement its decision. Croatia argued, however, that it was not bound by this ruling after declaring the arbitration process invalid.

Ruža Tomašić, a Croatian member of the European Parliament from the European Conservatives and Reformists Group, insists a new arbitration process is the only way forward.

"Thanks to Ljubljana, we are now back where we started. I see no solution other than new negotiations. The arbitration ruling can be a starting point but nothing more," she said.

Florian Eder contributed reporting.