Swiss Court Rules Illegal UBS Disclosure of US Account Holders

by Karl Hindle - London, UK

Last February, FinMa, the Swiss banking regulator ordered the release of the account information of 255 US residents to the US Internal revenue Service (IRS).

The decision sent shock waves through the Swiss banking establishment which prides itself on client confidentiality and privacy, and which also led directly to the weakening of Swiss banking secrecy laws by Bern.  A Swiss lower court ruling was revealed today that heard the issue on the legality of the disclosures and which found they were illegal.  FinMa is now considering whether to appeal to the Swiss Federal courts.

Rued Winkler, a law firm in Zurich acting for several American UBS account holders who obtained the recent ruling, issued a statement from managing partner, Andreas Rued in which he stated:

These customers have suffered massive material and immaterial losses and are now looking for compensation."

There is a moral tale in this somewhere but for the life of me, I can't see it.

The US authorities and any proponent of a clamp down on using offshore havens for domestic tax evasion must be sniggering and gloating.  An offshore tax haven being sued for unlawful disclosure and invasion of privacy for losses caused by the unlawful behaviour of account holders in their home country.

Poetic justice perhaps.

Rued is confident of winning if the case goes before the Swiss Supreme Court.  No matter what the outcome, he and his law firm are certain to reap the benefits of roguish conduct in the shape of hefty fees.  At the moment, it is up to FinMa to make the next move on an appeal to the top Swiss court, but if this happens it could be heard and ruled upon by the summer.  This will open the door for claims against FinMa and probably UBS as well.

UBS is silent on the matter, as well it ought to be - in this instance it is literally the piggy in the middle.  FinMa on the other hand claims it had the power to order the release of the information on the grounds of its powers under Swiss banking laws enabling "emergency intervention" in the event of "serious liquidity problems".  

How releasing account holder information relates to "serious liquidity problems" is unclear and must be cold comfort for the 255 American account holders.  Four UBS account holders have been jailed or sentenced to probation already, while significant sums have been seized or levied as fines by the IRS and US courts handling the numerous tax evasion cases which have resulted.