Swiss Government Intervenes In UBS Case

by Ulrika Lomas, Tax-News.com, Brussels

06 May 2009

On April 30, Switzerland filed a brief with the United States District Court in Miami competent in the UBS case. In its brief, the federal government explains its legal position on the case and emphasizes that Switzerland's legal system, and thus its sovereignty, must be respected.

In the civil proceeding against UBS before the United States District Court in Miami, the US Department of Justice and the US tax authority, the Internal Revenue Service (IRS), are requesting the handing over of information on 52,000 account holders suspected of tax evasion. This proceeding has a direct bearing on the Swiss-American Double Taxation Convention, as well as on the Swiss legal system and Swiss sovereignty. Switzerland is therefore taking the opportunity provided for in US procedural law to define its position on the case to the Court in what is known as an amicus curiae brief. This does not involve the Swiss government as a party in the case.

In its brief to the Court, the Swiss government underscores that the US civil proceeding against UBS is contrary to the current Tax Treaty between Switzerland and the USA. This Treaty provides for a procedure for the exchange of information, to which the parties to the Treaty agreed in full knowledge of all of the relevant facts as well as the restrictions. If the USA were to act outside of the agreed upon framework in order to obtain the information it wants in Switzerland, it would be disregarding the Treaty by unilaterally circumventing the agreed upon procedure.

In its brief, the Swiss government also points out that an attempt to force UBS to hand over client data would violate Swiss sovereignty since the information in question is located in Switzerland. Furthermore, such an attempt might force UBS to violate Swiss law. Finally, the Swiss government emphasizes that no other state would hand over data on that scale and in that way.

On April 28, the Swiss government entered into negotiations with the USA on a revision of the Tax Treaty between the two nations. The OECD standard on international administrative assistance in tax matters according to Art. 26 of the OECD Model Tax Convention is to be included in full in the revised Swiss-US Tax Treaty. In a statement the Swiss government warned that the pending civil court proceeding against UBS might prejudice the successful conclusion of these negotiations and jeopardize ratification of the new Treaty.

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