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In the legal dispute over the lost assets of the GDR, Julius Baer lost in federal court. The bank has finally been sentenced to a payment of around 150 million francs. The amount is covered by a provision.
Julius Baer has to pay the German Federal Agency for special tasks related to unification around 150 million francs.
The Swiss Federal Supreme Court has approved a lawsuit by the German Federal Agency for Unification-Related Special Tasks (BvS) against Julius Baer, as the company announced on Friday. These are assets of about 97 million francs plus interest accrued since 2009. Julius Baer has to pay the German state around 150 million Swiss francs.
For years, the Federal Agency has been trying to locate and recover funds that had been set aside by members of the GDR’s unity party, the SED, during the fall of the Berlin Wall. In its complaint, BaFin claimed that Julius Baer, as the successor to the former Bank Cantrade, had made improper payments and transfers from the account of an East German company.
Julius Baer wants to recover funds from UBS
Julius Baer joined Bank Cantrade in 2005 as part of the acquisition of “Bank Ehinger & Armand von Ernst” from UBS. Bear will now claim the amount from UBS, the bank said Friday. Julius Baer had already made a provision of 153 million Swiss francs following the judgment of the Zurich High Court in December 2019, which at that time was in favor of the bank.
The verdict of Switzerland’s highest court marks the end of an adventurous quest for a lost million-dollar fortune to which the Federal Republic of Germany was entitled after the collapse of the GDR. Rudolfine Steindling, the late Viennese communist and high society, played a central role; At the end of the GDR, she was the sole shareholder in foreign companies of the East German regime. This included, for example, the Novum company: the company engaged in business with the West was owned by the Socialist Unity Party of Germany (SED), which was not visible from the outside.
Taken out of the country when the GDR fell
Steindling exchanged about DM 500 million from the Novum account as the end of the GDR loomed. Among other things, the money flowed to his account at Zurich Bank Cantrade, where he had been a long-time customer. From there, fortune disappeared in ways that could no longer be traced later. The money belonged to the Federal Republic of Germany, which later recovered it from Julius Baer, Cantrade’s legal successor.
What should and could have known?
The question was: Could the Cantrade bankers have recognized that Novum was a front company for the SED and that something was wrong with the transactions on Steindling’s account? The Zurich High Court was faced with the difficult task of having to assess retrospectively over thirty years whether Cantrade’s bankers should have recognized in those months after the fall of the Berlin Wall that Steindling was hiding money from the former GDR regime from the RFA and, therefore, in the account list. I should have intervened.
The Zurich high court, which had to try the case twice, found the first time that Cantrade’s bankers had always acted in good faith. At that time, only a few people knew the exact conditions in East Germany and they knew that companies like Novum were SED affiliated companies. In 1996, years after the infringing transactions, German courts denied that these companies were close to the SED. A Berlin court spoke of a “perfect camouflage” of society as an enterprise of the Austrian Communist Party.
However, during the first examination of the case, the Zurich High Court declared that there were sufficient suspicions regarding a cash withdrawal of 20 million Swiss francs on December 4, 1990, which should have prompted the bank to conduct a in-depth research. In all transactions after that, Cantrade’s bankers should no longer have been in good faith, the judges found. According to Germany, this involved a “multitude of transactions with a total value of around 64 million euros, excluding interest”, after December 4, 1990.
Double payment: an asset?
However, the high court ruled in Julius Baer’s favor the first time. Because the German state, according to the Zurich judges, reached a settlement with Ms Steindling in 2009 and received his money. If Bär also had to pay this money, one would have to speak of “enrichment”, said a lawyer after the first judgment of the higher court. Unsurprisingly, the BvS filed a complaint against that ruling, which was partially approved by the Federal Supreme Court in early 2019. The lower court has now been ordered to re-evaluate the case.
In its second assessment, the Zurich High Court concluded that the 2009 settlement between the German State and Steindling, which at that time amounted to € 106 million, did not include claims against third parties. There was also no contradiction with the previous statements of the court, so the higher court regarding the first judgment itself, because the settlement agreement could not be understood as a partial relief of the debt in favor of Steindling. The result is that the German state is receiving money for the second time, this time from Bank Julius Baer. The Federal Supreme Court has now confirmed this ruling.
