THE SWISS BANKING SECRET

From a Legal View

By
KURT MUELLER *

A. INTRODUCTION
THE pledge of secrecy observed by the Swiss banks is often subject to
criticism abroad. The purpose of the following article is to clarify
the position of banking secrecy in the light of Swiss legislation.1
The article will not deal with the economic policy involved as this
aspect is already widely known and is not relevant to an examination
of the legal questions involved. Instead, we shall review the statutory
law, its interpretation by legal doctrine and the practice of the Swiss
banks in relation to their obligation of secrecy. It is hoped that this
article may be of value in giving an objective analysis of the Swiss
banking secret which—contrary perhaps to popular belief—is not of
an absolute nature but which has its place within a wide range of
other legal provisions of private and public law.
For too long the Swiss banks have interpreted their pledge of
discretion very extensively and have even concealed their own
economic activities under a cover of secrecy. This has not always
acted in their favour and has led to repeated attacks against the
so-called " gnomes of Zurich." The banking profession in Switzer-
land, therefore, became aware that a more informative approach was
necessary even in their own country and that a change of their public
• Attorney-at-Uw, Zurich.
• The references given in this article relate to publications which may be available
abroad. The following abbreviations are used:
BGE/RO, Decision! of the Swiu Federal Court (Entscheidungen des
Schweizerischen Bundesgerichtes, Arrttt du Tribunal F&leral Suisse) Lausanne.
BV/Cst., Constitution of the Swiu Confederation (Bundesverfassting der
Schweizerischen Eidgenossenschaft, Constitution de la Confederation Suisse).
OR/CO, Swiss Code of Obligations (Schweizerisches Obligationenrecht, Code des
Obligations).
SchKG/LP, Federal Law of Prosecution for Debt and Bankruptcy (Bundesgesetz
betreffend Schuldbetreibung und Konkurj, Loi Federale sur la Poursuite pour
Dettes et la Faillite).
SJZ/RSJ, Swiss Legal Review (Schwetzeriicht Juritten&ltung, Revue Sulttede
Jurisprudence) Zurich,
StGB/CP, Swiss Penal Code (Schweizerisches Strafgesetzbuch, Code Penal
Suisse).
WStB/IDN, Federal Defence Tax Act (EidgenOssischer Wehrsteuerbeschluss,
ArrCti du Conseil Federal concemant l'lmpflt pour la Defense Nationale).
ZGB/CC, Swiss Civil Code (Schweizerischei Zivilgetetzbuch, Code Civil Suisse)
360
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 APRIL 1969] The Swiss Banking Secret 361

image was overdue. The banks have themselves attempted to dispel

certain misconceptions which are still widely held concerning the
legendary banking secrecy but it is nevertheless obvious that publica-
tions coming from their desks must be read with a certain reservation.
The banks are still jealous of safeguarding their pledge of secrecy
as it is above all a service which they are able to offer to their clients.
For this reason, the banks have a tendency to maintain discretion
even in cases where court practice and independent authors follow
legal provisions that override the obligation of secrecy.
B. NATURE OF THE OBUGATION OF SECRECY
Oergymen, lawyers and physicians have always been subject to a
professional obligation of secrecy since they can only fulfil their
tasks if the person requesting their assistance can rely entirely on
his confidence being respected. Breach of this rule of professional
secrecy is punishable under the Swiss Penal Code.1 However, it is
the unanimous opinion that the application of this Article is limited
to the professions mentioned above and does not apply to banks.
Nevertheless, a banker's pledge of secrecy is known to a greater
or less extent in all countries,3 and indeed the origins of such a
pledge can be found in the beginnings of banking activity in the
sixteenth century. In Switzerland, where the protection of personal
freedom has always been of fundamental importance, the banking
secrecy first existed on a customary law basis. Later it became
founded in the mandatory's duty of loyalty as well as on the
individual's right to personal privacy. In an unpublished decision,
the Swiss Federal Court ruled that it was irrelevant whether a special
agreement existed between a bank and its client or not since the bank
would be obliged to observe secrecy even in the absence of an express
agreement. When the Banking Law * was proposed in the early
thirties, the pledge of secrecy was not initially mentioned and the
banks themselves did not press for it to be included. At that time,
however. Nazi Germany attempted to investigate assets held in
Switzerland by Jews and other "enemies of the state." At the
second reading, the Swiss Parliament therefore considered it necessary
to insert a specific provision in the Banking Law to protect bank
customers although the law was concerned mainly with administra-
tive provisions (financial security, supervision, statement of accounts,
etc.). This famous Article 47 (b) of the Banking Law reads as
follows:
1
Art. 321 StGB/CP.
3
See comparative study of Sichtermann, Bankgehelmnh und Bankauikunfi,
Frankfurt a/M (1966) p. 353 el seq.
* Federal Law of November 8, 1934, regarding bank) and savings institutions, based
on Art. 31 quater BV/Cst.

