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Does The Future Of The Revised US-Swiss Double Taxation Treaty Depend On The Outcome Of The UBS Case?
First posted on Commercial Law International on July 13, 2009.
UBS, the world´s largest wealth manager, has found itself embroiled in a diplomatic row between Washington and Bern. At issue is the interpretation of the current US-Swiss double taxation treaty and at stake is the newly inked, yet to be ratified, revised US-Swiss double taxation treaty.
Does the future of the revised US-Swiss double taxation treaty depend on the outcome of the UBS case?
As much was indicated by Doris Leuthard, the Swiss Economy Minister, as she called for a speedy resolution of the case. What the Minister is expressing in her pronouncements is simply the reality of the situation. Swiss maintain that the issues in the case are diplomatic and ought to be resolved in forum more appropriate to friendly relations between nations – face-to-face closed door negotiations – rather an the public spectacle of a courtroom. Secondly, while the treaty has been finalized it has yet to be ratified by the Swiss Parliament, a parliament that will be slow to give its blessing if it is dissatisfied with the outcome of the case.
So what exactly is going on in this case? This is a very good question for I myself was a bit confused for two reasons. The first is that UBS already plead guilty to assisting thousands of Americans to evade US taxes in a case brought by the Department of Justice (DOJ) in February of this year. In the same case it also paid fines of $750 million and disclosed 250 names of its US clients. So the case ought to be over, right? Well, yes and no. This was the criminal leg of the – and I am going to substitute strategy here for case to avoid any legal confusion – US authorities strategy to gain the names of as many as 52,000 believed to be evading US taxes.
The current case before the courts is the civil leg of the strategy brought by the Internal Revenue Service (IRS). They have served on UBS a John Doe subpoena in an effort to force UBS to reveal the names, so those people can in turn answer to the authorities.
While I know that criminal and civil matters are wholly different creatures, this smacks of double prosecution – persecution if you will. Or is it?
The second thing that was puzzling me was this IRS case seems to have stepped outside the four corners of the existing double taxation treaty. The treaty only requires UBS, through Swiss authorities, to co-operate with US tax evasion investigations if the IRS can provide the specific names of the holders of secret offshore accounts. It is clear from the IRS´s actions, issuing a John Doe subpoena, that it clearly does not know the names of the suspected tax evaders. So that should be the end of it, right. Well, clearly not.
Now, what the IRS is doing is clearly is not only not double prosecution/persecution, it is well within, I believe, the scope of the treaty. In fact I would go as far as saying that it is share genius. This was revealed to me in a brief filed by the IRS in response to one filed by UBS. To see what I mean just take a look at section 2 of the brief, the head tells it all: ¨Nothing in the Tax Treaty Limits the IRS´s Authority to Enforce a Duly Authorized Summons Issued to a Third-Third Party Witness within the United States, or Requires the IRS to Exhaust its Treaty Rights With a Foreign Government Before Seeking to that Summons.¨
Unfortunate for UBS, and as rightly pointed out by the IRS ¨the existence of a treaty….does not limit the rights granted to the United States under the laws of this country¨ (the bold being original). Well, that is in part, it should read doesn’t limit those laws so limited by treaty obligation.
What the IRS has done is not too circumvent the treaty but simply not to bring it into the equation at all. It has kept the issue entirely domestic. As I said, share genius.
In any event the prospects are dim for UBS if a negotiated settlement is not reach soon. If UBS loses, which it looks increasingly probable, it will be faced with either defying US law by refusing to reveal the names or reveal the names and be in violation of Swiss banking law which carries with criminal sanction.
Now that a Floridia judge has agreed to postone the case the excutives at UBS will surely be working over time to reach an amecible resolution of the case.
Driving While Under the Influence of Texting
The use of cell phones while driving has become increasingly controversial, with some studies suggesting that the practice costs thousands of lives by slowing the reaction time of drivers.
As many Canadians have already heard, Ontario is passing Bill 118, a special piece of legislation that bans the use of cell phones and texting devices while driving.
