Last summer’s landmark deal under which the Swiss and US governments agreed that UBS should transfer some client account details is in danger of collapsing following a court ruling. The Swiss government is expected to announce this week how it intends to revive the deal, media reports said.
In August, the Swiss government said that UBS should transfer the names of 4,450 wealthy US citizens to the US tax authorities, a move that represented a partial breach of the Alpine state’s historic bank secrecy laws. The agreement, which formed part of a civil case, came after UBS agreed, in a separate, criminal case, to pay a $780 million fine to the US to resolve charges that it helped US citizens evade tax.
The wrangling over client data transfer means that UBS, which may have hoped it had put the saga behind it and could focus on reviving its fortunes, faces the threat of continued, time-consuming litigation over the matter.
Swiss officials are seeking to revive the data transfer agreement after a federal court in Switzerland last week ruled in favour of a legal challenge to the Swiss-US accord. According to the Financial Times, the Swiss government is expected to seek retrospective parliamentary approval for the accord, which was tailor-made to defuse a US legal challenge to UBS.
The accord was framed in the context of existing bilateral treaties covering bank secrecy, and the restricted circumstances in which it could be broken. The accord also gave UBS clients the right to challenge any lifting of confidentiality, the newspaper explained. However, in its ruling on a first “pilot” case, the Swiss court surprised lawyers by saying the decision to reveal the client’s name had been illegal.
The challenge to the accord had been brought on behalf of a millionaire US woman. Tax evasion - in contrast to the laws of countries such as the US and UK - is not a crime in Switzerland, but tax fraud is. The court deemed that tax evasion was the issue and therefore Swiss secrecy law applied.