Former Yugoslav Navy captain Cedomir Borojevic has been placed in investigative prison in Split on suspicion that he ordered an artillery attack on Sibenik in September 1991.
Borojevic was arrested at the Karasovici border crossing between Croatia and Montenegro on March 16. Prosecutors requested 30-day investigative detention, citing a risk of flight, but Split County Court investigating judge Davor Svalina granted the defence motion for bail on Sunday.
The prosecution announced an appeal against the bail ruling, and Borojevic will remain in custody pending completion of the appeal process or bail payment.
Borojevic is suspected of war crimes against civilians and violations of the Geneva conventions.
"He conveyed an order to his crew to attack the city of Sibenik without selecting targets, by firing all weapons available at civilian buildings and civilians with the aim of intimidating them, destroying their property and occupying the city. They opened fire from a boat using 40mm Bofors guns and 20mm heavy machineguns, firing at civilian buildings," the Chief Public Prosecutor's Office (DORH) said in a statement, adding that the attack had threatened human lives and caused extensive damage to residential and commercial properties.