There has even been recent fuss online of a man observed shaving his head while driving, but nobody is suggesting that electric shavers should be banned too. It’s possible that Liebeck v McDonald’s would be decided differently today – with drinking coffee while driving reducing the punitive damages even further under a more recognized state of contributory negligence.
Yesterday the New York Times provided driving game that readers can use to see how texting would reduce their own reaction time. Just don’t expect to use this test as a defence for a subjective test for impairment under the new legislation.
Constitutional Lessons from an Israeli Supreme Court Justice
I had the opportunity to hear one of the Chief Justices speak at the Israeli Supreme Court today. He explained some of the basics of the Israeli judicial system, and shared some of the challenges that they currently face.
Unlike some jurisdictions, Israel has had no problem drawing on international law for their domestic discourse. For example, when developing their position on freedom of expression, they looked to the most robust and liberal legal discourse on the subject and borrowed freely from American case law.
As a Jewish state they also do use some Jewish religious law, although in a more limited fashion. All family law in Israel is conducted under separate religious courts for their respective adherents. The Supreme Court is primarily a court of appeal for criminal and civil cases.
But the Israeli Court also acts as a court of first instance for human rights issues. The history of this structure goes back to the British Mandate, when the British did not want complaints of this nature brought to the lower courts, which were staffed by Arabs and/or Jews, and instead staffed this court by judges brought for short terms from Britain.
A basic right
Allan Rouben explains what trial within reasonable time is and a June 2009 SCC decision in R. v. Godin.
Incredible
Canadian citizen? Be afraid.
Facebook and privacy
Ottawa takes on social media giant for violating Canada’s law
L´Oreal Found Guilty Of Racial Discrimination
This is part of the Middle Passage Law Series and is cross posted on Commercial Law International.
Now I know I have not posted a piece in this series in quite some time and for that I apologize – I have no excuse.
It may seem that I am either picking on L´Oreal, as I have tracked their recent legal battles with eBay on Commercial Law International, either that or I have an obsession with makeup. Let me assure you that neither in the case. With that over, let´s go to the story.
The La Cour de Cassation, the highest court in France, upheld the ruling by the Paris Court of Appeal, finding L´Oreal guilty of racial discrimination. The court also found Adecco, a temp-employment agency, involved through its Districom division, guilty and fined both it and L´Oreal €30,000. The court however, sent back to the Court of Appeal for its reconsideration the €30,000 each in damages payable to SOS Racisme, an anti-racism public interest group that brought the case.
The ruling ends three years of legal wrangling and is no doubt a huge blemish for L´Oreal.
The main issue of fact in the case was BBR. Yes, BBR. What in the world is BBR, you ask?
BBR or blue, blanc, rouge – the colors of the French flag. Now if you were to ask me I would have simply thought that this was a general patriotic gesture, however, it hides a much more sinister meaning. It, as the Times reports is an expression ¨widely recognized in the French recruitment world as code for white French people born to white French parents.¨ This would of course exclude not only the 4 million ethnic minorities current living in France but also any whites not born of pure French stock, including presumably none other than the French President himself Nicolas Sarkozy whose father is Hungarian.
It would seem that word got out that L´Oreal did not want any black, Asian or Arab sales staff to promote Fructis Style, a hair care product made by its Garnier division. Only BBR would do, I guess – because they are worth it – to play on L´Oreal´s because you are worth it ads. But, why?
And this for me is the most troubling aspect of this case. The BBR move by L´Oreal hints at a much larger and disquieting issue in French society. Yes, racism, this is very obvious but much more than that it is brand of racism that operates not just on the fringes of society but at its heart – in the labour and retail markets – while at the same time managing to remain in the shadows .
How is it that this BBR policy that so pervades the French employment and retail markets is only now seeing the light of day?
Like I said, very troubling indeed.
However, a silver lining to all of this is that BBR has now been fully exposed in a court of law. From now on the racial prejudice that operates in the French labour and retail markets can no longer be subject to denials of anecdote or conjecture. The court record stands as an official record by the state that BBR does exist and is a proven fact.