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 362 International and Comparative Law Quarterly [VOL. 18

Anyone who in his capacity as an officer or employee of a

bank, or as an auditor or his employee, or as a member of the
banking commission or as an officer or employee of its bureau
intentionally violates his duty to observe silence or his professional
rule of secrecy or anyone who induces or attempts to induce a person
to commit any such offence, shall be liable to a fine of up to 20,000
francs or imprisonment for up to six months, or both.
If the offender acted with negligence he shall be liable to a fine
up to 10,000 francs.
This provision makes the violation of the professional secret a
punishable offence. However, the Banking Law does not state in
what cases the bank has the right or duty to give information and
the professional secret remains primarily a matter of private law.
Previously some authors concluded from the wording of Article 47 (b)
of the Banking Law that the professional secrecy was absolute, but
this opinion is now no longer held. The professional secrecy of
bankers is subject to other legal provisions which may be imposed
by civil law, procedural rules, tax law or certain international con-
ventions. Although Switzerland is one of the few countries where
the professional banking secrecy is protected by statute and the
violation thereof is a punishable offence, the banks are nevertheless in
many cases obliged to give infonnation if the law so requires. It is
due more to the importance of Switzerland as a banking centre, the
specific clause in the Banking Law and the liberal attitude of Swiss
tax law, rather than to the rule of banking secrecy as such, that this
secrecy provision has become a myth and Switzerland has been
praised or damned as the stronghold of the banking secrecy. As
regards the institution of the numbered accounts, they are often
criticised because of a misunderstanding, since they do not in fact
favour anonymous transactions in any way. They are merely an
additional means of secrecy and prevent a client's name from appear-
ing on ordinary. correspondence so that it thereby becomes known
to any employee of the bank; bank managers, however, are always
aware of the identity of the account holder. It must be emphasised
that a numbered account is legally of no relevance if the bank is
required by law to reveal certain infonnation.

C. RIGHTS OF THE CLIENTS

The banking secrecy covers all items of a business or personal nature
of which the bank acquires knowledge in connection with the
business transactions of and the consultations with its clients. As
already mentioned above, Swiss court practice obliges the banks to
observe secrecy even in the absence of a special agreement to this
effect. This obligation results mainly from the law of agency and in

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 APRIL 1969] The Swiss Banking Secret 363

particular from the duty of loyalty to be observed by a mandatory.8

This duty does not end when the contract has been fully performed.
In addition, the unauthorised disclosure of information may be in
violation of the personal privacy to which each individual (as well as
legal entities, e.g., companies limited by shares or foundations) is
entitled to under the law.' In the event of a breach of such obligation,
and notwithstanding any criminal action which may arise, the bank
may be sued for damages for breach of contract or under the
provisions regarding unlawful actsT as the case may be. In certain
circumstances the injured party may even claim an amount for moral
compensation.
Because of this private law nature of the professional secret, the
client of the bank remains the " master of the secret" and the bank
itself may not plead that its obligation to secrecy is in the public
interest.* Upon request from the client, the bank is therefore obliged
to produce all information relating to his transactions.' There is a
time limit of ten years during which the banks must keep their files 10
but in practice most banks keep them for longer. The customer, and
in general also his legal representatives (e.g., parents of minors,
guardians, partners of a partnership), may therefore ask the bank for
all such information and they may also authorise and request it to
furnish such information to third parties. Even when the bank is
acting merely as an intermediary between two clients, it must disclose
the name of the other party if so requested by one client."
In relation to third parties however, whether they are private
persons or government authorities, the bank is. in general, not
allowed to disclose facts that are subject to banking secrecy. This
rule also applies to dealings with other banks (even if the records are
transmitted marked " confidential") and for this reason the system
of inter-bank communications concerning the financial status of
clients as used in Anglo-Saxon countries is not permissible in
Switzerland. With regard to foreign relations, it must be remembered
that the Banking Law applies also to subsidiaries or branch offices
of foreign banks established in Switzerland." Thus these banks arc
subject to the secrecy rule to the same extent as Swiss banks. Conse-
quently, they are not allowed to reveal any information regarding
matters of clients to their parent company, head office or auditors that

' Contract of agency, Art. 398 (ID OR/CO.

« One of the specific rights protected by Art. 28 ZGB/CC.
» Art. 41 el teq. OR/CO.
• BGE/RO 74 (1948) I 492.
• Duty of information, contract of agency. Art. 400 (I) OR/CO.
io Art. 962 OR/CO.
>< BGE/RO 68 (1942) I 198.
u Art. 2 (I) of the Banking Law.

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 364 International and Comparative Law Quarterly [VOL. 18

are not one of the organs of the bank as specified in its articles of
incorporation. Furthermore, any foreign resident on the board of
directors of the Swiss subsidiary remains subject to Article 47 (b) of
the Banking Law and he is thus forbidden to reveal secret information
to foreign authorities, private persons or the parent bank.
The main issue of the banking secret therefore concerns the cases
in which a bank may or must give information in accordance with the
provisions of Swiss law. Since by its nature, the banking secrecy is
a personal right of the customer under private law, the obligation of
the bank is subject to overriding provisions of private or public law.
including penal provisions of the Penal Code. In the following
paragraphs, we shall examine the most important situations of
conflict between the individual's right to secrecy and the obligation
of a bank to produce information. Any rules generally applied in
Switzerland to resolve a conflict of law such as the dicta " Federal
law breaks cantonal law " or lex posterior derogat legi priori arc of
no assistance in this case and the solution must be found elsewhere.

