Swiss Data Protection vs. Disclosure of Information
Federal Supreme Court – Case no. 4A_83/2016, 22 September 2016
The Swiss Bank A. participated in the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the Program) that was agreed upon between Switzerland and the United States in 2013.
The Program was designed to regulate disputes between Swiss banks and the US authorities regarding taxpayers evading US taxes by hiding behind and exploiting Swiss bank accounts.
According to Article 2 (D)(2)(b)(5) of the Program Swiss banks were able to obtain a non-prosecution agreement with the US Department of Justice (DoJ) if they disclosed information including “the name and function of any relationship manager, client advisor, asset manager, financial advisor, trustee, fiduciary, nominee, attorney, accountant, or other individual or entity functioning in a similar capacity known by the bank to be affiliated with said account” pertaining to US-related accounts.
A. planned to comply with the above rule in order to obtain a non-prosecution agreement by disclosing the identity of two Swiss lawyers as well as a Swiss law firm. Subsequently, B., C., and D. filed a suit before the Commercial Court of Zurich, arguing that the intended transfer of the information violated the provisions on banking secrecy, business secrecy and right of privacy contained in the Swiss Data Protection Act.
Enjoining A. from disclosing any information to the DoJ the Commercial Court ruled in favor of B., C., and D.
A. consequently appealed against the verdict escalating the case to the Federal Supreme Court.
In order to obtain a non-prosecution agreement with the DoJ, the Swiss bank intended to forward details of lawyers affiliated with US-related bank accounts and their dealings.
The court was asked to decide whether the planned disclosure was consistent with Swiss data protection regulation in this case.
In its opening consideration, the Federal Supreme Court affirmed that information to be forwarded to the DoJ fell within the scope of the
Data Protection Act (Art. 3 (1)).
According to Art. 6(1) of the Data Protection Act personal data may not be disclosed abroad if the privacy of the data subjects would be seriously endangered thereby, (in particular) due to the absence of legislation that guarantees adequate protection. The Court noted, that both parties acknowledged that the legal framework in the U.S. lacked adequate data protection.
Furthermore, Art. 6 (2)(d) of the Data Protection Act provides that in the absence of legislation that guarantees adequate protection, personal data may be disclosed abroad only if the disclosure is essential (indispensable) in order to safeguard an overriding public interest or for the establishment, exercise or enforce legal claims before the courts.
The Court was therefore held to perform a weighing of the public interests on the one hand against how the transfer of data would affect the individuals involved on the other.
The Court noted that the benefit of settling tax disputes with the United States without further criminal proceedings was indeed a significant public interest and was the reason Switzerland and the United States established the Program. An additional, Swiss public interest was Switzerland’s reputation as a dependable negotiation partner and country that lives up to commitments made. These were considerations, as argued by the claimant, which could make the exchange of data indispensable and therefore legitimate.
The Federal Supreme Court, however, came to a different conclusion. It stated that the transfer of data was not necessarily indispensable to safeguard the aforementioned public interests in this particular case.
Firstly, the Court took notice of the Program’s non-compulsory nature. The Court stated that the Swiss parliament and the DoJ were aware that, by design, not all relevant data would always be exchanged. It could therefore not be concluded that the disclosure of data in this particular case was to considered indispensable to safeguard public interests (reputation & dependability), as the possibility of non-participation was foreseen by the contracting parties from the outset.
Moreover, the Federal Supreme Court agreed with the lower court’s quantitative assessment of the situation. An increasing number of banks had already complied with the Program at the time. This led the court to consider this particular case less indispensable when it came to achieving the public interest of maintaining a positive relationship with the United States.
Lastly, the Court did not follow the bank’s final argument. The bank had stated that obtaining a non-prosecution agreement was necessary to secure jobs and the Swiss banking sector as a whole, making the transfer of information indispensable per se.
In conclusion, the Federal Supreme Court rejected the appeal, prohibiting the Bank from disclosing any data.