As for L´Oreal, this cannot be good for its brand management. For a company that so fiercely defends its brands, just take a look at its battles with eBay, this was not only a poorly conceived recruitment drive but also incorrectly defended case – this is not to be read as a dig at L´Oreal´s lawyers, not at all, I am sure they represented their client the best way they could, however, I am unreservedly criticizing L´Oreal.
L´Oreal forgot that it´s all about the brand. What they sell is much more than simply a product, it is a lifestyle, it is instant gratification, it is control and it is improved self-confidence through a line of beauty products designed for one thing – to improve the true beauty that is you. Nothing can be allowed tarnish the brand less they lose sales and market share.
If this is the basic market reality of the L´Oreal brand, and for that matter any brand, why would you maintain the spectacle of a public trial for three years with a case that even if it comes out in your favor could still blemish the brand?
There is no doubt that L´Oreal´s PR team is hard at work trying to figure out how to either make this go away or finding an angle on how to spin this. A word to the wise, L´Oreal, you have already been found guilty, it would be an exercise in futility to deny any part of this. In fact such a denial, in whole or in part, direct or indirect, could result in a backlash against the brand. It would be better to fully accept culpability, say sorry and take positive and no doubt public steps in order to combat BBR or other forms of discrimination. That my friend is your angle.
More on Omar Khadr
A Rose By Any Other Name?: Law Schools, Legal Education, and Professionalism
Several times in the last few weeks I, and other budding law students, have been reminded that the future is bleak. For some, it is a collapsing job market. For others, it is a profession that is systemically broken. Yet for some it is the law schools themselves that are the subject of scorn.
Call me an optimist, but I’ve never been one for apocalyptic prognostications. It is not that the end isn’t nigh, relatively speaking, but rather that such soothsayers have a horrendous track record when it comes to actually pinning down the date. In fact, if I were a betting man (which, indecently, I am not), I’d put the odds against them every time.
This isn’t a matter of ‘thinking positively, and it will all turn out.’ Indeed, if things continue unaltered, they probably won’t turn out. What is the case, however, is that the choice facing law school administrators today should not be one of merely more of the same, but with clinics, as if a few more hours handling small claims files will teach you how to run a practice. If, then, the naysayers are right, the choice is between the high road or the low road, with little in between.
Criticisms
Before we can talk about solutions, though, we should probably understand the problem. First, and foremost, there is the charge that the legal scholarship produced by tenured law professors is fundamentally disconnected from the day-to-day practice of lawyers. Now, having limited exposure to both said theory and said practice, my comments on this matter should be taken with a grain of salt. What I can attest to, however, is that the majority of assigned readings in my honours seminars on contemporary political theory (neutrality and perfectionism and liberalism and toleration) were written by, ostensibly, legal theorists. This is not to say that such questions don’t necessarily contain legal aspects or implications, but it does demonstrate how such work is not as purely ‘legal’ as some of its critics would like.
Second, there is the complaint that law schools focus too much on providing a ‘liberal’ education and not enough time on providing the ‘professional’ skills need to actually lawyer. While it might be worth probing the distinction made here, and the assumptions that underlie it, what is at issue at the moment is what kind of institution a law school is meant to be. This gets to the heart of the criticism that law schools have been attempting to respond to, it would seem, through the growth of clinical programs.
The final criticism I will mention here is the non-US problem of the shortage of apprenticeship positions available to new law graduates (I use apprenticeship so as to include the UK experience as well). While this is not a comment on the law school curriculum directly, the implicit concern is that if there are not enough positions in which a law graduate could learn the necessary skills to practice, then why not abolish the apprenticeship and shift the burden to the academic phase of their training. Furthermore, there is the insinuation that law students aren’t learning all that much of value at law schools anyway.
J.D. v. M.D. – What’s In A Name?