D. POSITION OF HEIRS
The question of the extent to which a bank is obliged to furnish
information to a client's heirs has given rise to much controversy."
In accordance with the Swiss principle of direct and immediate
succession " the heirs become entitled without delay to all rights
over the estate of the deceased and they are of course entitled to all
assets of the deceased deposited in a bank. In addition, the right to
secrecy passes to the heirs, and not only the testamentary executor
or the representative of a community of heirs, but each of the heirs
in person has, the right to obtain full information on the estate." This
is also the position taken by the Swiss Union of Bankers.1*
However, while the banks and certain authors take the view that
the obligation of a bank is limited to the disclosure of the amount of
the estate at the time of death or, in the case of bank accounts and
stock deposits, at the time of the last credit advice, other writers take
the view, which is supported by recent decisions of the courts, that
a bank must furnish all information that can be given from its files."
The latter, it is submitted, is the correct view. It may be of prime
importance to reveal the bank transactions of the deceased in order
to trace assets that may be allocated before death to preferred heirs
or third persons, particularly where the allocations conflict with the
" See SJZ/RSJ 62 (1966) p. 69 et seq. and p. 119 et seq.
14
Univertalsukzesslon, succession univerielle. Art. 560 ZGB/CC.
'• BGE/RO 82 (1936) II 566 tt seq.
'• Direction to member banks, 1955.
»' BGE/RO 89 (1963) II 89 et seq.. Cantonal High Court of Zurich, quoted in
SJZ/RSJ 61 (1965) p. 354 et seq.

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 APRIL 1969] The Swiss Banking Secret 365

reserved portion of legal heirs. Swiss inheritance law affords a wide

protection to the descendants, spouse and near relatives of the
deceased.11 A restriction on the right to full information could
often lead to a too low estimation of the total estate and thus of the
consequent reserved portion.
Foreign persons resident in Switzerland may subject the succession
to their estate to the law of their origin by an express provision in
their will or inheritance contract. **•30 Nevertheless, the rule of the
professio juris applies only to the freedom of testamentary disposition
but not to the devolution as such, the opening of the succession, the
effects of devolution and the procedure of distributing among a
community of heirs. With the above exceptions, Swiss law cannot
be avoided if the last domicile of the deceased (under Swiss rules) is
in Switzerland. Assets of a foreigner deposited in Swiss banks are
therefore not subject to any special treatment that might result from
the law of the foreigner's origin. It should therefore be emphasised
that the duty to inform the heirs does not depend on the existence of
a rule relating to reserved portions. The bank's files are, for instance,
often the only means of establishing the financial position of the
deceased. If, according to Swiss inheritance law, the heirs acquire
both the assets and the debts of the deceased, there is indeed no
reason why they should be refused an important source of information.
A problem which has not yet been resolved is whether or not the
information to the heirs must also include any information which is
of a strictly personal nature to the deceased. In practice, banks refuse
to divulge any information relating to matters that are primarily of
a personal nature. In deciding whether to withhold information on
the grounds that it is of a personal nature, the banks have hitherto
taken into consideration the presumed intent of the client in the
light of the circumstances. However, modem doctrine inclines to
the view that an intention to conceal personal facts from the heirs
cannot be presumed and that therefore the bank may only refuse to
disclose certain facts to the heirs where this was expressly requested
by the deceased. A mandatum post-mortem is expressly provided
for by Swiss law.11 The Federal Court has reserved the opinion on

» Art. 471 ZGB/CC in connection with Arts. 457, 458 and 462 ZGB/CC.
>• Art. 22 (IT) and 32 of the Federal Law of June 25, 1891, regarding the private- law
applicable to permanent and temporary residents.
" Swiss court practice has so far denied this advantage to citizens of the United
States, referring to Art VI of the Convention of Friendship of 1850 between
the United States and Switzerland and maintaining that this Convention contains
a specific provision that overrides the general rule of Swiss internal private
international law. The two decisions were those of a cantonal court and no
appeal was made to the Swiss Federal Court. For a review of the problem
regarding real estate see SJZ/RSJ 60 (1964) p. 181 el teq.
»i Art. 405 OR/CO.
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 366 Internationcd and Comparative Law Quarterly [VOL. 18

the question of whether or not the banking secrecy should be

maintained if it concerns personal matters which the deceased wished
to conceal from his heirs" but it is evident that any instructions to
the bank with an illegal or immoral content are null and void."
In conclusion, we may therefore state that the banks must treat
heirs not as third parties but as full successors in title to the deceased.
Thus, the banks are under the obligation to disclose information upon
request from the heirs without need of special justification or any
specific enforcement order from the court.

E. DUTY TO DISCLOSE FACTS TO CERTAIN AUTHORITIES

When is the bank's pledge to professional secrecy superseded by the
obligation to furnish information or to produce documents to the
court or administrative authority? This question may arise in cases
of civil and criminal court proceedings, in matters of debt and bank-
ruptcy and tax administration and in dealings with foreign authori-
ties.14 Since the duty of discretion is of a private law nature, this
primary duty may be overridden by provisions of public law. The
banks are therefore either obliged to keep secrecy or, should other
provisions override, to lift the secrecy and to disclose the information
required. Tertium non datur. Consequently, it is not for the banks
to decide whether the secret is to be maintained or not.

