Credit Suisse AT1 Bondholders bring Investment Treaty Claims

Credit Suisse’s Additional Tier 1 (“AT1”) bondholders can now take action against Switzerland for expropriation, by bringing investment treaty claims, holding the Swiss state accountable for breaching its international investment agreements when it wrote the bonds down to zero as part of the takeover of Credit Suisse by UBS.

Unlike other claims challenging the decision to write down the bonds – which are being brought before Swiss courts and will be determined according to Swiss national law – these claims, which are being launched by global law firm Clyde & Co, will use an international arbitration mechanism and will be decided on the basis of International Investment Agreements. These 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 Swiss government-mandated distressed sale of Credit Suisse to UBS in March 2023, particularly affected AT1 bondholders who held $17.6 billion of AT1 bonds. One year on, Clyde & Co has prepared a legal opinion on the viability of investment treaty claims in international arbitration proceedings.

Clyde & Co is now planning to launch a series of investment arbitration claims which will apply international law and investor protection provisions to bring effective international remedy to investors. The claims will be launched on behalf of Credit Suisse AT1 investors from a series of jurisdictions, including but not limited to China, Hong Kong, Japan, Korea, Singapore and the UAE. These claims will be unique (but are not unprecedented) in combining international arbitration and public international law with collective redress techniques to provide justice to investors. Clyde & Co is in advanced discussion with third party funders who have expressed their willingness to fund these cases.

Loukas Mistelis (pictured), partner in Clyde & Co’s International Arbitration group commented: “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. 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.”