Those familiar with the history behind the American shift from the Commonwealth standard LL.B. to the, now contagious, J.D. designation will know that it was a, more or less, conscious effort to emulate the medical profession. Some have drawn the connection even closer by arguing that if one were to look for cutting edge, practical work in each of the two respective fields, then one would be quite disappointed if one had chosen to search in the vaunted halls of the t14. The assertion is that, as we saw above, law schools, unlike medical schools, are simply out of touch with their profession. The analogy, however, misses one crucial point.
That is, medical schools create doctors, surely enough, but they do not create medical practitioners. The point of the distinction is to note the (prolonged) period of apprenticeship required by, an otherwise fully qualified, doctor in order to practice medicine in their own right. In turn, this point of distinction is to draw attention to, particularly the American, but also the Canadian practice with regard to law students and lawyers. The practice with M.D.’s clearly indicates an acceptance on the part of society that, given the complexity of the subject, no amount of class time can substitute for an extended immersion in its practical application. J.D.’s, to the contrary, are expected to function with little (the Canadian approach) or no (the US approach) practical experience in the practice of the subject at hand.
A Fork in the Road?
It would seem, then, that the problem is not so much with the requirement to do three years of law school on top of a four year undergraduate program (the de facto if not the de jure requirements). Indeed, the problem is not with the schooling at all, but the lack of practical training provided to would-be lawyers. As such, it is the legal profession that must take the lead in deciding just what kind of profession they want to be before they can expect the law schools to oblige them; the law schools simply cannot aim at a moving target.
The first option for the profession would be to adopt the medical model more closely and arrange for longer (or any, as the case may be) on-the-job training programs. In effect, J.D.’s would get a similar kind of residency as their ( however distant) medical cousins. This would then in turn imply that the legal profession, and our society as a whole, genuinely feels that the body of law which lawyers manipulate, and the operation of their practice, is comparable in its complexity to the body that doctors (i.e. medical practitioners) manipulate. Do not misunderstand me, there are, and will forever remain, stark differences between the two professions, but purely in terms of practical training, I think there remains something to be learnt as well.
The second option would be to do away with the second-entry requirement entirely and adopt a model more akin to the current English and Welsh practice or the practice of other professions. For example, in Ontario becoming a Chartered Accountant requires (at least) an undergraduate degree with the requisite courses, passing the necessary exams, and somewhere close to two and a half years of supervised experience. Similarly, to become a certified Professional Engineer requires an undergraduate degree in engineering or applied science, passing the requisite exams, and four years of supervised practice. There are other direct entry professions, but these two provide a sufficient example of an alternative approach to legal education and licensing.
Where To?
The question seems, then, which of the two routes that should be taken. Personally, I don’t see the practice of North American legal education adopting the English (and Welsh) model anytime soon. Rather, I’d bet (and remember, I’m not a betting man) that, if anything, it would move toward the, for a lack of a better term, ‘medical’ model (and, for what its worth, Mr. Furlong doesn’t disagree). Or, at least, I hope it does. What is clear is that the current model satisfies no one – not students, not employers, and, probably, not even professors. If a change happens at all, the only question will be how long it will take and who will push for it.
What do you think? Does legal education need change and, if it does, in which direction? Or, perhaps, I’m totally out to lunch – I’ll leave that up to you.
More on Ontario Ombudsman
Ombudsman urges career college crackdown
The press-release.
Our previous post on Ontario Ombudsman is here.
I Dream of Suing Genie
We’ve seen both God and Sa Tan as litigants before the courts in the past year.
Well the absurdity continues with a new suit out of Saudi Arabia against a jinn, commonly known in the Western world as a “genie” of sorts.
The offending party allegedly harassed the plaintiffs with threatening voice mails, theft of cellular phones, and throwing rocks at windows.
What does make this case unique is that the entire family is behind the suit – perhaps a case of mass hysteria.
No word yet on whether the genie has filed a statement of defence.
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- The ‘Return to Unanimity’ in Insite and Division of Powers Jurisprudence: Chief Justice McLachlin’s ‘Oversight’
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