I. Evidence in Civil Procedure

The obligation to give evidence in court is a public duty which cannot
be avoided by referring to a contractual pledge to secrecy.15 Excep-
tions to this duty may only be provided for by public law. In this
respect, the professional secrecy imposed on clergymen, lawyers and
physicians by the Swiss Penal Code " is of an absolute nature and it
is also protected by various procedural laws. Although the banking
profession would be in favour of reading Article 47 (b) of the Banking
Law in conjunction with Article 321 of the Penal Code it is clear from
an examination of the relevant parliamentary discussions that the
legislature never intended this effect and that accordingly Article 321
is not to be taken as applying to banking and other professions.
In addition to the Federal Code of Civil Procedure, which relates
to all actions brought in the Federal Court, each of the 25 cantons has
its own Cantonal Code of Procedure. The application of the cantonal
law is expressly reserved by Article 64 (3) of the Swiss Constitution.

" See BGE/RO 89 (1963) II 93 el seq., 74 (1948) I 403 et seq.

« An. 20 OR/CO.
" See SJZ/RSJ 45 (1949) p. 145 it seq. and SJZ/RSJ 49 (1953) p. 333 el seq.
« BGE/RO 92 (1966) I 397.
>• See above, p. 361.

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 APRIL 1969] The Swiss Banking Secret 367

Where the provisions of material Federal law override cantonal

procedural law it is always expressly mentioned in the Federal law
and the Banking Law contains no such exception. Whether or not
banks are obliged to give evidence on matters relating to their clients
is therefore a matter of cantonal or Federal procedural law which
overrides the Banking Law. Although this is the general position,
the various cantonal codes of procedure vary in their treatment of the
subject In six of the cantons the right to refuse evidence is granted
to all professions which are bound by a legal duty of professional
secrecy while under the law of the Confederation and of five other
cantons this duty is imposed on clergymen, physicians, attorneys
and notaries, and on members of other professions only if the duty to
maintain secrecy overrides the duty of disclosure and in this case it is
for the court to resolve the conflict between the two duties. In the
majority of the cantons, however, the banks are obliged to give full
evidence.
In general the banks are willing to co-operate with the judicial
authorities but they have been anxious to reserve for themselves the
right to decide whether the banking secrecy should be protected or
not. Since bankers (unlike lawyers or physicians) are subject to
neither a special code of ethics nor to a supervisory authority which
may take disciplinary action in the case of suspect or illegal trans-
actions, this point of view is not supported outside the banking
profession. The obligation to give evidence is after all based on the
necessity to present the courts with all the relevant facts and if excep-
tions are to be made for professions where the client-relationship
is one of specific personal confidence, it is only because these
exceptions are in the public interest that they are allowed. A
general right to refuse evidence is therefore justified in the case of
clergymen, lawyers and physicians. Should the exception also be
extended to banks, there seems to be no reason why it should not also
cover trust companies, custodians, tax advisers, social workers,
psychologists, etc.
It may be of interest to mention here certain details in connection
with the bank's obligation to give evidence in civil procedure. If a
client of the bank has released the bank from its duty to maintain
professional secrecy the bank is then obliged to supply full informa-
tion on the matters requested by its client. On the other hand, if the
bank itself brings an action against one of its clients it may present
all the facts which are necessary to enforce its claim, but facts that are
not connected with the action remain subject to the rule of secrecy
even in the case where a contract has already been fulfilled or where
the contract itself is the subject-matter of the action. Furthermore,

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 368 International and Comparative Law Quarterly [VOL. 18

the bank is in its allegations in court not permitted to violate the

duty of secrecy owed to another client not involved in the action, and
it can only adduce such facts with the special consent of that third
party.

II. Evidence in Penal Proceedings

The basic rules mentioned above for civil proceedings apply also to
criminal proceedings. Article 77 of the Federal Code of Criminal
Procedure lists the specific professions which have a right to withhold
evidence but does not mention the bank amongst these. Nevertheless,
the banks have expressed the opinion that they could invoke Article
79 of that Code" because they might otherwise expose themselves
to action under Article 47 (b) of the Banking Law for disclosing
information subject to banking secrecy. But the observance of a
public duty cannot give rise to a prosecution or a private action for
indemnity. As regards cantonal law, expressly reserved by Article
64 bis (2) of the Swiss Constitution, the various codes of penal
procedure contain even fewer exceptions to the duty to give evidence
than the codes relating to civil procedure. Indeed it seems that there
could be no case in which a penal prosecution could be prevented by
the rule of banking secrecy.

ITI. Information in Proceedings for Enforcement of Debts

The position of the banking secret in relation to the Federal Law of
Prosecution for Debt and Bankruptcy (SchKG) has been settled
except for the procedure of " arrest,"" and it is commonly held
that the rule of banking secrecy cannot grant any protection against
measures for distraint. If a debtor does, not comply with an official
order to pay or does not succeed in his action against such order,
Swiss law provides that his property can be seized or, if he is
registered in the Register of Commerce, that he may be made
bankrupt
In the case of seizure " the law expressly provides that all objects
in the possession of the debtor as well as assets deposited with third
parties, including banks, may be liable to distraint. Consequently,
the banks are obliged to give information to the debt collection
office " on all the debtor's assets in their possession " and the debt
17
Providing for a right to refuse to answer questions that would expose the witness
or his close relatives to penal prosecution or grave discredit.
11
Sequatrt, a provisional order to safeguard later measures of seizure.
" Art. 88 et teq. SchKG/LP.
10
Betreiburigsamt, Office del Poursuites.
>' BGE/RO 31 (1925) III 39 et ttq., 56 (1930) III 47 et seq., 66 (1940) III 32 el teq.,
SJZ/RSJ 43 (1949) p. 148, SJZ/RSJ 49 (1953) p. 338.

