CASE OF G.S.B. v. SWITZERLAND
No violation of Article 8 - Right to respect for private and family life (Article 8-1 - Respect for private life);No violation of Article 14+8-1 - Prohibition of discrimination (Article 14 - Discrimination) (Article 8 - Right to respect for private and family life;Article 8-1 - Respect for private life)
Branko Lubarda;Dmitry Dedov;George Nicolaou;Helen Keller;Johannes Silvis;Luis López Guerra;Pere Pastor Vilanova
6. The applicant was born in 1960 and lives in Miami. 7. The facts of the case as submitted by the parties can be summarised as follows. 8. In 2008 the US tax authorities (the Internal Revenue Service [IRS] in Washington) discovered – primarily from a complaint lodged by a former employee of the UBS SA bank in Geneva responsible for asset management for the bank’s private North American customers – that thousands of US taxpayers held UBS bank accounts which had not been declared to their national authorities or else held economic rights in respect of such accounts. Owing to the role which it had apparently played in that connection, the bank faced a risk of criminal prosecution. 9. On 18 February 2009 a deferred prosecution agreement (DPA) was concluded between UBS SA and the US Department of Justice (DOJ). In this document the bank acknowledged that it had, in particular, allowed US taxpayers to use off-shore accounts to conceal their assets and income from the US tax authorities and had met with and provided on-the-spot advice, in the United States, to customers who had not declared their accounts to the IRS. It was agreed that proceedings could be dropped in return for a settlement amount of 780 million US dollars (USD). 10. On 19 February 2009 the IRS brought a civil action (a so-called “John Doe summons” [JDS]) requesting a formal order to UBS SA to reveal the identities of its 52,000 American customers and to communicate data on their bank accounts. 11. Switzerland was concerned that the dispute between the US authorities and UBS SA might give rise to a conflict between Swiss and US law should the IRS obtain that information, and the civil proceedings were therefore suspended pending extra-judicial reconciliation. 12. On 19 August 2009, with a view to identifying the taxpayers in question, the Federal Council (Government) of the Swiss Confederation and the United States of America (“the United States”) concluded an “Agreement concerning the request by the Internal Revenue Service of the United States relating to the Swiss company UBS SA” (“Agreement 09”) ... Under the first Article of Agreement 09 Switzerland undertook to deal with the US request for mutual assistance concerning UBS SA’s American customers in accordance with the criteria laid down in the Appendix to that Agreement and, moreover, in conformity with the Convention of 2 October 1996 between Switzerland and the United States on double taxation (CDI-US 96) ... Drawing on those criteria, the parties to Agreement 09 considered that the request for mutual assistance concerned “some 4,450 open or closed accounts”. Switzerland further undertook to set up a “special task force” enabling the Swiss Federal Tax Authority (AFC) to reach its final decisions in the framework of the mutual assistance request within a specific timescale. In return, the Agreement provided that the United States and UBS SA would submit to the US District Court for the Southern District of Florida a joint request for the discontinuance of the request for enforcement of the “John Doe Summons” (see Article 3 of Agreement 09) ... 13. On 31 August 2009 the IRS submitted a mutual assistance request to the AFC with a view to obtaining information on US taxpayers who, between 1 January 2001 and 31 December 2008, had had “authority to sign or other access rights to” bank accounts “held, supervised or maintained by a section of UBS SA or by one of its branches or subsidiaries in Switzerland”. 14. On 1 September 2009 the AFC ordered UBS SA to provide information for the purposes of the 15 June 1998 Order concerning the US-Swiss Convention of 2 October 1996 on double taxation (CDI-US 96) ... The AFC decided to instigate a mutual assistance procedure and requested that UBS SA provide, in particular, complete files on the customers mentioned in the Appendix to Agreement 09. 