French court overturns judgment in UBS tax case
Published: Wednesday, Nov 15th 2023, 15:20
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The UBS scattering dispute in France will drag on. The big bank has been successful with its appeal before the supreme court. Now the proceedings are being reopened - with an uncertain outcome.
On Wednesday, the Court of Cassation in Paris partially overturned the judgment of the lower court, according to the judgment of the highest court in France published on Wednesday, which is available to the news agency AWP. The appeal concerns all provisions on penalties and civil interests. However, the Court of Cassation upheld the fundamental judgment.
In December 2021, the French Court of Appeal also found UBS guilty at second instance of illegally soliciting wealthy French taxpayers between 2004 and 2012. It had wanted to persuade clients to open undeclared accounts in Switzerland, according to the ruling.
"Violation of French law"
At the time, the court ordered UBS to pay a total of over 1.8 billion euros. This includes a fine of EUR 3.75 million, the forfeiture of EUR 1 billion and a civil damages payment of EUR 800 million.
With regard to the penalties, Wednesday's ruling states that these will be waived so that UBS's situation can be assessed as a whole. With regard to the claim for damages, it states that the lower court did not sufficiently justify the amount.
However, the Court of Cassation upheld the basic ruling of the lower court: UBS did not have any business licenses in the EU in general and in France in particular. Therefore, the big bank had violated French law with its activities.
Hanging game continues
The decision by the French Supreme Court to send the verdict back to the lower court means that the legal dispute, which has already lasted around ten years, continues to drag on. The French authorities have been investigating the case since 2013.
In February 2019, UBS was sentenced for the first time by the Paris criminal court to pay a hefty fine totaling 4.5 billion euros for unauthorized money transactions and aiding and abetting money laundering. The fine was then significantly lower in 2021 before the "Cour d'appel" in Paris. However, UBS also appealed against this judgment.
A hearing before the Court of Cassation had already taken place at the end of September. However, the supreme court does not fundamentally reassess cases, but only whether there have been any formal errors. If the Court of Cassation had rejected UBS's appeal on Wednesday (today), the bank would also have lost the last instance in France. Now, however, there will be new proceedings.
Cards are reshuffled
In a new trial, the cards are theoretically shuffled all over again. The court of appeal is under no obligation to pass a more lenient sentence in the second round. But according to the experience of experts, this is often the case.
However, today's decision also means that this legal matter will remain in limbo for much longer. Some market analysts had already expressed the opinion after the ruling in December 2021 that it would have been better to accept the judgment and put the case to bed.
However, if UBS had accepted the verdict, it would also have accepted the guilty verdict. This would have meant that the bank would have admitted to helping criminals with money laundering, which also poses risks for its other global business activities. The bank denies any criminal misconduct.
Extraordinary case
Lawyer Patrice Spinosi, who is defending UBS in France, described the case as extraordinary at the hearing in September: This is because it is the first time in Europe that a Swiss bank has been convicted for managing client funds "in accordance with banking secrecy".
UBS has set aside 1.1 billion euros. There is therefore the threat of a high additional loss should the Court of Appeal also reach a harsher verdict in the appeal proceedings.
Of the other outstanding major legal disputes, UBS has recently brought three (RMBS, Archegos, Mozambique) - the latter two inherited from CS - to a conclusion.
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