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 APRIL 1969] The Swiss Banking Secret 369

collection office is even permitted to compel the opening of a safe."

In short, the bank is obliged to disclose information to the same
extent as its client and cannot refer to its duty of secrecy.
If the debtor is made bankrupt," a list of his assets may be drawn
up at the time when the petition for bankruptcy is initiated if this
measure is deemed necessary to secure the creditor's rights.3* Even
if this is only a provisional measure the bank cannot withhold
information. Once the order of bankruptcy has been made third
parties who possess assets of the debtor are required by public
notice to place them at the disposal of the office of bankruptcy " and
non-compliance with this duty is a punishable offence.*'
Under Swiss law the debtor may in certain circumstances avoid
a distraint on his property by concluding with his creditors a contract
of relief " whereby the creditors renounce a part of their claim. Such
an agreement is also often to the advantage of the creditors who may
receive more by way of partial satisfaction if the debtor remains in
business than by requiring the debtor's assets to be sold by public
auction. The application for a contract of relief must be filed with
the special relief authority which, if it agrees; appoints a trustee with
the specific duties prescribed by law. This trustee exercises an
official function but he is not a representative of the debtor and he is
not entitled to take enforcement measures against him. If the debtor
does not co-operate sufficiently in making the inventory, the relief
authority may refuse to permit a contract of relief. However, the
debtor cannot be compelled to give full information and the trustee
is not entitled to require a bank to disclose directly information
concerning any possible hidden assets.
While seizure and bankruptcy are full measures of distraint, the
" arrest" *' provides only for provisional measures to secure the
rights of creditors in cases in which the debtor has no fixed residence
or is not a resident of Switzerland or where it is likely that he may
abscond or where there is a provisional or definite certificate of loss."
An order for " arrest" becomes void if the creditor fails to bring
further proceedings for seizure within ten days or if he does not file
an action in the court.40 There is no uniform opinion as to whether

" BGE/RO 66 (1940) III 32 el ttq.

" Art 159 et uq. SchKG/LP.
" Art 162 ScbKG/LP.
« Art. 232 cif. 4 SchKG/LP.
« Art. 324 cif. 3 and 326 StGB/CP.
" Nachlassvertng, concordat, Art. 293 el teq. SchKG/LP.
« Art. 271 et leq. SdiKG/LP.
« Veriujtichein, Acte de DeTaut de bienj, resulting from a prcrious prosecution
for debt
*° Antstprosequierong, Formalites destinies a parfaire le Sequestra, Art. 278
ScbKG/LP.

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 370 International and Comparative Law Quarterly [VOL. 18

or not third parties, and not only banks, are obliged during the
proceedings of arrest to furnish information concerning assets in
their possession.41 The Federal Court has in practice always
acknowledged such an obligation but it has admitted that the
authorities have no power to enforce their demands.*1
Since the " arrest" is a security measure that must be executed
swiftly, the law requires only that the claims and the reasons for
" arrest" must be proved on a basis of probability. In the order of
" arrest," the property to be arrested may be described in a general
manner only " and such property is blocked during the duration of
the " arrest." Third parties are ordered to hand over such assets
to the debt collection office or to refrain from disposing of any such
assets. The execution of the " arrest" does not therefore depend
on precise information being given by a third party.
Any person who violates even a general order of "arrest"
becomes guilty of disposing of seized or arrested properties44 and
is liable to pay damages. The necessary description of the property
may be established when the " arrest" has been successfully main-
tained and an order for seizure or bankruptcy has been made. In
the absence of an express obligation to give information there are
strong grounds for assuming that third parties are under no obligation
to reveal the assets of the debtor to the arrest authorities. In
addition, there are specific reasons for banks to refuse such informa-
tion. There is a danger that the procedure of arrest may be abused
in order to discover assets of clients for other purposes than the
prosecution for debt. This practice is known as " research arrest."
As a rule, therefore, the banks refuse to divulge any information
during the arrest proceedings. Even in the absence of a general
right to withhold information, banks can successfully rely on
Article 47 (b) of the Banking Law to support the withholding of
information since this provision was especially enacted to protect
banking business against " bank spies." 4 ' During the Second World
War " research arrests " were expressly forbidden by the emergency
legislation passed by the Federal Council. Since the banks are bound
to maintain true and accurate accounts, there is little danger that a
creditor's interests will be prejudiced during the period between the
arrest order and a later distraint. The banks are therefore under no
obligation to reveal any information relating to assets of a debtor
which they hold during the period of arrest proceedings.