15. By judgment of 21 January 2010 (A-7789/2009) the Federal Administrative Court (TAF) accepted an appeal against a decision taken by the AFC which concerned, in the framework of the Appendix to Agreement 09, a challenge falling within the category defined in paragraph 2/A/b. In its reasoning, the TAF held that: – Agreement 09 was a mutual agreement which should remain within the framework set out by the convention on which it depended, CDI-US 96; – under the terms of the aforementioned convention, mutual assistance was granted in cases of tax fraud, but not in cases of tax evasion (that is to say the mere failure to declare a bank account to the tax authorities; regarding this distinction under Swiss tax law ...; – accordingly CDI-US 96 only facilitated exchange of information in cases of “fraud or a similar offence” for the purposes of Swiss law, that is to say tax swindle (tax evasion by dint of “creative accountancy”) or document forgery; – having regard to the obligations which it imposed on Switzerland, that agreement should have taken the form of an international treaty ratified by the Swiss Federal Parliament and been put to an “optional referendum”; – accordingly, the form of a mere friendly agreement concluded by the Federal Council on its own had been insufficient. Consequently, the Federal Administrative Court voided the decisions given by the AFC on the basis of Agreement 09. 16. The entry into force of that TAF judgment of 21 January 2010 called into question the application of Agreement 09. Indeed, out of the approximately 4,450 individual cases covered by that agreement some 4,200 concerned situations of long-term tax evasion of enormous proportions. The Swiss Government considered that an inability to provide mutual aid in such cases could create major difficulties for Switzerland in its bilateral relations with the United States. The Federal Council deemed likely that the United States would impose compensatory measures, and that the minimum they could expect was that the US would reactivate the enforcement procedure in respect of the UBS customers through mutual assistance channels. The Federal Council were concerned that an American court might then order UBS SA to provide the IRS with the data in question and force the judgment through by dint of extremely high coercive fines. On 31 March 2010, in order to prevent such a development, after fresh negotiations with the United States, the Federal Council concluded a “Protocol amending the Agreement between Switzerland and the United States concerning the IRS’s request for information on the Swiss company UBS SA, signed in Washington on 19 August 2009”, referred to as “Protocol 10”. The provisions of that protocol were incorporated into Agreement 09. They became provisionally applicable on the date of its signature by the parties. 17. By Federal Decree of 17 June 2010 “approving the Agreement between Switzerland and the United States concerning the request for information regarding UBS SA, as well as the Protocol amending that Agreement”, the Federal Assembly (the Swiss Parliament) approved Agreement 09 and Protocol 10, and gave the Federal Council leave to ratify them. The consolidated version of Agreement 09 as amended under Protocol 10 is sometimes referred to as “Convention 10” ... The aforementioned Federal Decree stated that the optional referendum mentioned in Article 141 of the Federal Constitution in respect of certain international treaties concluded by Switzerland ... was not available in the present case. 18. On 15 July 2010 the Federal Administrative Court delivered judgment in a pilot case (A-4013/2010) concerning the validity of Convention 10. In that judgment the TAF ruled that: – Convention 10 was fully binding on it within the meaning of Article 190 of the Constitution ...; – there was no substantive hierarchy in international law (apart from the pre-eminence of jus cogens); accordingly, Convention 10 held the same status as CDI-US 96; – as CDI-US 96, like the Convention (for the Protection of Human Rights and Fundamental Freedoms) and the International Covenant on Civils and Political Rights (“UN Covenant II”), had been adopted prior to Convention 10, its provisions were only applicable insofar as they were compatible with the rules of the latter 96, because Convention 10 took precedence by virtue of its posteriority. 19. UBS SA transmitted the applicant’s file to the AFC on 19 January 2010. In its final decision of 7 June 2010, the AFC ruled that all the conditions had been met for granting mutual assistance to the IRS and ordering the communication to it of the documents published by UBS SA. 20. On 7 July 2010 the applicant appealed to the Federal Administrative Court against that decision. By judgment of 21 September 2010, without assessing the actual lawfulness of the decision of 7 June 2010, the court set it aside, noting that the applicant’s right to a hearing had been flouted. Consequently, it referred the case back to the AFC, inviting it to allow the applicant to submit his observations and to give a fresh decision on affording the US authorities mutual assistance in his case. 21. By letter of 28 September 2010 the AFC notified a deadline of 29 October 2010 for the applicant to forward any observations before the issuing of a fresh decision. On 13 October 2010 the applicant submitted a statement of his position on the matter. In its final decision of 4 November 2010 the AFC once again held that all the requisite conditions were fulfilled for granting the IRS mutual assistance and ordering UBS SA to communicate the requested documents to the US authorities. 