Swiss Federal Court snubs request for gold sector transparency

Diggers called "bouloneurs" wash gold ore in the Democratic Republic of Congo (2019) Cèdric Gerbehaye / Agence Vu

Switzerland’s Federal Court has turned down a Swiss NGO’s request for detailed data on the origin of gold imported into Switzerland.

The decision on Wednesday marks a stinging setback for advocates of greater transparency in the gold sector and a win for refiners protective of their business secrets.

Switzerland’s highest court ruled that the Federal Office of Customs and Border Security is not entitled to provide the Bern-based Society for Threatened Peoples (STP) with information concerning gold imports by Swiss companies. The ruling confirmed an earlier decision by the Federal Administrative Court.

“The disputed information is covered by the tax secrecy imposed by the VAT law and is therefore excluded from the right to obtain information under the Transparency Act,” the court said in a press release published after the public hearing held in Lausanne.

Christoph Wiedmer, managing director of the NGO that made the request, said the four-against-one decision by Swiss judges came as a disappointment but not as a surprise. He was not persuaded by the argument of tax secrecy and said economic interests of the gold sector had prevailed despite the reputational risks the gold sector represents for Switzerland.

“It was hard to understand,” he told SWI swissinfo.ch. “They argued this on tax secrecy. We never asked for any money or transfer values. It was just quantities of gold and the name of the commerce… We are very disappointed even though we expected it because the pressure of the economic sector was very high. They did not want to have any transparency.”

He said the NGO would continue to put pressure directly on Swiss refineries to declare where their gold is coming from. It would also support efforts to pass and strengthen corporate due diligence laws in Switzerland, which suffered a blow when a Responsible Business Initiative was rejected at the ballot box in 2020.

STP is part of a vocal cluster of Swiss NGOs, experts and academics calling for greater transparency in the gold trade. Established in 1989, its stated mission is to defend the rights of indigenous peoples across the globe. STP has campaigned to end illegal gold mining in Brazil among other environmental causes.

 + Swiss gold refiners pledge to avoid Brazilian Amazon gold

Lengthy legal battle

In February 2018, STP asked the Federal Office of Customs and Border Security (FOCBS) for figures on gold imports carried out between 2014 to 2017 by seven companies, including two banks. Citing public interest and a federal law on the principle of transparency in administration, it requested gold import quantities, broken down by the gold exporter’s name and the receiving Swiss importer.

The FOCBS agreed to provide the data. However, the titans of Switzerland’s gold-refining sector – Argor-Heraeus, Metalor Technologies, MKS Pamp and Valcambi –  appealed against this decision to the Federal Administrative Court. They cited tax secrecy, business secrecy and the protection of third-party privacy.

The STP, which dropped its request for the bank figures during the proceedings, appealed to the Federal Court in 2022 to weigh in on the matter. According to the NGO, around 70% of the world’s mined gold is refined or marketed in Switzerland. Others estimate a third of the world’s mined gold and half of recycled gold is processed or refined in the Alpine nation.

In St Gallen, the judges of the Federal Administrative Court concluded that the requested data was collected for the purpose of calculating VAT. Consequently, it fell within the scope of tax secrecy. In their view, the fact that this data could be used for other purposes was irrelevant, according to court documents. The Lausanne decision on Wednesday aligned with that logic.

“This decision shows just how far we still have to go to achieve greater transparency in the supply of gold to refineries,” said Marc Ummel, head of raw materials at the NGO Swissaid. “However, it is high time that refineries took responsibility for their supplies and the conditions under which this gold was extracted, by disclosing the names of their suppliers.”

Mark Pieth, author of the book Gold Laundering: the dirty secrets of the gold trade, concurred saying the decision marked “a real step back for refineries on the way to sustainable gold. There are reasons why transparency is essential: think of Venezuela, of Amazonas gold or of conflict gold (Sudan, Russia)”.

Series of scandals

Where and how Switzerland sources its gold has been a subject of growing media and public attention in recent years.

The environmental damage associated with gold mining has brought the sector under greater scrutiny as the world struggles to address climate change. The role of gold in bankrolling Russia’s war on Ukraine has also made it a hot topic.

Newspaper Le Temps highlighted fresh controversies of the Swiss gold sector just last month. The Ticino-based refinery MKS Pamp, for example, reportedly sources gold from the New Liberty Gold Mine in Liberia linked to the pollution of river war.

It is not the only refinery to come under scrutiny. In the same article, the NGO Action de Carême criticised Argor-Heraeus, another Swiss refinery, for sourcing gold from Colombia in areas where minors are used to mine the gold.

Switzerland’s largest refiner, Valcambi, has also made headlines this year. Contrary to its statements, it continued to import gold from the precious metal dealer and refiner Kaloti after 2019, according to an investigation by Swiss public broadcaster, RTS. Dubai-based Kaloti has been accused of money laundering and trading in gold from conflict areas.

 +The dark secrets of Switzerland’s largest gold refiner

The primary demand for gold in Switzerland comes from the gold and watchmaking industry (about 50%). Investment gold and gold held by central banks make up the bulk of the rest (about 37%). Medical devices and a wide range of electronics, including computers and phones, also make use of gold.

Transparency versus competitiveness

Wednesday’s decision was a victory for Swiss refiners. The Swiss Association of Manufacturers and Traders in Precious Metals (ASFCMP), which recently dropped Valcambi from its ranks due to a dispute over its sourcing practices, says it is aligned with STP’s goal to make the value chain more transparent and more sustainable.

“But it’s definitely the case that we from the association see the term transparency a little bit different from how the NGO sees it,” the association’s president and the former CEO of Argor-Heraeus, Christoph Wilder, told SWI swissinfo.ch ahead of the session. The ASFCMP itself is not party to the proceedings.

“We have to create this kind of transparency in other ways,” he argued. “We have to guarantee transparency towards an authority which is accepted by all concerned parties and which can judge the work of a refinery or another player of our situation.”

The ASFCMP has been advocating for several years for a strengthening of the role of the Central Office for Precious Metals Control as the governmental regulator. “They have to carry out the audits and to be able to sanction a player who is not willing to improve,” Wilder says. “But to do so, the [office] needs additional means in terms of staffing and legal instruments.”

Competition in Switzerland, he noted, is extremely high and so is competition internationally. In the view of refiners, customer data are sensible data. By siding with the Swiss refiners, the Federal Court has helped protect the competitive landscape of Switzerland. “We can’t and we do not want to share customer data with everybody,” he stressed.

Winds of change

Other players in the supply chain, however, seem to be embracing transparency.

Gold mining companies – at least the 33 members of the World Gold Council – have embraced the need for greater transparency in their supply chains. In September, they committed to joining the Gold Bar Integrity (GBI) platform and supply “core data” on the gold they have produced to their refining partners.

Ummel, the Swissaid researcher, observes that more and more information on the gold industry supply chain is now publicly available. That can be via mining companies as well as players at the end of the supply chain, such as watchmaking and jewellery companies.

 + Fully traceable gold – technically feasible or pure fantasy?

“Transparency strengthens the responsibility of players in the gold sector and encourages them to take the necessary steps to combat human rights violations and environmental damage,” he said. “When it comes to refineries, however, there’s a lot of opacity… [they] use the argument of business secrecy and competition to keep the names of their suppliers to themselves, when in fact it’s more a question of the risk of being found out.”