The Swiss Federal Court has decided that data on around 40,000 clients of Swiss bank UBS should be handed to Paris tax authorities. The decision has been described as key for the country’s banking sector.
Judges approved the move by three to two, it was announced on Friday. The court said external link that France’s administrative assistance request was not an “inadmissible fishing expedition”. The specialty principle, whereby the information should not be used for other purposes, does not justify refusing the request, given the guarantees given by the French authorities, it added.
UBS said in reaction to the ruling: “We take note of the decision, which reverses the 2018 ruling of the Swiss Federal Administrative Court following an appeal by the Swiss tax authority”.
“We will carefully review the written verdict. Regardless of the decision, it is important to note that the Swiss Federal Tax Authority will have to ensure that any data cannot be used against UBS in its pending criminal proceeding in France. This was also the clear expectation of the court today,” it wrote in an emailed statement.
In May 2016, the French tax authorities requested administrative assistance from the Federal Tax Administration (FTA). They wanted historical details about UBS clients who lived or had lived in France.
The FTA agreed to help in February 2018, but Swiss bank UBSexternal link, along with account holders, filed a complaint against this, which was upheld by the Federal Administrative Court. The FTA, wanting a specified judgement in the administrative assistance issue, took this court decision to the Federal Court.
Switzerland’s highest courtexternal link has now decided that the the FTA may hand over the data to the French authorities. This includes the account details – including names and addresses – of thousands of French citizens suspected of hiding funds in Switzerland.
However, the judges said the data could not be used by prosecutors in Paris against UBS in an ongoing criminal case.
UBS is appealing the €3.7 billion (CHF4.2 billion) penalty levied in February after the lender was found guilty of helping clients evade taxes in a Paris trial.
The Swiss banking giant and its French subsidiary were accused in this case of laundering proceeds from tax fraud carried out from 2004 to 2012. UBS denies these charges.
In terms of Friday’s verdict, UBS Chief Executive Officer Sergio Ermotti has said that this week is importantexternal link for the “entire financial centre” in Switzerland. This was reiterated in the UBS statement on Friday.
Settlement in US case
In the past, the leading Swiss bank has also been at the centre of a controversial data transfer to the United States.
UBS was fined $780 million (CHF772 million) in 2009 for aiding and abetting US tax evaders. The Department of Justice (DoJ) then demanded the names of more than 50,000 UBS clients, which it later trimmed down to 4,450.
The Swiss courts refused to allow the information to cross the Atlantic until the Swiss parliament gave the transmission legal status in 2010 by formally voting on the handover treaty.
In 2015, the European Court of Human Rights turned down a request by a UBS bank client in the US to protect his right to privacy, saying economic interests of Switzerland outweighed his individual privacy.
The Swiss finance ministry said in a statementexternal link that it had taken note of the Federal Court decision and would “carry out a detailed analysis once the written grounds for the judgment are available”. “The decision concerns administrative assistance in this specific case which dates back many years,” said finance minister Ueli Maurer. “Each future request will also be subject to a detailed examination as to whether the conditions for the transmission of data have been fully met.”
The Swiss Bankers Association (SBA) said it was “highly sceptical” of the verdict, but that it would also wait for the written decision before making a conclusive assessment. “The hurdles for pure evidence-gathering activities could be lowered, thus increasing the risk of fishing expeditions,” it said. “The use of data for purposes other than tax could also be permitted, which could fatally weaken the principle of speciality. Compliance with that principle is key and is an internationally recognised standard.”