«> See SJZ/RSJ 44 (1948) p. 369 et seq., SJZ/RSJ 45 (1949) p. 38 el seq., SJZ/RSJ
46 (1950) p. 187 el seq.
<» BGE/RO 75 (1949) III 108 et seq.
« BGE/RO 63 (1937) HI 65, 75 (1949) II 109.
« Verstrickungjbruch, EMtoornement d'objeti mis sous main de justice. Art. 169
StGB/CP. 4i Above, p. 361.

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 APRIL 1969] The Swiss Banking Secret 371

IV. Information to Tax Authorities

It is perhaps a popular conception that Swiss banking secrecy offers
particularly attractive advantages in tax matters. In fact, the situation
of the banks is the same as that of any other third parties whether
they are obliged to observe secrecy or not. The fact that the Swiss
tax authorities may receive information from a bank only with the
consent of the taxpayer concerned results not from the rule of banking
secrecy but from the general provisions of Swiss tax law. This
legislation reflects the belief that a confidential relationship between
the citizens and government authorities should exist also with regard
to tax matters. Consequently, it is the taxpayer's duty to supply
true information in his tax return or upon the later request of the
authorities. As evidence of his debts and expenses he is required to
file a list of debts, together with the names of his creditors, and to
substantiate the amount of interest paid on these debts/' If the
taxpayer does not comply with this obligation he risks being taxed
by the authorities on an assumed income and wealth basis. In
Switzerland all tax bills may be submitted to public referendum and
it is unlikely that a majority of voters would approve any Bill sub-
mitted to them which gave the tax authorities power to interrogate
third persons, unless they were convinced that this was the only
effective way of combating tax evasion. The high withholding tax
of 30 per cent, on capital income and particularly on interest on bank
accounts and deposits is a sufficient measure to prevent any large-
scale evasion. Moreover, the tax authorities have access to
information from the tax returns of other taxpayers, and there is an
extensive system of co-operation between Federal and cantonal tax
authorities which allows both bodies to exercise a considerable
degree of control. For this reason there is no practical need for
evidence to be furnished by third parties. Should it become
necessary, however, the relevant legislation could be modified at
any time and neither the Federal nor the cantonal governments would
be bound by Article 47 (b) of the Banking Law. Although this
measure was contemplated after the war, an obligation on third
parties to divulge information to the tax authorities is at present
not likely to be introduced.
Since the taxpayer must give evidence of his debts and the
interest paid thereon, the creditor, as well as the debtor, is obliged to
deliver to the taxpayer (and not directly to the tax authorities)
certificates of these payments.41 This rule applies also to banks.
Moreover, the banks cannot refuse to give information on a client's

«« Art. 89 WStB/IDN and similar provisions of cantonal tax law.

<' Art. 90 (6) WStB/IDN.

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 372 International and Comparative Law Quarterly [VOL. 18

accounts or business transactions if the disclosure is authorised and

requested by the client and in this case the bank attestation must
give a true and accurate record. The bank is, of course, not allowed
to present modified or falsified statements upon request from the
client. The law also provides for a specific obligation to give
information to the heirs of a deceased, whereby they may request
third persons, including banks, to give them information on assets
held in their possession or for the administration of the deceased
during the year preceding his death.4* Contrary to the right to
receive information under the title of succession" this obligation
results from public law and it is not necessary that the heirs rely
on their rights as successors to the contract of agency between the
bank and the deceased. Furthermore, where an investigation for
tax evasion is made into the assets of the estate, the heirs have the
same rights and duties as the deceased would have had and this is
of particular relevance to the bank's obligation to disclose all
necessary information.50
All existing tax legislation in Switzerland contains penal clauses
of some nature since the public duty to pay taxes cannot be enforced
without such provisions. However, the authorities are not entitled
to call third parties as witnesses in a procedure for fiscal distraint
as they can in the case of a criminal procedure. Four years ago, the
Swiss parliament proposed in conjunction with a general tax amnesty
to punish severe cases of tax evasion as criminal acts. But the law
was rejected by the people in a public vote and Swiss law continues
to separate tax offences from criminal acts.
Particular problems arise in connection with the taxation of
the banks themselves. Of course, the banking secrecy cannot serve
to avoid the bank's own tax obligations but it is also recognised that
the obligation to give information on debtors and interest paid must
not render the banking secret illusory. As a solution to this conflict,
the Federal Tax Administration may order an examination of the
bank's files by a special commission whose members are expressly
bound to the banking secret and not only to their own administrative
secrecy. In this manner the taxation of the banks does not prejudice
the rule of banking secrecy.
Except in.the last-mentioned case, no special consideration is
granted under Swiss tax law to the rule of banking secrecy and the
banks have neither more nor less duties to give information than
other third parties. If foreigners seek protection in Switzerland from
heavy taxation elsewhere by depositing assets with the Swiss banks.
«» Art. 90 (8) WStB/IDN.
«» Above, p. 364 el seq.
«« BGE/RO 74 (1948) I 490 el seq.

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 APRIL 1969] The Swiss Banking Secret 373

it is not directly the banking secret that assures this protection but the
Swiss tax legislation itself, together with the attitude adopted by
Switzerland towards international cooperation on tax matters which
will be discussed below.

