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European shares hit a 10-month high last week but fell back on Friday, tracking losses on Wall Street. Talk that LVMH could sell its coveted Moët Hennessy division to long-time suitor Diageo sent the luxury brand group’s shares higher. LVMH has repeatedly denied it is planning to sell, in spite of rumors that Diageo is a willing buyer. It ended the week up 3.2% at €65.62. Nestlé shares fell 4.3% at SFr42.20 after the Swiss food group reported a slide in profits and sales in its interim results. Read more

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UBS and the US government have agreed to an out of court settlement ending one of the most bitter assaults on Switzerland’s hallowed bank secrecy laws. The case has significant implications for the future of client confidentiality, amid fears among many Swiss bankers that a dilution of traditional secrecy rules could prompt a defection by worried foreign customers. No details of the deal were revealed yesterday, pending formal signing, probably early next week. However, lawyers said the settlement would involve UBS supplying the names of least 5,000 US offshore clients and possibly paying a big fine. Shares in the bank closed up 3% at SFr16.34 on relief that the issue had finally been resolved. Read more

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Switzerland has strongly requested that a US court reject demands by the US Internal Revenue Service for information about US clients of UBS AG, saying disclosure would violate its sovereignty and international law. The Swiss government’s petition came in a federal court filing in Miami, where the. Internal Revenue Service is seeking to force UBS to reveal the identities of 52,000 Americans suspected of using accounts at the bank to hide about US$14.8B of assets and evade US taxes. “Switzerland’s laws prohibit the release of confidential information to foreign governments when the request has not been made through authorized intergovernmental channels,” the government said in its filing. “If the court were to order UBS to produce evidence from Switzerland, and backed that order with coercive powers, the court would be substituting its own authority for that of the competent Swiss authorities, and therefore would violate Swiss sovereignty and international law,” it said. Echoing a similar filing earlier in the day from UBS, it said Swiss government law also specifically prohibits release of the information demanded by the IRS.

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US efforts to force UBS AG, Switzerland’s largest bank, to disclose the names of 52,000 American customers would require the bank to violate Swiss sovereignty and criminal law, bank lawyers said.

A US lawsuit filed last week improperly seeks to enforce summonses from the Internal Revenue Service for the identities of account holders and would trample on Swiss sovereignty, according to a UBS filing in federal court in Miami. “Swiss law strictly prohibits UBS and its employees from disclosing to the IRS the account information located in Switzerland that the IRS seeks,” UBS lawyers wrote. “The IRS’s petition does not acknowledge these restrictions and instead simply ignores the existence of Swiss law and sovereignty.”

By trying to force disclosure, the IRS seeks to expose bank employees to “substantial prison terms, as well as fines, penalties and other sanctions,” bank lawyers wrote. The IRS also wants a judge to force UBS “to violate Swiss law in a manner that will expose it to penalties, civil liability and the possible revocation of its banking license.”

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