Swiss lawmakers approved a UBS AG tax treaty, ending a two-year legal battle with the US that threatened the bank's American operations.
The agreement, through votes in both chambers of parliament, came after eleventh-hour negotiations between the upper and the lower house in which deputies dropped a demand for the treaty to be opened to a nationwide referendum.
Switzerland agreed in August 2009 to hand over data on as many as 4,450 UBS clients suspected of tax evasion to the US Internal Revenue Service. Parliamentary approval became necessary after a court ruled on January 21st that the agreement couldn't be enforced as it then stood. A referendum would have meant a deadline for disclosure of the information would have been missed.
The Bern-based lower house, or National Council, voted 81 by 63 to endorse the treaty without the referendum option, with 47 abstentions. The upper house, or Council of States, approved the treaty earlier today. Though supported by the government and the Liberal and Christian Democratic parties, the agreement became entangled in partisan politics as both the nationalist Swiss People's Party, or SVP, and the Social Democrats made their support conditional on their own agendas.
The SVP dropped its initial opposition and its insistence on the referendum option, saying that rescuing the UBS treaty was in the country's higher interest. It previously argued that Switzerland should stand up to US pressure and maintain its banking secrecy.
The Social Democratic Party remained opposed to the end, on the grounds the deal should have been linked to a tax on bankers' bonuses and measures to contain the risk of failure at UBS and the second-biggest lender, Credit Suisse Group AG.
In February 2009, UBS avoided US prosecution by paying $780 million, admitting it helped wealthy Americans evade U.S. taxes from 2000 to 2007, and handing over account data on more than 250 US clients. The next day, the U.S. sued UBS, seeking data on 52,000 Swiss accounts in a so-called John Doe summons.
Today's vote removed the threat of further civil litigation against UBS under the John Doe summons and additional fallout under criminal law. The US Justice Department agreed last year to defer prosecution of UBS for allegedly aiding tax evasion. Justice minister Eveline Widmer-Schlumpf said at the time UBS faced an "existential threat" without the accord and the Swiss economy would have suffered severe repercussions.
In a January ruling, the Swiss Federal Administrative Court said the deal struck between Switzerland and the US wasn't enforceable under existing bank-secrecy rules.
REUTERS