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FINMA Acted Unlawfully In UBS Case, Swiss Court Rules

by Ulrika Lomas, Tax-News.com, Brussels

12 January 2010


Switzerland’s Federal Administrative Court has ruled that the order issued by the Financial Market Supervisory Authority (FINMA) to disclose UBS client information to US authorities was unlawful.

According to the Court, FINMA did not have the right to issue the order under its own authority, but should instead have referred the matter to the Federal Council for approval. The Court judged that in this case, neither the Swiss Banking Act, nor the right of constitutional necessity could be invoked.

FINMA ordered the disclosure of UBS client information to the Internal Revenue Service back in February last year. Complaints against FINMA have subsequently been made by clients.

While the court expressly acknowledged the difficult situation in which FINMA had been placed, it nevertheless stipulated that Articles 25 and 26 of the Swiss Banking Act were insufficient grounds on which to base its decision.

Although these measures allow FINMA to take preventative measures if there is a risk of bank insolvency, they do not authorise the supervisory authority to directly disclose client information,according to the court.

Given that the Federal Council is the only body to have recourse – together with parliament – to the country’s constitutional right of necessity, FINMA was not able to invoke this right either, the court noted.

In response to the court’s ruling, FINMA emphasized that it had based its decision on Articles 25 and 26 of the Swiss Banking Act, which it argued enable the Authority to impose unspecified preventive measures if it has reasonable grounds to suspect serious liquidity problems.

FINMA stated that: “These measures may affect individual creditors' rights same as payment moratoriums or payment bans which, unlike the "preventive measures", have been specified in law.”

The statement continued: “Following consultation with the Federal Council, the FINMA Board of Directors ordered the disclosure of the client data as it considered this as the only way to avoid the real threat of the US authorities starting proceedings against the bank, which would have threatened its existence and seriously worsened its liquidity situation which, in turn, would have impacted the Swiss economy.”

FINMA now aims to analyze the ruling closely before deciding whether or not to launch an appeal to the Federal Supreme Court.


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