The United States Guards the Guards Themselves: The International Law Implications of the Swiss Bank and IRS Controversy

Abstract

On August 19, 2009, the prominent Swiss bank UBS entered into a settlement agreement with the United States Internal Revenue Service (IRS) in order to avoid legal action levied against it by the IRS. The crucial and controversial provisions of this agreement require UBS to disclose the confidential identification information of its American clients to allow the IRS to ascertain whether these Americans have committed tax fraud. The global banking and financial communities have taken enormous notice of this settlement agreement. The infamous banking secrecy policies of Switzerland have contributed to the incredibly lucrative banking sector of the Swiss economy. However, the settlement and subsequent changes in Swiss law could potentially and irrevocably harm both the country’s banking sector as well as its international standing. This note seeks to identify the possible international law implications of the UBS/IRS settlement agreement and how this decision will affect U.S. relations with the Swiss. Ultimately, the author’s intent is to contribute to the greater body of knowledge and legal analysis surrounding the outcome of the clash of two nations’ laws.