Federal Supreme Court Prohibits Bank from Delivering Client related Data to US Authorities

In its decision 4A_83/2016 of September 22, 2016 the Federal Supreme Court confirmed the decision of the Zurich Commercial Court prohibiting the delivery of data concerning two Swiss attorneys and a law firm by a Ticino-based bank (“Bank”) to US authorities under the “U.S. Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks” (“US Program”).

With the aim to complete a non-prosecution agreement with the US Department of Justice (“DoJ”) the Bank which participated in the US Program intended to disclose to the US authorities data relating to several bank accounts that were beneficially owned by a US citizen. Such data included information on two Swiss attorneys and a Swiss law firm in their capacities of representatives of the beneficial owner vis-à-vis the Bank. The attorneys and the law firm objected against the data delivery to the USA.

On December 16, 2015 the Zurich Commercial Court prohibited the intended data disclosure. The Bank appealed against this decision to the Federal Supreme Court which considered that the relevant data constitutes “personal data” in the meaning of the Swiss Federal Act on Data Protection (“FADP”). Personal data may not be disclosed abroad if the privacy of the data subjects will thereby be seriously endangered, in particular due to the absence of respective foreign legislation guaranteeing an adequate data protection (art. 6 FADP), which is the case for the USA. Consequently, personal data may only be disclosed to US authorities if such disclosure is indispensable in the specific case in order, either to safeguard an overriding public interest, or for the establishment, exercise or enforcement of legal claims before the courts (art. 6 al. 2 let. d FADP).

The Federal Supreme Court acknowledged that there is a public interest to settle the tax dispute between Swiss banks and the USA. In accordance with the previous instance, though, the Court concluded that the data disclosure intended by the Bank was not indispensable to protect such public interest and that, therefore, a prohibition of the data disclosure was justified.

The decision of the Federal Supreme Court implicates that clients (and other affected parties) of Swiss banks participating in the US Program henceforth will very likely succeed in preventing a transmission of their data to the USA. The situation would, however, have to be reconsidered if a series of data transfer interdictions will lead to a severe re-escalation of the bank related tax dispute between the USA and Switzerland or to the DoJ’s cancellation of non-prosecution agreements entered into with Swiss Banks.

To read the full article in German, please click here.