Swiss lawmakers refused on Tuesday to vote on a deal with the United States exposing US tax dodgers with assets in Swiss banks, risking a clash with Washington just as G8 leaders vow to crack down on secrecy.
At issue in the complex procedural wrangling is the extent to which Swiss banking secrecy, until recently widely seen as sacrosanct, will be prised open, exposing hidden accounts.
A stormy session of the Swiss lower house, or National Council, refused for the second time to hold an emergency debate on the controversial "Lex USA" deal, which Washington has demanded must come into force by July 1.
The deal is seen as crucial if Swiss banks are to escape the threat of a raft of lawsuits in the United States -- with massive fines the price of legal peace -- as well as being barred from the big and profitable American market.
But without a parliamentary green light, revealing the names of their US clients would put them in breach of Swiss banking secrecy laws.
Swiss banks are believed to hold accounts worth billions of dollars belonging to American citizens who have not declared these assets to US tax authorities.With the global economic crisis putting tax havens into sharp focus -- notably at the G8 summit in Northern Ireland this week -- Switzerland has fought to defend the principle of banking secrecy by giving some ground.
Currently, US investigators have to make a formal request for legal assistance concerning a specific tax-dodger, a procedure seen as cumbersome in Washington.
The take-it-or-leave-it deal proposed by the US side, approved by the Swiss government at the end of May, involves lifting secrecy laws for US clients for one year.
The banks need parliamentary approval to reveal clients' names and which employees handled US business.
There has been anger across the Swiss political spectrum because details of the agreement will not be revealed until after it comes into force.A total of 126 members of the National Council refused on Tuesday to debate the deal, while 67 were in favour.
It is the second time the lower house has slapped down efforts to drive through the deal, leaving it on a parliamentary knife-edge.
Switzerland's upper house, the Council of States, approved it last week by 24 votes to 15 and was scheduled to hold a new vote on Wednesday.
Rejection there would effectively stop the deal in its tracks, but if the upper house sticks to its earlier approval, the bill will be put to a conciliation commission, before a final vote on Friday.
The banking sector has said it wants to draw a line under an issue which has poisoned ties with the United States, and has backed the deal.
"It is important to have a clear, defined legal framework for action in these talks with the United States," the Swiss banking association said in a statement to AFP on Tuesday.
The battle began in 2009 after Swiss banking giant UBS was fined in the United States for complicity in tax evasion, and American clients sought new places to stash their cash.
Despite warnings from Switzerland's banking association, other players in the country moved to scoop up former UBS clients and their undeclared holdings.
Fourteen Swiss banks have found themselves in US investigators' sights for doing so.
Two of them are cantonal banks -- run by the Swiss equivalent of US states -- and American legal action could leave taxpayers with a massive bill if they were found guilty and needed state support to deal with the consequences.