The Swiss Justice Ministry said yesterday that Swiss law prevents UBS from handing over client information to U.S. tax authorities. The Ministry added that it would actively prevent UBS from handing over the information.

A court hearing on the UBS tax case is due to start in Miami on July 13.  The U.S. authorities are demanding that the Swiss bank hand over information an additional 52,000 clients that they suspect of hiding funds in offshore accounts to avoid paying U.S. taxes.

Last week, the U.S. Justice Department filed a brief asking a federal court in Miami to enforce the summons against UBS to disclose the client information.

But the Swiss Justice Ministry said in a statement: “Switzerland makes it perfectly clear that Swiss law prohibits UBS from complying with a possible order by the court in Miami to hand over the client information.” The ministry further stated: “all the necessary measures should be taken to prevent UBS from handing over the information.”

Alois Pirker, senior analyst at Aite Group, says the Swiss government is preparing for a “head on confrontation” with the U.S. in an attempt to protect its lucrative offshore banking industry, and UBS is being caught in the crossfire. “UBS is suffering and they want to resolve this case,” says Pirker. “They’ve been made a scapegoat for the offshore private banking industry.” Ultimately Pirker believes the two governments will reach a settlement, “but it will cost UBS dearly.”

UBS issued a statement saying it would abide by Swiss law, and that it believes the matter should be resolved diplomatically by the two governments. “It is entirely up to the Swiss government to take the measures it deems appropriate to protect its own sovereignty. UBS will continue to vigorously defend itself in the civil proceedings in this case,” the statement said.

In February, UBS entered into an agreement with U.S. authorities, in which the firm agreed to pay $780 million in disgorgement, unpaid taxes, penalties and interest to the U.S. government. As part of that pact, the firm also agreed to end its U.S. cross-border business (including offshore trusts, foundations and non-operating companies with one or more U.S. individuals as a beneficial owner) and service U.S. resident private clients only through subsidiaries or affiliates registered with the U.S. Securities and Exchange Commission. In addition, UBS also agreed to hand over the names of more than 300 clients allegedly involved in the evasion of U.S. taxes.