With the UBS Agreement of August 19, 2009, Switzerland committed itself to processing the new US treaty assistance request concerning around 4,450 accounts within one year. In its ruling dated January 21, 2010, the Federal Administrative Court stated that there were insufficient legal grounds for providing treaty assistance in around 4,200 cases of continued and serious tax evasion. This placed a question mark over the implementation of the UBS Agreement.
The Federal Council, however, believes that there is no alternative to implementing the Agreement in order to lay the UBS affair to rest once and for all. The US is additionally insisting that Switzerland meet the obligations it entered into under international law when the Agreement was signed and has already warned during consultations that it would otherwise take the planned “appropriate compensatory measures”. It must be assumed that the US would at least restart its civil litigation against UBS and that a US court could order the bank to disclose the details of some 4,450 accounts.
The Federal Council therefore intends to remedy the shortcomings identified by the Federal Administrative Court by making formal changes to the UBS Agreement and requesting approval of these changes by parliament. The amending protocol signed on March 31, 2010 makes it clear that the Agreement in fact constitutes an international agreement rather than a mere competent authority interpretation and thus requires approval by parliament. Furthermore, a conflict rule ensures that, in case of doubt, the revised UBS Agreement takes precedence over the applicable bilateral double taxation convention and that the provision of treaty assistance is possible not only in cases of tax fraud, but also in cases of continued and serious tax evasion.
Agreement Being Applied on a Provisional Basis
The revised UBS Agreement has been applied on a provisional basis since the amending protocol was signed, i.e. the Swiss Federal Tax Administration (SFTA) can also issue final decisions on the basis of the new legal foundations in cases of continued and serious tax evasion. The Federal Council is convinced that both of the prerequisites for provisional application stipulated in the Government and Administration Organization Act – the safeguarding of important Swiss interests and particular urgency – are met. On the one hand, an escalation of the conflict with the US and the related risks for the Swiss economy can only be avoided if Switzerland meets its obligations under international law as quickly as possible. On the other, the deadline for issuing all final decisions (the end of August 2010) cannot be met without provisional application.
The provisional application of the revised treaty request agreement does not take the parliamentary decision for granted. Parliament is free to decide as it sees fit. To ensure that this is the case, the Federal Council has instructed the SFTA not to pass any client details to the US before parliament approves the UBS Agreement. This does not apply to those cases where the person involved has expressly consented to his or her details being disclosed or has made a voluntary disclosure under the program operated by the US Internal Revenue Service (IRS).
Not Subject to Optional Referendum
The revised UBS Agreement concerns only one request for treaty assistance from the US and a specifically defined group of some 4,450 UBS clients. The Agreement has a fixed term and does not govern future treaty assistance relations with the US in the general, abstract sense. Instead, it resolves a special case in the legal and sovereignty conflict with the US. Consequently, it does not contain any key provisions that establish new law and should therefore not be subject to an optional referendum.
Last modification 14.04.2010