Clyde & Co. eyes arbitration claims against Switzerland for Credit Suisse AT1 bondholders

Claims would be based on a breach of international investment agreements, and launched on behalf of Credit Suisse’s AT1 investors from jurisdictions including Hong Kong, China, Japan, Korea, Singapore and the UAE.

March 25, 2024

Following UBS's rapid takeover of Credit Suisse last year, law firm Clyde & Co. has said that Credit Suisse’s Additional Tier 1 (AT1) bondholders, who were wiped out at the time, can now take action against Switzerland for expropriation by bringing investment treaty claims, according to a March 25 media release. 

This move is valid if the government breached international investment agreements, which operate on a cross-border basis, when it wrote the value of the AT1 bonds down to zero as part of the takeover of Credit Suisse by UBS.

These agreements can include bilateral investment treaties or free trade agreements, which classify the action of writing down the bonds as expropriation. The outcome of these arbitration claims will be determined by an independent arbitration tribunal rather than by Swiss judges.

The law firm said these claims will be different to ones being brought about in the Swiss courts via Swiss national law as they will use an international arbitration mechanism 

UBS took over Credit Suisse in March 2023 in all-share deal worth CHF3 billion (around $3.3 billion). 

In addition to sharholders, staff and the global financial markets, in particular, the takeover impacted AT1 bondholders who held $17.6 billion of AT1 bonds, the value of which was written down to zero by the Swiss financial regulators, ranking these bondholders behind Credit Suisse shareholders.

Clyde & Co said it has now prepared a legal opinion on the viability of investment treaty claims in international arbitration proceedings. This opinion is also supported by a financial report provided by Charles River Associates, added the law firm. 

The law firm said it is planning to launch a series of investment arbitration claims which will apply international law and investor protection provisions. The claims will be launched on behalf of Credit Suisse’s AT1 investors from jurisdictions including but not limited to Hong Kong, China, Japan, Korea, Singapore and the UAE.

The claims will combine international arbitration and public international law with collective redress techniques, according to the media release. Clyde & Co is in advanced discussion with third party funders who have expressed their willingness to fund these cases.

Loukas Mistelis, a partner at Clyde & Co’s International Arbitration group and an expert on international dispute resolution and investment treaty law, said in the statement: "It is clear to us that de-localised and depoliticised proceedings against Switzerland on the basis of international investment agreements are the most likely route to a favourable outcome for AT1 bondholders, who were treated outrageously as Credit Suisse collapsed and had their investments unlawfully expropriated.”

Mistelis added: “We now intend in the coming months to bring a series of international arbitration claims against Switzerland on behalf of groups of affected investors in a range of countries, in particular in Asia and the Middle East.”

The Swiss government declined to comment when approached by FinanceAsia. 

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