Thomas Cottier“Tax fraud or the like”

2.53 Thomas Cottier, „Tax fraud or the like“: Überlegungen und Lehren zum Legalitätsprinzip im Staatsvertragsrecht, in Zeitschrift für Schweizerisches Recht, Zeitschrift für Schweizerisches Recht, 2011, I, p. 97-122

[„Tax fraud ort he like“: Considerations and lessons learned on the principle on legality in the law of treaties]

a) Background

The text at hand is situated in the context of the dramatic and internationally coordinated efforts to curb tax evasion that were brought about by the financial crisis of 2008 and have been gathering momentum and political thrust from the G20 and OECD. Approximately twenty five percent of private assets held by individuals in the world are held in Swiss banks. This is fostered by specific policies of the Swiss financial centre and affected by a certain business model in trans-border private banking and a defensive policy and use of the Swiss banking secrecy provisions and the provisions of the double taxation treaties concerning the treaty-based exchange of information.

The text is a critical scientific review and generalization of the UBS case, which led to a potential conflict of jurisdictions between Switzerland and the United States. The text appeared in a special issue of the Zeitschrift für Schweizerisches Recht (Journal of Swiss Law) on a variety of burning issues of the UBS case. The text deals with considerations and lessons learned from the UBS case with a specific focus on the role and the function of the general principle of legality as regards to the UBS agreement, a treaty of mutual legal assistance between the United States and Switzerland providing for and leading to a disclosure by UBS of 4550 identities of accounts based on special criteria set forth in an Annex to the Agreement upon a specific request of legal assistance by the United States.

Thomas Cottier opined on behalf of the Swiss Government together with René Matteotti on the Treaty Request Agreement between the Swiss Confederation and the United States of America of the 19th August 2009 (UBS-agreement). The arguments of the opinion about the principles and their domestic applicability were not upheld by the Federal Administrative Court in January 2010. The UBS agreement had to be hastily renegotiated and pushed through a parliamentary authorization proceeding enabling Switzerland to fulfil its international public law obligations of the UBS agreement within the deadline of 360 days.

The UBS case is an example of a sudden culmination of the international pressures on the slow erosion and breaking up of the business model of the Swiss banks in trans-border private banking and of the defensive upholding of the application of the banking secrecy provisions of Swiss law. The text attempts to clarify the role of the general principle of legality, which has been obfuscated in the dust and the fog of legal and parliamentary crises management in politics and in media under great stress and duress.
Thomas Cottier is a full Professor for European and International Economic Public Law at the University of Bern, and is the Director of the World Trade Institute. Cottier has an international academic education at the Universities of Cambridge (United Kingdom) and Michigan at Ann Arbor (United States). He has experience in practice in the function of Deputy Head of the Swiss Office of Intellectual Property and as a negotiator for Switzerland in the GATT and WTO process. As an international scholar he is part of a small group of reading specialists in international economic law in the world.

b) Summary

Cottier summarizes at the end of the text as follows:

“UBS legal assistance treaty between Switzerland and the United States of August 19, 2009 and the civil law enforcement proceeding against UBS of the Internal Revenue Service in a Federal District Court in Miami to produce 55,000 entities of accounts in the Double Taxation Treaty between Switzerland and the United States, expanded the narrow understanding in Switzerland up until now of “tax fraud or the like” excluding from legal assistance behavior of tax evasion qualified as Steuerhinterziehung. The Federal Administrative Court in its fundamental judgment of January 21, 2010, as a result held that the UBS agreement went beyond the framework of double taxation treaties and therefore may not be qualified as so called “consultation agreement” and may not be concluded on the level of the executive or the administration. The decision of the Federal Administrative Court according to Cottier is based upon a concept of the legality principle especially developed in writing on tax law and on a treaty interpretation, which neither is in conformity with international public law nor with constitutional and administrative law. The consequences of the judgment of a necessary renegotiation and a legal insecurity connected therewith and the political costs could have been avoided if the issues at stake had been decided within the framework of accepted theory in international public law and interpreted within constitutional, governmental and administrative law. With regard to the future, the development shows that the existing constitutional framework of allocation of competences in matters of foreign policy are adequate and do not need to be changed.”

c) Text

You can find a scan (PDF) of the original text here:
A_2.53_COTTIER_Tax Fraud or the Like

© Prof. Jens Drolshammer,,

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