V. Legal and Administrative Assistance

Residents of foreign countries are mainly concerned with the extent
to which foreign revenue authorities can, with the help of their Swiss
counterparts, request assistance from the Swiss banks. In consider-
ing this problem in relation to the banks' discretion, it must be
remembered that the banking secrecy itself does not enjoy particular
protection under the law. We shall nevertheless examine in what
cases the bank's obligation to give information to foreign authorities
overrides the primary duties of secrecy. The necessity for this co-
operation arises out of the fact that judicial and administrative
authorities can exercise their powers only within their territory of
competence. Foreign judicial or administrative authorities are not
permitted to make investigations in Switzerland" and Swiss law
also prohibits the interrogation of witnesses by private persons, e.g.,
lawyers, even if the foreign court would accept testimony obtained
in this way. As a result of the federal structure of Switzerland
similar restrictions also exist between the cantons, and for this reason
we shall consider the co-operation both on an intercantonal and an
international basis.

1. Co-operation between cantons

Co-operation between the cantonal authorities is largely governed
by the Federal legislation. In matters of civil procedure, it results from
an interpretation of the Constitution " while in matters of criminal
procedure the rules of co-operation between the Federation and the
cantons and among the cantons themselves are provided in the
Penal Code." In tax matters, the obligation of the cantons and the
Federation to exchange information is contained in the Federal
Defence Tax Act." In matters of debt and bankruptcy the duty to
co-operate is " dependent on the fact that a federal law must be
enforced by all Cantons." "
In addition, it is considered that a general duty to co-operate
constitutes an " old federal custom " and that it has its origin in the
81
See Art. 271 (I) StGB/CP, Verbotene Handlungen fUr einen fremden Staat,
Actes executes sans droit pour un Ctat Stranger.
« Art. 61 BV/Cst.
" Art. 332 el stq. StGB/CP.
" Art. 90 (I) WStB/IDN.
" BGE/RO 54 (1938) I 174, 83 (1957) III 130.

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 374 International and Comparative Law Quarterly [VOL. 18

strong unity of the cantons as members of the Confederation. In

applying procedural law relating to a request for evidence, however,
the applicable provisions are those of the canton to whom the request
is addressed. This can be of some importance where banks are
concerned as their right to refuse evidence varies from canton to
canton."

2. International co-operation
In respect of foreign countries, the applicable rules are somewhat
different both in their nature and their extent. In accordance with
the practice of most other nations, Switzerland has limited its co-
operation to matters of civil and penal law and has excluded all
matters of administrative law.
(a) Civil law procedure. Whether or not a bank may be com-
pelled upon request from a foreign court to give evidence or to
produce its files is subject to the rules of international civil procedure.
Switzerland is a party to the Hague Convention of July 17, 1905.
concerning civil procedure." In addition, co-operation with other
countries is granted as a general principle without the requirement of
reciprocity. Nevertheless, the extent of this co-operation is subject
to the rules of the cantonal procedural law, a reservation expressly
provided for in the Hague Convention." Consequently, no bank
can be compelled to disclose information subject to banking secrecy
which it would not be compelled to disclose under the rules of civil
procedure in the canton from which the evidence is required. Should
an interested party allege that the bank would not be obliged to
give evidence under the law of the foreign court making the request,
this legal situation would be respected in Switzerland.
The prosecution for debts is internationally recognised as a matter
of procedural law and Switzerland will grant its co-operation with the
important exception, applied by other countries as well, that the
assistance is not granted for claims based on public law, e.g., taxes
or customs duties.
(b) Penal procedure. In matters of penal law, Switzerland affords
foreign countries extensive assistance for the prosecution of criminal
acts but not for the violation of simple administrative law. Although
there is no Swiss Federal Law which relates to such cooperation,
there is an important and consistent body of jurisprudence which
has developed on this subject. In general, the Swiss authorities will
co-operate in all cases where an extradition of the accused might be

»• Above, p. 367 el teq.

i1
The co-operation between national authorities is provided for in Art. 8 ei teq.
»• Art. 11 (1), for internal Swiss law, see BGE/RO 47 (1921) I 97.

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 APRIL 1969] The Swiss Banking Secret 375

possible." In addition, Switzerland has acceded to the European

Convention of April 20, 1959, concerning legal assistance in criminal
matters, which is in fact a codification of the rules already applied
in practice. Under this Convention, legal assistance is limited to
criminal actions before the court and no assistance is given in cases
of political, military and fiscal crimes, or in cases where a prosecution
would violate the Swiss ordre public." This latter exception applies
in particular to offences against foreign exchange regulations and
the Federal Court has firmly maintained this position in the face of
criticism from abroad.*1
(c) Exchange of information between tax authorities. Although
Switzerland does not offer assistance in matters relating to the
prosecution for fiscal offences, either by way of administrative
assistance or in court proceedings, it is still important to examine to
what extent foreign tax administrations may obtain information
through the medium of international co-operation between tax
authorities. In general the Swiss administration is bound to secrecy
and an exchange of information on taxpayers may only take place
if this is expressly provided for in a double tax convention. Indeed
such co-operation is always considered important when Switzer-
land negotiates the conclusion or revision of such conventions.
This problem has also been extensively discussed in the light of the
Draft Double Taxation Convention of the OECD Fiscal Committee.
Switzerland has made an express reservation to Article 26 of the
Draft Convention as, in its view, information should be limited to
whatever is necessary for the correct application and for the
prevention of abuse of a convention." Switzerland takes the view
that it is the duty of the internal legislation of each country to pro-
vide effective measures against tax evasion. Information given
pursuant to the existing convention by the Federal tax administration
therefore mainly concerns the information necessary for the correct
apportionment of profits to permanent establishments in different
countries, for the reduction of withholding taxes in the country of
source, or for the tax credit claimed for the remaining amount in
the country of residence or citizenship. By renouncing the advantages
of a particular double taxation convention, a taxpayer can therefore
avoid any exchange of information. Only the convention with the
United States contains more extensive provisions for co-operation

