Indian reservations are subject to federal law

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Judgment of July 17, 2018
II. Public Law Department
Federal judge Seiler, President,
Federal judge Aubry Girardin,
Federal judge Stadelmann, Haag,
Court clerk M sching.
all four represented by X .________ & Y .________, lawyers,
Federal Tax Administration, Information Exchange Service
Administrative assistance, Eigerstrasse 65, 3003 Bern,
Appeal against the judgment of the Federal Administrative Court, Section I,
dated July 5, 2017 (A-778/2017)
On March 27, 2015, the Indian Ministry of Finance (hereinafter: MoF) sent a request for administrative assistance regarding A .________ and B .________ to the Federal Tax Administration (FTA), based on the agreement of November 2, 1994 between of the Swiss Confederation and the Republic of India to avoid double taxation in the field of taxes and income (DBA CH-IN; SR 0.672.942.31). In its request, the MoF declares, based on the results of investigations by the Indian income tax authorities and information provided by the British Virgin Islands (hereinafter: BVI), on the basis of the agreement on the exchange of tax information between India and the BVI, the two Indian taxpayers A .________ and B .________ would not have declared certain assets held outside India in accordance with Indian income tax law. In detail, the MoF provides the following:
B .________ is the settlor of the E .________ trust domiciled on the BVI. According to the trust deed received from the BVI authorities, B .________ and his relatives - in particular A .________ - are beneficiaries of the trust. The E .________ Trust is the beneficial owner of the companies D .________ Ltd., C .________ Ltd., F .________ Ltd., which are also domiciled on the BVI. and G .________ Ltd. These four companies decided on July 20, 2015 to open bank accounts at Bank H .________. The resolution authorized two authorized signatories of the joint director of the four companies, I .________ Inc., to manage the accounts on behalf of the four companies
According to the MoF, there is a reasonable suspicion that A .________ and B .________, based on their relationships with the companies mentioned in India, did not declare taxable income. With its request, the MoF requests various information on the accounts held by the four companies mentioned with their registered office in the BVI at Bank H .________ for the period from April 1, 1998 to March 31, 2015.
In the course of the proceedings, the FTA requested Bank H .________ to provide various information on the period from April 1, 2011 to March 31, 2014. Bank H .________ complied with this request. After the FTA had informed them which information it intended to transmit to the MoF, A .________, B .________, D .________ Ltd. and C .________ Ltd. in the context of further correspondence with the FTA, the position that no administrative assistance was to be provided because the request of March 27, 2015 was based on data stolen from Bank H .________
On January 3, 2017, the FTA issued a .________, B .________, D .________ Ltd. and the C .________ Ltd. a final decree. It ordered that the MoF regarding A .________ and B .________ had to be provided with administrative assistance for the period from April 1, 2011 to March 31 (Dispositiv-Nr. 1). In Dispositiv-Ziff. 2, the FTA listed the information and documents to be transmitted. She also stated that she would point out to the MoF that the information received should be kept secret and only be made available to persons or authorities who are involved in the assessment, collection or administration, enforcement or prosecution or are concerned with the decision of legal remedies with regard to the taxes mentioned in Art. 26 DTA CH-IN. These persons are only allowed to use the information for these purposes (Dispositiv-No. 4)
A .________, B .________, D .________ Ltd. and C .________ Ltd. on February 2, 2017 complaint to the Federal Administrative Court. With an interim ruling dated March 23, 2017, the Federal Administrative Court ordered in particular that the FTA must submit documents for a meeting it held on August 19, 2016 with Indian authorities. The FTA complied with this request in a letter dated April 6, 2017. The Federal Administrative Court granted A .________, B .________, D .________ Ltd. and the C .________ Ltd. with interim ruling dated April 25, 2017, on the one hand, limited access to enclosure 1 to the FTA's letter of April 6, 2017 and, on the other hand, full access to enclosure 4 to this letter. In a judgment of July 5, 2017, the Federal Administrative Court dismissed the complaint
With the filing of July 17, 2017, A .________, B .________, D .________ Ltd. and C .________ Ltd. Complaint in public law matters. They request that the judgment under appeal and the final ruling of the FTA dated January 3, 2017 should be set aside and that the administrative assistance requested by the Republic of India should not be accepted or that the administrative assistance requested by the Republic of India should be refused. Eventually, the matter should be referred back to the Federal Administrative Court for reassessment, and sub-eventually to the FTA. The FTA requests that the complaint be dismissed. The Federal Administrative Court waives a consultation. In a letter dated August 18, 2017, A .________, B .________, D .________ Ltd. and C .________ Ltd. to the legal request made
1.1. The present proceedings are based on an administrative assistance request from the MoF dated March 27, 2015 based on the DBA CH-IN. The procedure is based on the Federal Act of September 28, 2012, which came into force on February 1, 2013, on international administrative assistance in tax matters (Tax Administrative Assistance Act, StAhiG; SR 651.1; cf. Art. 24 StAhiG e contrario).
