“The prosecution will try to stir up emotions”


UBS Group General Counsel Markus Diethelm at the first trial in 2018. Now the chief lawyer is defending UBS on site in France.

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UBS Group General Counsel Markus Diethelm at the first trial in 2018. Now the chief lawyer is defending UBS on site in France.

Law professor Peter V. Kunz expects UBS to be more gentle in the appeal process – and gives her the chance of an acquittal.

The second round of the trial against UBS in France begins today. What are the chances of the big bank?

It’s an epic fight that has been raging in front of numerous courts for years. So far, UBS has lost every time, even before the European Court of Human Rights and the federal court. Because the current process is a fresh start, the chances are much better. It is not just a filing process that deals with legal issues. Instead, the process is started again in the second instance.

Manu Friederich /

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Manu Friederich /

What did UBS learn from the first process – and will it now do it differently?

She was obviously not happy with her principal attorney in the first instance and has reorganized her legal team. The matter will not change much; it will repeat its previous legal arguments. Presumably, however, it will be a little more gentle. Your appearance in the first case seemed relatively aggressive externally. For example, she was very negative about former employees of UBS France. That should not have been well received by the court: Goliath faced David. UBS will now want to appear a little more human.

An important argument of UBS is the taxation agreement between Switzerland and the EU of 2004, which allows Swiss banks to do business with foreign clients in compliance with banking secrecy. This argument apparently did not catch on in the first trial.

The argument was important for the defense of UBS in the first instance. The savings tax agreement relieves UBS, but it is not clear and unambiguous: it can be interpreted in different ways. In the first trial, however, the court did not address the argument at all. Now the new court has to deal with it seriously, that was not the case in the first trial, it simply ignored it at the time.

In the summer of 2019, UBS had to deliver 45,000 customer data to the French tax authorities. The federal court only approved the delivery on condition that the data did not flow into the process. Will Paris stick to it?

The French tax authorities are not allowed to pass on this data due to the so-called specialty principle. I believe they will stick to it. France is a constitutional state. If they gave up the data, it would be a scandal. In such a case, the Federal Council would have to intervene, if it were a question of Swiss sovereignty.

But I think media leaks are very likely: That leaks will result in tax data being published in the media over the next few weeks, so that UBS’s image will suffer. The court consists of people and also makes decisions emotionally. Against this background, such leaks that blacken UBS would not surprise me.

Are you expecting a media campaign against UBS?

Absolutely. You have to be aware: We have a new court that will reopen the process. A big bank is in a difficult position anyway, especially a foreign big bank. Many people don’t like big banks. A court also argues emotionally, this can be seen in the first trial. Because the evidence against UBS is relatively weak, the prosecution will try to stir up emotions. Because the evidence actually speaks in favor of an acquittal for UBS.

more on the subject

UBS brings in a star lawyer for its defense in France.

Even if convicted, UBS can expect a lower fine because the legal situation has changed: Now the fine must be based on the taxes evaded and not, as in the first trial, on the assets evaded …

As I said: UBS should actually be acquitted, unless the indictment could present new, convincing evidence today. There was no evidence of the judgment of the first instance. If no new evidence is presented, UBS cannot be accused of systematic misconduct. The accusation is simply not given.

Should a judgment nevertheless be reached, the amount of the fine would actually have to be reduced considerably. The benchmark for the fine is now not the evaded assets, but tax amounts that have not been paid. Even in a word-case scenario with a conviction of UBS, the fine would be much lower – instead of several billion euros, we are now talking about several hundred million euros in fines.

Would UBS only accept an acquittal – would it move on to a judgment in which it was only partially exonerated?

UBS would also move a reduced fine, I am convinced of that. Actually, you should. The bank has been litigating intensively for years and rejects any guilt. Against this background, it would seem implausible if she accepted a partial conviction. The other side, the public prosecutor’s office, may also move the judgment on if it loses it in whole or in part. In any case, the process should take a few more years.

Who is actually responsible? The new CEO Ralph Hamers has only recently been in office.

