Thousands of UBS client accounts must be disclosed to France, says Swiss supreme court

Monday, 29 July, 2019

Switzerland’s highest court has ordered the Federal Tax Administration (FTA) to hand over information on 40,000 UBS clients to the French tax authorities.

Paris has been trying to get the information since May 2016, when it submitted an administrative assistance request under the two countries’ mutual assistance agreement. The Swiss tax authority (FTA) accordingly collected the information from UBS, but the bank, and some of its clients, appealed.

In July 2018, the Swiss Federal Administrative Court in St Gallen allowed UBS’ appeal and told the FTA not to cooperate with the French request, which was based only on names and addresses of UBS clients with French addresses. The court dismissed the request as a ‘fishing expedition’ that did not explain why it was thought the accounts had not been declared.

The FTA then appealed to the Swiss Federal Supreme Court. This court has now reversed the lower court’s finding and ordered the FTA to release the client data to France. It decided by a 3:2 majority that France’s administrative assistance request was not an ‘inadmissible fishing expedition’ in the light of guarantees given by the French authorities to use the data only for the purposes stated in its administrative assistance request.

Switzerland’s government issued a statement noting that approval of disclosing the data to France has only been granted ‘in principle’, suggesting that further discussions will take place before this actually occurs.

‘The decision concerns administrative assistance in this specific case which dates back many years’, commented Swiss president 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.’

UBS said it would ‘carefully review’ the written verdict, when it appears. ‘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’, the company said.

The Federal Department of Finance also noted that use of the information is restricted by the ‘principle of speciality’, so that it cannot be used against UBS itself. UBS is currently challenging a EUR3.7-billion fine imposed by France this February for helping French clients evade taxes.

However, the decision could set a precedent for other foreign governments seeking information from Swiss banks. UBS’ chief executive, Sergio Ermotti said that the verdict is important for Switzerland’s entire financial centre.

The Swiss Bankers Association (SBA) issued a statement expressing scepticism about the Supreme Court’s verdict. ‘Under certain circumstances, it may mean that administrative assistance in tax matters is no longer limited to purely administrative assistance’, it commented. ‘The hurdles for pure evidence-gathering activities could be lowered, thus increasing the risk of fishing expeditions, [and] the use of data for purposes other than tax could also be permitted, which could fatally weaken the principle of speciality.’

Sources

Martin Scarpino