Hollow Relief

Switzerland is breathing again after passing a peripheral agreement between Berne and Washington concerning the fiscal dispute of UBS. But the country did not emerge unscathed.

Five thousand names without a fine. The extra judiciary agreement concluded between Switzerland and the United States, which will be sealed next Friday, put out a fire that threatened to destroy UBS and gravely alter our relationship with Washington. Switzerland breathes a little better, but everyone surely emphasizes that this agreement is fragile and will demand a lot of finesse and judiciary tact in order to achieve its objective. Because the faults committed by UBS are not only serious, but they open up a gaping breach in secret banking that can no longer be kept closed.

While it is hoped that the transmission of names is done under the proper administrative procedures and will be dealt with as well as possible in the legal system of Switzerland, the United States really blew up a dam that we had considered immovable and undiminished. Switzerland and its banking system will not get out of this unscathed. Neither will UBS, whose ordeal is far from over.

Moreover, the agreement anticipates the new law promised on the OCDE principles regarding fiscal cooperation. Its implementation will demand reasonable execution from the Swiss authorities. We guess that the United States will not accept it if the investigations launched against some taxpayers get bogged down in a procedural swamp. The implementation of the agreement will surely strain the legal system of appeals. Many abroad see that its mechanics, as sophisticated as they may be, were built as an unfair barrier. It is also feared that the set-up of UBS will splatter and eventually finish by incriminating some well-established shadow companies.