22. On 8 December 2010 the applicant appealed to the Federal Administrative Court against the decision of 4 November 2010. He complained, in substance, of a lack of any legal basis for the decisions of 1 September 2009 and 4 November 2010, as well as of the violation of the Convention and other international treaties, owing, in particular, to noncompliance with the prohibition of the retroactivity of laws and non-respect for his right to respect for his private life, the presumption of innocence, the principle of equality and non-discrimination, and his right to remain silent. 23. Determining as the final domestic instance, the Federal Administrative Court delivered judgment on 2 March 2011. It first of all held, in substance, that Convention 10 was binding on the Swiss authorities, considering that they did not have to verify its conformity with Federal law and previous conventions. Secondly, with reference to the pilot case A-4013/2010 of 15 July 2010 (see paragraph 18 above), the Federal Administrative Court set out the following reasoning: “3.2. The AFC’s decision of 1 September 2009 concerning UBS SA does not relate to the grant of mutual assistance. It is merely a decision whereby the lower-level authority requested information from UBS SA for the purposes of Article 20c (3) of CDI-US 96. Therefore, it may be accepted that Agreement 09, in relation with the aforementioned provision, constituted a sufficient legal basis for the AFC to take a decision against UBS SA, requiring, in particular, the handover of the complete files of customers covered by the Appendix to Agreement 09. That being the case, the appellant’s complaint is ill-founded. 4.1.1. In the pilot case A-4013/2010 of 15 July 2010 this court found that Convention 10 was binding on the Swiss authorities. No derogation to it was possible under domestic law or in the authorities’ domestic practice. It was stated that Article 190 [of the Constitution] required the authorities to apply international law, which includes Convention 10, and that – in any event – the conformity of international law with the Federal Constitution and Federal legislation could not be assessed where the international law in question was more recent. The Federal Administrative Court thus accepted that Convention 10 should be applied, even if it was contrary to the Federal Constitution or Federal legislation (see Federal Administrative Court judgment A4013/2010 of 15 July 2010, point 3 and the references therein; see also Federal Administrative Court judgments A-7014/2010 of 3 February 2011, point 4.1.1 and the references therein, A-4835/2010 of 11 January 2011, point 5.1.1, and A6053/2010 of 10 January 2011, point 2.1). 4.1.2 With particular regard to the relationship between the different conventions (Convention 10, CDI-US 96 [in particular Article 26 thereof], the ECHR [in particular Article 8 thereof] and UN Covenant II [in particular Article 17 thereof]), the court pointed out that that relationship was established pursuant solely to the rules set out in Article 30 of the Vienna Convention on the Law of Treaties of 23 May 1969 (VCLT) and that there was no substantive hierarchy in international law (apart from the pre-eminence of jus cogens). This court therefore considered that the rules of Convention 10 took precedence over the other provisions of international law, including Article 8 ECHR and Article 17 UN Covenant II, as the latter two provisions did not comprise jus cogens. It did, however, find that even if Article 8 (1) ECHR were applicable, the conditions set out in Article 8 (2) ECHR, which permits restrictions on the right to respect for private and family life, were fulfilled. Convention 10 was indeed a sufficient legal basis under the case-law of the European Court of Human Rights. Furthermore, Switzerland’s major interests and the interest of being able to honour the country’s international commitments took precedence over the individual interests of the persons concerned by the mutual assistance agreement to keep their pecuniary situation secret ... 4.1.3 This court also stated, in judgment A-4013/2010 cited above, that Article 7 (1) ECHR (no punishment without law) was not relevant to mutual assistance procedures. That provision was, exceptionally, applicable in the framework of Swiss mutual assistance procedure if the person concerned by the assistance was threatened, in the requesting State, with proceedings in breach of Article 7 ECHR ... That was not the situation in the present case ... 