The European Commission legal services have concluded that bilateral tax treaties signed by Switzerland, the United Kingdom, and Germany violate European Union law, but European Taxation Commissioner Algirdas Semeta is hopeful that both EU member states will revise the terms of the Swiss deals without having to revert to a long-drawn out legal challenge.

European Commission Spokeswoman Emer Traynor denied media reports that Semeta was threatening legal action against the United Kingdom over the terms of its recently agreed bilateral deal with Switzerland. She noted that the United Kingdom and Germany agreements with Switzerland have not been ratified and that the EU executive was confident that each side “will work to remove the parts that impinge on EU law.”

A legal battle between the European Commission and the United Kingdom and Germany has been brewing since August when the bilateral deals, which are designed to repatriate billions of dollars in revenue hidden in secret Swiss bank accounts, were first announced. Both agreements commit the Swiss to impose penalties but would not alter their bank secrecy laws any more than they have already done to meet OECD and G-20 requirements on tax havens.

The European Commission believes the Swiss deals with the United Kingdom and Germany are illegal because they go against the terms of the EU cross-border savings tax legislation that calls for a system of automatic information exchange.