Vaduz Liechtenstein – The Rhein’s first port of call

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Map of Leichtenstein

Map of Liechtenstein

I was working as a lawyer in London in 1971, when someone asked me to set up for him a Liechtenstein Anstalt.  I told him that I would need to visit Liechtenstein to consult with a local attorney to ensure that the job was done properly and I requested that a substantial amount of money be deposited with my firm to cover the travel expenses and the fees of all concerned.  An Anstalt is a trust that can hold assets with complete anonymity.  It is a corporate veil that is impossible to pierce.  I forget my client’s motivation for wishing to conceal ownership of some of his assets.  He may have been trying to protect himself from the claims of a greedy ex-spouse or a zealous bankruptcy trustee or a demanding tax collector at some future time.  I do not remember.  Certainly there was nothing sinister behind his request, in that he was seeking to hide the proceeds of crime, because his wealth was honestly come by.  As soon as his money arrived in my firm’s account, I flew from London to Kloten Airport, which is just outside Zurich. Liechtenstein has no airport of its own.  From there, a rental car took me to Liechtenstein in little more than an hour.

Lake Constance

Lake Constance

It starts as a mere trickle of water high in the Swiss Alps but it develops into a great river, before finally emptying itself into the North Sea nearly a thousand miles away.  In the course of that long journey, the mighty River Rhein serves as the frontier between several countries.  It flows into one end of beautiful Lake Constance and out the other.  It passes through famous cities and deep gorges.  It receives the waters of dozens of tributaries.  More than two thousand years ago, it served as a frontier for the Roman Empire, until it finally failed to keep out the barbarians.  More recently, it was the German frontier faced by the allied armies in World War II as they advanced towards Berlin early in 1945.  The crossing of the Rhein at that time cost many lives.  But one of the first tasks that the Rhein has to perform, after it has left its mountain source, is to mark the western boundary of the tiny independent principality of Liechtenstein.   This little country is sandwiched between Switzerland on the west and Austria on the east.   It has an area of only 62 square miles and is about 15 miles long by 4 miles wide, with a population of about 35,000.  It’s about the same size as Washington DC, which has a population of about 600,000………what a difference!   The Rhein serves as the western frontier of Liechtenstein, separating it from Switzerland, although there are no formal customs or passport controls between the two countries.  In fact, Liechtenstein will not stamp one’s passport unless it is paid a generous fee for so doing.

There is one major road running the length of the country and that road runs through the town of Vaduz, which is the capital.  As one drives into Vaduz, one finds that the road runs alongside a big cliff.   On top of the cliff, high above the road, sits Vaduz Castle.  This is the home of the Prince of Liechtenstein, to which the public is definitely not admitted .  His family has provided the Head of State for centuries and its position today seems as secure as ever.  I visited the office of the local attorney, who was to establish the Anstalt that was the reason for my trip.  He proudly told me that the Prince was one of his clients.  I was impressed, but later discovered that this is a claim made by all the attorneys in Vaduz.

Vaduz Castle

Vaduz Castle

Liechtenstein is the world’s largest producer of false teeth.  At the time of my visit, nearly forty years ago, I was not in a denture buying mode.  However, much more recently, this could have been really useful to me.  They even make those effervescent pills used for cleaning dentures overnight. The country also profits from wine making and from selling postage stamps.  It is said to be a good skiing location, but my visit was in summer so I cannot confirm that.   I can confirm however that there was a plethora of picturesque German restaurants, some of which serve delicious dumplings.

At the time of writing (2009), the banks in tax havens like Liechtenstein are under pressure from the big countries in the western world to forget about their bank secrecy laws and to disclose the names of foreign customers, who may have avoided taxes in their home countries.  How this situation develops is vital to Liechtenstein, which has greatly benefitted over the years from the billions of dollars, pounds and euros secretly deposited in its banks.  Indeed, it is no exaggeration to say that its banking industry has transformed Liechtenstein from a poor Alpine farming community into one of the wealthiest places in the world.   Although there is now a steady stream of money being pulled out of Liechtenstein banks by nervous foreign depositors, the situation is complicated by devices like Anstalts, which make it impossible to tell who owns what.  Therefore the tax haven industry may still have a future.  Time will tell.

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