4.1.5 This court has also held that the parties to an international agreement are free to provide expressly or implicitly for the retroactive application of such agreement ... Moreover, procedural rules could be applied retroactively to previous events, because the prohibition of non-retroactivity only applied to substantive criminal law, not to procedural law, which included provisions on mutual assistance ... Furthermore, the parties to Convention 10 had wished to characterise differently the facts which had occurred prior to the signature of Agreement 09, which was commonly referred to as ‘retroactive effect’. That wish to apply Agreement 09 – which had become Convention 10 – with retroactive effect transpired clearly from the criteria for granting mutual assistance as set out in the Appendix to Convention 10. Even though the parties had specified, in Article 8 of Convention 10, that that instrument would come into force on the date of its signature, they had wished that retroactive effect to prevail ... 4.1.7. In the present case it should be noted, in the light of the aforementioned judgments, that the following objections as to the validity and applicability of Convention 10 can be discarded without further ado: incompatibility with the ECHR and other international treaties, violation of the principle of the prohibition of the retroactivity of laws (see Article 7 ECHR and Article 15 UN Covenant II), and violation of the right to respect for private life (see Article 8 ECHR). Furthermore, contrary to the appellant’s opinion, Convention 10 is in fact a sufficient legal basis for granting mutual assistance, notwithstanding the failure to put it to a referendum (which is optional). Finally, even though Switzerland was unable – in this specific case – to obtain the same information under its own legislation, it is still bound by its international commitments and must grant mutual assistance where the requisite conditions have been met. 4.2. The appellant further submitted that Convention 10 breached the principles of equality and non-discrimination by solely penalising one specific category of persons, that is to say UBS SA customers. He claimed that Convention 10 only applied to UBS SA customers and not to those of other banks. The appellant relied on Article 8 of the Constitution, Article 14 ECHR, Article 2 paragraph 2 of the International Covenant of 16 December 1966 on Economic, Social and Cultural Rights (UN Covenant I; RS 0.103.1) and Article 2 paragraphs 1 and 26 of UN Covenant II. As stated above, this court cannot verify the conformity of Convention 10 with the Federal Constitution and Federal legislation. That legislation, moreover, overrides any previous international agreements to the contrary (see point 4.1.2 above). Therefore, Convention 10 must be applied even if it establishes different legal regulations for UBS SA customers as compared with the customers of other banks (see Federal Administrative Court judgment A-7156/2010 of 17 January 2011, paragraph 5.2.1). ...” 24. On those grounds, the Federal Administrative Court dismissed the applicant’s appeal. 25. On 24 March 2011 the applicant lodged a public-law appeal with the Federal Court, submitting that the considerations set out in the judgment challenged solely concerned mutual assistance in criminal matters and were not relevant to administrative mutual assistance. By judgment of 11 April 2011 that court declared the appeal inadmissible, mainly with reference to a judgment of 20 December 2010 (ATF 137 II 128), which had found that appeals against AFC decisions given pursuant to the Convention on Double Taxation and subsequent agreements concluded with the United States fell within the scope of administrative mutual assistance. 26. On 14 December 2012 the banking data concerning the applicant were transmitted to the US tax authorities. 27. By letter of 14 June 2013, the Court invited the applicant to inform it of the subsequent developments in the case, and, in particular, to give a brief summary of any consequences or any criminal penalties imposed personally and effectively on him in the United States following the disclosure of his banking data as ordered by the Swiss Federal Tax Authority (AFC). 28. By letter of 7 August 2013 the applicant stated that he was not currently in a position to respond to the Court’s request. By letter of 30 June 2014 the applicant pointed out that the US authorities were still conducting their tax inspection and that he had not yet been charged with any criminal offence. ...