In a landmark ruling on August 28 2015, the Swiss Supreme Court held that the Swiss Financial Markets Authority (Finma) did not have sufficient statutory authority to prevent a bank from disclosing the content of an order, without its prior consent. In the case concerned, Finma had ordered Bank Frey & Co AG in August 2013 to discontinue as soon as practicably possible any business relationship with US clients without increasing its legal and reputational risks. As part of its order, Finma expressly barred the bank from transmitting its decision to any third party without its consent. The bank appealed the decision. However, following its decision to cease banking operations, the bulk of the case, except the issue of supervisory privilege, became moot. The bank, nevertheless, continued the proceedings on this single issue.

In a carefully reasoned decision, the Swiss Supreme Court, affirming an earlier ruling of the Federal Administrative Tribunal, held that Finma's order infringed on the fundamental rights of the bank to determine its own image and its freedom of expression. Therefore, Finma required a formal statutory basis on which to issue such an order. After analysing the numerous confidentiality obligations applying to Finma, the court concluded that these provisions were binding on Finma and its staff, but did not extend to supervised institutions. This meant, therefore, that Finma could issue an order limited in time to avoid compromising existing investigations, but could not issue a general gag order. Despite this, other limitations resulting from data protection regulations, banking secrecy obligations and article 271 of the Swiss Criminal Code making it an offence to carry out actions on behalf of a foreign state, still applied.

This decision has potentially far-reaching consequences for Swiss financial institutions involved in cross-border investigations and litigation. Although it does not affect decisions that were issued in the past, it will limit Finma's ability to subject new proceedings to the supervisory privilege and may require institutions to disclose sensitive issues in order to obtain co-operation credit. While a revision of the Finma SA, which is expected to enter into force on January 1 2016, will allow Finma to prevent the disclosure of certain supervisory activity to foreign government authorities subject to an overwhelming private or public interest, this ruling is likely to shape future decisions regarding cross-border proceedings.