Skiplink Navigation

Main Features

Tax evasion case Has UBS’s CHF5 billion legal gamble backfired?

UBS legal team in court

UBS's legal team, including General Counsel Markus Diethelm (centre right, pictured at the Paris court), have vowed to continue the fight

(Keystone / Christophe Petit Tesson)

UBS is refusing to sit back and lick its wounds after being hit with financial penalties totaling €4.5 billion (CHF5.1 billion) in France. By appealing the decision, has it bitten off more than it can chew? Or can it claw back lost ground in the high stakes duel with the French authorities?

Round one of the tax evasion legal battle has clearly been won by French prosecutors. A Paris court on Wednesday found UBS guilty of systematically helping French citizens avoid paying taxes. It imposed a €3.7 billion fine plus €800,000 in compensation costs.

UBS, however, insists that no clear-cut evidence was presented in court that proved the prosecution’s case. Swiss corporate legal expert Peter V. Kunz, a professor of law at the University of Bern, tends to agree.

“It was a risky gamble. What UBS did not take into account was France,” he told “I am quite convinced that had the same evidence been produced in a German court, the result would have been different.”

Kunz believes that weeks of French gilets jaunes street protests, in part over taxes, has created a volatile anti-establishment climate that may well have worked against UBS. And yet appealing to a higher court in several months’ time may be a gamble – but it’s one worth taking, he believes.

Criminal records

“French prosecutors also have to weigh up the risks of losing the appeal,” he said. “That would be a disaster for them. It might push them into negotiating a lower settlement.”

Not everyone agrees with Kunz. UBS whistleblower Bradley Birkenfeld helped bring down UBS in a similar case in the United States. In a Facebook post, he claimed credit for providing testimony in Paris that contributed to the criminal conviction.

“This is a victory for the French people and a victory for the rule of law,” he wrote.

The Paris verdict bears little resemblance to the out-of-court settlement UBS managed to negotiate in the US in 2009, where the bank ‘escaped’ with a $780 million fine and no criminal record. The bank would have had less appetite back then to take on the country that dominates the financial markets, Kunz believes.

And these days, a decade on from the US tax evasion crackdown, having a criminal record is not such a problem for corporate entities, he argues. “In the last 10 years there is hardly a bank without one.”

And in Sergio Ermotti, Kunz believes UBS now has a more street-fighting CEO than in the past.

Lengthy rebuttal

However, UBS still needs to explain its significant setback to shareholders at its annual general meeting on May 2. This is another point that Birkenfeld raises in his Facebook post. The fine would wipe out the group’s $4.9 billion (CHF4.9 billion) profit from last year.

A day after the Paris ruling, UBS began its public campaign to justify its actions in a lengthy rebuttal of the “extremely superficial, inconsistent and contradictoryexternal link” judgement. This statement catalogues a long list of legal arguments why the bank should continue its fight.

The bank knows it has to win over the French courts, the media, and even public opinion and shareholders to stand a chance of reversing its setback.

Neuer Inhalt

Horizontal Line

WEF 2018

WEF Teaser 2018

Why Switzerland struggles with dirty gold

subscription form

Form for signing up for free newsletter.

Sign up for our free newsletters and get the top stories delivered to your inbox.

Click here to see more newsletters