For once, you cannot personalize a court case. The main person during the process was former CEO Sergio Ermotti. Of course, he was mostly not in office in the period from 2004 to 2012. But it was he who did not seek a comparison in the process. Ermotti always said, “We’re not making a lazy comparison here”. I can understand. A bank should not make a bad compromise at the expense of corporate funds.

But if UBS was unable to come to an agreement with the French prosecutor a few years ago, it is now almost impossible to find a deal. For once there is no culprit: Neither Mr Ermotti, nor the new CEO Ralph Hamers, nor UBS chief lawyer Markus Diethelm.

Ralph Hamers himself has legal problems because of a money laundering scandal from his time at the head of the Dutch ING. Could this Hamers mortgage affect the process in France in any way?

In France, Hamers’ past has so far not aroused much interest. Should there be a media campaign against UBS, the proceedings against Hamers could become an issue. But the court will pay little attention to it. The investigation against Hamers should have no impact on the process. An indictment or even a verdict against the CEO would be a problem for the image of UBS.

The UBS process in France – the second round begins

(Today) Monday the appeal process in the tax dispute between France and UBS begins in Paris. The big bank was in the first instance two years ago was sentenced to a total of 4.5 billion euros.

According to the allegations, UBS is said to have instigated French customers to smuggle money past the tax authorities. Between 2004 and 2012, customers in France were recruited by bankers from Switzerland, which French law classified as illegal.

In round one, the prosecutors won

“Illegal bank advertising” and “money laundering aggravated by tax fraud” was the verdict of the Paris criminal court in February 2019. UBS was subsequently sentenced to a record fine of 3.7 billion euros, plus damages of 800 million euros.

The first round of the tax evasion lawsuit ended with a clear victory for the French public prosecutors. UBS appealed against it on the day it was announced and demanded an acquittal.

No comparison is made

So it’s (also) about a lot of money when the lawyers cross the blades again from next Monday. At current exchange rates, the 4.5 billion euros represent around 80 percent of last year’s annual profit of just under 6.6 billion US dollars.

For the case, UBS (unchanged for a long time) has only set aside 450 million euros – that is, a tenth of the first verdict. After a defeat before the court of appeal, the bank would have to make significantly more provisions.

Risky strategy

Incidentally, UBS deliberately risked the process. The bank deliberately refrained from making a comparison without admitting guilt. Such a comparison would have been “very expensive,” said former UBS CEO Sergio Ermotti in a newspaper interview.

“It would have been a catastrophic signal to pay billions if there is no proof of error,” said Ermotti after the first trial in an interview with the CH media.

Important guiding judgment

Two years ago, the bank spoke of a conviction “without concrete evidence”. UBS also accused the Paris judges of mistakes and negligence. According to UBS, the calculation of the fine was particularly contradictory. It is not clear from the judgment whether it is based on customer assets or unpaid taxes.

Since then, important things have happened when the Court of Cassation in Paris passed a key ruling in September 2019, according to which French courts should calculate fines for tax fraud on the basis of the taxes actually evaded and not on the basis of the evaded assets.

This judgment could therefore be of great importance for UBS and decisively influence the outcome of the appeal process in its favor, at least with regard to the amount of the fine.

New line of defense

In defense of the appeal process, UBS now apparently wants to rely on a contract that the EU has concluded with Switzerland. Specifically, it is about the 2004 savings tax agreement.

“This agreement allowed Swiss banks to manage foreign client funds while maintaining banking secrecy,” explained law professor Peter Nobel, who works as an advisor for UBS, to “NZZ am Sonntag” two weeks ago.

Thus, it was legal for UBS to manage funds from clients in France. The bank did not want to comment on Nobel’s statements when asked by the AWP news agency.

No quick deal in sight

Whatever the outcome of the second round, which will last until March 24, the case should keep UBS busy for several years until a final judgment is reached. Sergio Ermotti actually wanted to close the case while he was still in office, but last autumn he handed over the baton to his successor Ralph Hamers.



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