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Bank Secrecy, Exchange of Taxpayer Data, Search, And EU Law: The Case Of K.S. And M.S. v. GERMANY



William Byrnes

In 2006, the German secret service (Bundesnachrichtendienst) bought a data carrier from a certain K. for a considerable amount of money. The data carrier contained financial data from the Liechtenstein L. Bank relating to 800 people. K., who had formerly been an employee of the L. Bank, had illegally copied the data. The data carrier was submitted to the German tax investigation authorities, which subsequently instigated proceedings against, inter alia, the applicants, in relation to tax evasion crimes.

The background to the case

The search warrant indicated that, in the course of investigations against another suspect, the prosecution had obtained information that the applicants had established the “K. Foundation” on January 17, 2000 and the “T.U. S.A.” on June 14, 2000. The applicants were suspected of having made financial investments via these two associations with the L. Bank in Liechtenstein, for which they were liable for tax in Germany. According to the search warrant, the applicants had failed to declare about 50,000 euros (EUR) of the yearly interest accrued from the capital of both the K. Foundation and T.U. S.A. in their tax returns for the years 2002 to 2006. It indicated that the applicants had evaded tax payments of EUR 16,360 in 2002, EUR 24,270 in 2003, EUR 22,500 in 2004, EUR 18,512 in 2005 and EUR 18,000 in 2006. The search warrant stated that the house search was urgently needed in order to find further evidence and that, weighing the seriousness of the alleged crimes against the constitutional rights of the applicants, the house search was proportionate.

On September 23, 2008, the applicants’ flat was searched and one envelope containing L. Bank documents and five computer files were seized.

Procedure

1. The case originated in an application (no. 33696/11) against the Federal Republic of Germany lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by two German nationals, Mr K.S. and Mrs M.S. (“the applicants”), on May 27, 2011. The President of the Section acceded to the applicants’ request not to have their names disclosed (Rule 47 § 4 of the Rules of Court).

2. The applicants were represented by Mr F. Bielefeld, a lawyer practicing in Munich. The German Government (“the Government”) were represented by one of their Agents, Mrs K. Behr, of the Federal Ministry of Justice and Consumer Protection.

3. The applicants alleged, in particular, that the search of their residential premises had violated Article 8 of the Convention, as the search warrant had been based on evidence which had been obtained in breach of international and domestic law.

Verdict

FOR THESE REASONS, THE COURT, UNANIMOUSLY,

  • Declares the complaint under Article 8 of the Convention admissible and the remainder of the application inadmissible;
  • Holds that there has been no violation of Article 8 of the Convention.
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William H. Byrnes has achieved authoritative prominence with more than 20 books, treatise chapters and book supplements, 1,000 media articles, and the monthly subscriber Tax Facts Intelligence. Titles include: Lexis® Guide to FATCA Compliance, Foreign Tax and Trade Briefs, Practical Guide to U.S. Transfer Pricing, and Money Laundering, Asset Forfeiture; Recovery, and Compliance (a Global Guide). He is a principal author of the Tax Facts series. He was a Senior Manager, then Associate Director of international tax for Coopers and Lybrand, and practiced in Southern Africa, Western Europe, South East Asia, the Indian sub-continent, and the Caribbean. He has been commissioned by a number of governments on tax policy. Obtained the title of tenured law professor in 2005 at St. Thomas in Miami, and in 2008 the level of Associate Dean at Thomas Jefferson. William Byrnes pioneered online legal education in 1995, thereafter creating the first online LL.M. offered by an ABA accredited law school (International Taxation and Financial Services graduate program).