" Federal Law of January 22, 1892, concerning extradition to foreign countries,
Bundesgesetz Ober die Auslieferung gegenOber dem Auiland, Loi fMe'rale tur
I'extradition aux fitau Strangers.
•° See Art. 2 of the Convention, in force for Switzerland as from March 20, 1967.
•' BGE/RO 64 (1938) II 96.
" Dnft Double Taxation Convention on Income and Capital, Paris 1963, C (63)
87, p. 160.

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 376 International and Comparative Law Quarterly [VOL. 18

but the internal legislation of the country in which information is

requested and its ordre public as well as professional secrecy remain
expressly reserved." Accordingly, the Swiss tax administration has
always refused requests from the U.S. Internal Revenue Service for
information on assets deposited with banks in Switzerland or on
banking operations of U.S. clients, maintaining that an obligation of
third persons to give information does not generally exist in Switzer-
land and that the banks must also have regard to their duty of
secrecy, two exceptions provided for in the text of the convention.
Thus no Swiss bank can be compelled to give information concerning
the real owner of shares and bonds which they keep in a nominee
account. In general terms, it is the view of Swiss legislation and its
concept of international co-operation that a bank is not compelled to
reveal to any foreign tax administrations any information relating to
transactions unless its clients expressly authorise the bank to do so.

F. DEPOSITS OF VANISHED PERSONS

It is well known that before and during the Second World War many
persons transferred their assets to Switzerland in order to protect
them from confiscation by totalitarian governments. Many of them
were persons persecuted for racial or political motives and did not
survive the end of the war. This gave rise to rumours that, as a
result, the Swiss banks and other administrators of estates had been
able to enrich themselves to a great extent Such abuses of confidence
would be heavily punished " but, in order to remove any doubt, the
Swiss Federal Council imposed a duty to declare any deposits of
persons now unknown." This duty relates to all assets'in Switzerland
owned by foreigners or stateless persons of whom no news has been
received since May 9, 1945, and who are presumed to have been
victims of racial, religious or political persecution. The object of
the Federal decree was to transfer these assets to their owners,
successors or to a special fund. To obtain payment of these deposits
a claim will be allowed on the basis of probability if the documents
of proof were lost during the war or if evidence cannot be obtained
for political reasons. The legal position with regard to these deposits
has now therefore been finally settled although the necessity of the
Federal decree was not generally admitted, mainly because the banks
and trustees considered that their own measures to ascertain the
persons entitled to deposits were sufficient. However, the Swiss

« Art. XVI (1) and (3) of the Double Taxation Convention between Switzerland
and the United States.
•« Veruntreuung, Abus de confiance. Art. 140 StGB/CP.
" Decree of the Swiss Federal Council of December 20, 1962.

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 APRIL 1969] The Swiss Banking Secret 377

government was anxious to dispel any suspicion that Swiss persons

have enriched themselves as a result of the wartime atrocities.

G. CONCLUSION
Although we have in this analysis emphasised the cases in which the
banks are obliged to give information, it must be remembered that
these are the exceptions to the rule. In general the banks are obliged
to maintain secrecy and any unjustifiable violation of this rule may
give rise to a claim for damages as well as to penal sanctions. It is
the common opinion that the banking secret is a necessary basis for
the relation of confidence between a bank and its clients. The
pledge to secrecy gives the clients a guarantee that no information
relating to their transactions will be disclosed to third parties, nor to
other banks or government authorities and in particular not to tax
administrations. Apart from the specific provisions relating to
heirs •• the exceptions to the general rule concern only cases in
which the bank is compelled to give evidence in civil or penal
procedure according to the provisions of procedural law or under
the application of the Law of Prosecution for Debt and Bankruptcy.
No modifications to the Federal or cantonal laws relating to banking
secrecy are expected in the near future. In our view the law relating
to the rule of banking secrecy strikes a good balance between the
various interests concerned. However, it is often the banks alone
which hold information which would enable the authorities to enforce
the duty to disclose information, namely to heirs or creditors. But
the banks can hardly be expected to give information to the legitimate
heirs or authorities on their own initiative and against the presumed
will of their clients. On the other hand, the banks must not take
advantage of their stronger position and a line must be drawn between
secrecy within well set limits and unlawful concealment. If the banks
relied too extensively on the rule of secrecy and thereby violated
directly or indirectly the provisions of civil or public law this could
lead to new regulations being enacted which would certainly limit the
extent of banking secrecy. This would not be in the interest either
of the banks or their clients.

•• Above, p. 364 el seq.

I.C.L.Q.—18 . 13
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