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Washington, DC and Bern, Switzerland (GenevaLunch) - The New York Times Tuesday 23 June reports that the US Justice Department “may drop a closely watched legal case” with the IRS trying to force Swiss bank UBS to turn over the names of 52,000 clients. The newspaper’s unnamed source appears to confirm what Swiss President Hans-Rudolf Merz hinted at 19 June after a revised tax treaty was initialed by the two countries, that the US , cites “an American official who was not authorized to speak publicly about the matter.”

Neither the bank nor the Swiss government have commented on the news story.

According to the anonymous official, says the Times, “a meltdown” in US-Swiss relations doesn’t make any sense, and the newspaper appears to credit, without explicitly saying so, “a fierce lobbying campaign to persuade Washington to drop the case”, on the part of UBS and the Swiss government. The newspaper mentions the 19 June initialing of a new tax treaty between the two countries, but does not, as reported by some Swiss media, credit this with influencing a change of heart by the Justice Department.

Merz, for his part, said after the agreement was initialed last week that he expected to see some relaxation of US demands, without being more precise. Swiss Justice Minister Eveline Widmer-Schlumpf told the Swiss-American Chamber of Commerce annual meeting in Zurich 22 June that it is “unacceptable” for the US to push to obtain confidential data, and that the US must respect existing bilateral tax agreements.

The Times article refers to Americans who have filed Swiss lawsuits to protect their UBS bank information and says that the Swiss government is considering “conveying these Swiss-based filings to the Justice Department as part of a deal in which the United States agency would drop the entire case, something that would allow Switzerland to say that it has not breached its own secrecy laws.”

The newspaper does not say if the unnamed official is the source of this speculation or if it is the reporter’s own idea.

Related:

• Reuters
• TSR, Fre
• commentary by Ann Woolner in Bloomberg, 12 June 2009