1.2.The contested judgment was passed by the Federal Administrative Court and, as the final decision in a matter of public law, is generally subject to a complaint in public law matters (Art. 82 lit. a, Art. 86 para. 1 lit. a, Art. 90 BGG).
1.3. Art. 83 lit. h BGG provides that an appeal to the Federal Supreme Court is inadmissible against decisions in the field of international administrative assistance, with the exception of administrative assistance in tax matters.
1.3.1. A complaint against a decision in the field of international administrative assistance in tax matters is admissible if a legal question of fundamental importance arises or if, for other reasons, it is a particularly significant case within the meaning of Art. 84 para 2 BGG (Art. 84a BGG). According to Art. 42 Para. 2 BGG, the reasoning must briefly explain the extent to which the contested act violates the law. If a complaint is only admissible under the condition that a legal question of fundamental importance arises or that there is a particularly significant case according to Art. 84 or 84a BGG, it must be explained why the respective condition is met, unless this is clearly the case. Like Art. 84 BGG, Art. 84a BGG also aims to effectively limit access to the Federal Supreme Court in the area of ​​international administrative assistance in tax matters. A particularly significant case must therefore be accepted with caution. When answering the question of whether there is a particularly significant case, the Federal Supreme Court has a wide margin of discretion. According to Art. 84 (2) BGG, a particularly significant case exists if there are reasons to believe that elementary procedural principles have been violated or that the proceedings abroad show serious deficiencies. According to the express wording of Art. 84 (2) BGG, the law contains a non-exhaustive list of possible particularly significant cases. The existence of a legal question of fundamental importance must regularly be answered in the affirmative if the decision can guide the practice, in particular if many similar cases are to be assessed by lower authorities. A legal question of fundamental importance is also to be assumed under certain circumstances if it is a question to be assessed for the first time and which requires clarification by the Federal Supreme Court. However, it must be a question of law, the decision of which can guide the practice and, due to its weight, calls for a clarification by the Supreme Court. Legal questions of fundamental importance can also arise after the adoption of new substantive or procedural norms. The same applies if questions of fundamental importance arise due to international developments (BGE 139 II 404 at 1.3 p. 410; 139 II 340 at 4 p. 342 with further information).
1.3.2.According to the complainant, there is a legal question of fundamental importance as well as a case that is particularly important for other reasons. They pose two legal questions which, in their opinion, are of fundamental importance, both of which are related to the application of Art. 7 lit. c StAhiG and Art. 26 DBA CH-IN.
1. Disclosure of illegally obtained data: Article 7 (c) of the StAhiG stipulates that a request for assistance from another state may not be dealt with if this request is based on illegally obtained and passed on data. The question arises whether the non-illegal disclosure of data can cure the illegality of their acquisition
2. Refusal of the requesting state to provide information on the origin of the data on which the request is based: The FTA questioned the legal origin of the data on which the request was based and therefore asked the requesting Indian state. The latter refused to confirm the legal origin of this data. The question arises whether this refusal constitutes a violation of the principle of trust
1.3.3. Although these are also questions of interpretation of Art. 7 lit. c StAhiG, neither of them has yet been judged in this form by the Federal Supreme Court. Unlike France in BGE 143 II 224, India has not made an explicit declaration that the data on which the request is based are of legal origin. In addition, the MoF received the illegally stolen data from another state and not from the perpetrator. Both questions raise fundamental problems in the application of the law and can also arise in a variety of other cases. In contrast to judgment 2C_479 / 2017 of June 2, 2017, the complainants do not expect the Federal Supreme Court to provide an abstract definition of the circumstances in which the good faith of the requesting state would be denied. You have already asserted before the lower court that the request for administrative assistance is based on the data stolen by Falciani from the bank H .________ in U .________. After the lower court has left this question open, it must be assumed - in connection with the questions raised here - that the facts could be so and that the questions put by the complainant are therefore crucial. The answers can be indicative for the practice of international administrative assistance and, given their weight, a supreme court clarification by the Federal Supreme Court seems appropriate. The complaint in public law matters is therefore admissible.
1.4. The complaint submitted in due time and in the correct form by the person making the complaint (Art. 89 para. 1 BGG) must be dealt with (Art. 42 and 100 para. 1 BGG). The complaint is to be judged in an ordinary process and in accordance with Art. 20 (2) BGG with five judges (BGE 139 II 404 at 1.3 p. 411).
1.5.With a complaint in public law matters, violations of the law according to Art. 95 and 96 BGG can be asserted. The Federal Supreme Court applies the law ex officio (Art. 106 (1) BGG). It is consequently neither bound by the arguments put forward in the appeal nor by the considerations of the lower court; it can approve the complaint for a reason other than the one invoked, and it can reject a complaint on grounds that deviate from the reasoning of the lower court (motive substitution; BGE 140 III 86