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Court rules UBS data transfer to US illegal

The transfer of UBS data came just a month before the government decided to ease banking secrecy Keystone

A Swiss court has ruled that the handing over of confidential UBS bank details to United States investigators by the Swiss authorities last year was illegal.

The federal administrative court said the Swiss Financial and Market Supervisory Authority (Finma) abused its power when it ordered that details of 285 account holders suspected of tax evasion in the US be sent to Washington.

“Finma could not base its decision on emergency rights enshrined in the constitution,” a statement said on Friday.

The government did not give the green light to apply the emergency clause, but only asked Finma to take the necessary steps to prevent a legal complaint by the US against UBS, the statement added.

The regulatory authorities repeated that their decision was based on consultations with the government and aimed at protecting the bank and the Swiss economy from serious damage.

Finma said in a statement that it will examine the court decision before deciding on whether to lodge an appeal.

UBS declined to comment on the decision.

But a lawyer representing UBS clients welcomed the ruling. Andreas Rüd said it was an important first step. He said it was too early to say whether he would sue the bank or the regulator for damages.


Carlo Lombardini, expert on banking law in Geneva, came out in favour of the court ruling because it helped to reassure clients.

“It proves that the justice system in Switzerland works,” he told the Swiss News Agency.

Although the court decision cannot make the clocks go back, Lombardini says much depends on whether the US authorities will be allowed to use names that were handed over to them in a procedure considered illegal.

Peter V. Kunz, professor of business and comparative law at Bern University, said he was surprised by the scope of ruling which could have consequences for Finma.

The reputation of Finma is at stake, notably abroad, if the ruling is upheld and it could face criminal charges, he told public radio.

Political fallout

The ruling is seen as a setback for the Swiss government and Finance Minister Hans-Rudolf Merz.

Kunz says the government shirked from taking a clear stance and delegated the decision to Finma.

The main political parties were divided in their reaction. The centre-left Social Democrats and the Greens as well as the rightwing Swiss People’s Party see the court ruling as confirmation of their policies.

They call for a parliamentary investigation into Finma, the cabinet and the finance ministry.

The centre-right parties appear to downplay the impact of the court ruling.

The Christian Democrats said Finma had helped to limit economic damage even if it acted illegally in the eyes of the court.

In a similar vein the Radical Party said it was important to boost the position of the regulator. It reject any calls for Merz – a member of the Radical Party – to step down.

The cabinet is due to discuss the court ruling at its regular meeting next week, according to the government spokesman.



Banking secrecy

This content was published on Swiss banking secrecy is intended to protect information concerning bank clients from access by third parties, whether private or official. The banks refer to it as bank client confidentiality. There are clear limits to banking secrecy. It is lifted if criminal activities are suspected. It will not, however, be lifted in cases of tax evasion.…

Read more: Banking secrecy

Banking secrecy

Last February Finma and UBS announced they would disclose details of 285 clients suspected of tax evasion by US authorities.

UBS paid $780 million (SFr806.5 million) in fines relating to this matter after admitting “improper activities” from some of its employees.

It paved the way for an easing of banking secrecy rules in line with the standards of the Organisation for Economic Co-operation and Development, but intense pressure on UBS continued.

In August the Swiss government also agreed to hand over a further 4,450 account holder details to the US Internal Revenue Service investigating cases of suspected tax fraud.

As agreed with the US government as part of a deal the first 600 files were processed by the end of last year and will be handed over pending court appeals.

Urs Geiser, and agencies

In February 2009 Finma ordered UBS to hand over confidential data about 285 clients to the US authorities investigating cases of tax evasion.

In March the government decided to adopt OECD rules, effectively easing banking secrecy rules for foreign clients of Swiss banks.

A further 4,450 account holder details are to be divulged to the US authorities as part of a deal agreed between the Swiss and the US governments last August.

The Swiss had processed the first 600 files of suspected tax evasion by the end of 2009.

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR