Switzerland’s Federal Supreme Court, in a decision made public yesterday, has concluded that a bank in the Swiss Canton of Ticino is prohibited from divulging the names of lawyers and a law firm associated with the bank’s US clients to the US IRS and Department of Justice.
In the decision, reached September 22, the Federal Supreme Court confirmed the ruling of the Commercial Court of the Canton of Zurich and has rejected the appeal of the bank.
The bank was involved with the US Department of Justice, Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks, designed to settle disputes between Swiss Banks and the United States linked to tax evasion of US related accounts held in Swiss banks.
The bank intended in this context to provide to the US with the names of two Swiss lawyers who had managed accounts for US customers as authorized representatives of the bank as well as the name of the law firm that introduced the American clients to the bank.
The Federal Supreme Court concluded that the delivery of data to US authorities is in principle a violation of privacy, finding that the level of data protection in the US insufficient.
The Court said that delivery of data is allowed only if the foreign legislation ensures an adequate level of data protection under article 6 paragraph 1 LPD of the Federal Act on Data Protection.
Moreover the Court said that, in the absence of legislation that guarantees adequate protection, personal data may be disclosed abroad only if it is essential to safeguard an overriding public interest, under Article 6 paragraph 2 LPD.
The Court concluded that it was not demonstrated that the delivery of data was essential to safeguard a public interest.
The Court said that the delivery of data would have been authorized only if the bank had proved that not delivering of data would intensify again the tax dispute between US and Switzerland, put the Swiss financial market under pressure, or destroy the reputation of Switzerland as a reliable negotiating partner.
Therefore, the Federal Supreme Court concluded the decision given by the Commercial Court did not conflict with the Federal Act on Data Protection.
Hence, the Swiss Federal Supreme Court prohibited the bank to exchange information with the IRS and DOJ, within the framework of the bank’s participation in the DOJ’s Swiss bank program.
Davide Anghileri
Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.
Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.
Davide can be reached at [email protected].
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