Credit Suisse At1 Bondholder Legal Initiative

In 2023, authorities in Switzerland facilitated the merger of Credit Suisse with UBS, resulting in a total write-down of Credit Suisse’s Additional Tier-1 bonds (CS AT1 Bonds). 

Holman Fenwick Willan has been instructed by a substantial group of Credit Suisse AT1 bondholders to formally commence an investor-state treaty international arbitration against the Swiss Confederation. The action against the Swiss state (Swiss Confederation) seeks to protect our clients’ rights to pursue claims for losses sustained on their AT1 bonds. This is not a claim against UBS or Credit Suisse. To participate in the AT1 bond group action or for further inquiries, please express your interest here. Registration is complementary and does not obligate you to engage. 

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Information on this initiative

On March 2023, FINMA issued a directive to write down AT1 bonds valued at approximately CHF 16 billion, marking the largest loss in the AT1 debt market thus far. AT1 bonds were created following the 2008 financial crisis to develop “loss absorbing” capital for banks facing or potentially facing a capital shortfall. Their intent is to mitigate the need for government bailouts. During the period when Credit Suisse encountered a so-called ‘crisis of confidence,’ both FINMA and the Swiss government, along with Credit Suisse, consistently claimed that the bank met or surpassed its capital and liquidity standards. AT1 bonds, which are meant to absorb capital losses, were reduced to zero without any necessity to strengthen the bank’s capital. Credit Suisse itself contended that the viability clause that triggered the write-down had not been satisfied. Despite this, the Swiss authorities opted to compensate Credit Suisse shareholders while unlawfully eliminating the rights of AT1 bondholders. 

What legal remedies are accessible to bondholders? 

We believe it is essential to pursue the dispute resolution process on a neutral and international platform, removed from the Swiss legal system. Bondholders have the right to seek compensation from Switzerland through international investment treaties via international arbitration. Some investors have tried seeking recourse through other approaches, including pursuing action in Switzerland’s federal administrative court action or litigation in the courts of their home country. However, these options have presented practical difficulties. For example, many bond holders are angered by the Swiss court decision to compel individual claimants to pay individual administrative fees, in some cases more than CHF15,000 per claimant even though they are pursuing their legal action as part of a group. Swiss financial regulator FINMA also sought to block investors from accessing key documents related to FINMA’S decision to write down the AT1 bonds.  

The collective investor treaty arbitration that Holman Fenwick Willan will pursue is strictly related to the remedies provided by international investment treaties against the Swiss Confederation. Remedies under Swiss law are not being considered. Furthermore, there will be no action taken against UBS or Credit Suisse. Bondholders are not required to engage in proceedings in Swiss courts to be part of the international arbitration that Holman Fenwick Willan is advancing. 

What is an investment treaty? 

An investment treaty is a globally recognized agreement that grants private investors and companies the right to seek compensation when a foreign government harms their investments within that country. 

What is the basis for the claim? 

The write-down of the bonds was neither essential nor an appropriate solution to the difficulties faced by Credit Suisse. It disrupted the established legal hierarchy and destabilized global financial markets. By violating the principles of proportionality and good faith, the decision represented an unlawful infringement on the property rights of the bondholders. 

Switzerland has commitments to safeguard foreign investments, which encompass duties to provide fair and equitable treatment to investments and returns of investors from the applicable jurisdictions, and to refrain from expropriating investments except lawfully, non-discriminatorily, for public purposes, and with suitable and adequate compensation. Switzerland has violated these responsibilities by mandating the write-down of AT1 bonds and facilitating the merger of Credit Suisse with UBS. Particularly, Switzerland distorted the established loss absorption hierarchy during the emergency actions taken over the weekend of March 18-19, 2023. Moreover, the legal criteria for exercising any contractual powers to impose a write-down were not met at that time. Bondholders are entitled to reasonable compensation for the losses incurred due to Switzerland’s violations of its international obligations. 

Switzerland is alone in this crisis. The nation’s reputation as a stable environment where the private sector operates freely without government interference has been significantly damaged by FINMA’s ruling. Following the announcement of the write-down, other key central banks, such as the Bank of England, the European Central Bank and the Monetary Authority of Singapore, indicated that they would not have pursued the same course of action and reiterated their commitment to maintaining the hierarchy of bondholders in the capital structure. 

Am I qualified to participate in the claim? 

You must be an individual or entity with nationality from one of the following relevant jurisdictions. With emphasis on the global offices of Holman Fenwick Willan around the world, we are focused on bondholders in particular from Singapore, Mainland China, Hong Kong, and United Arab Emirates. Bondholders from other relevant jurisdictions remain welcome to register. These are Japan, Republic of Korea, Kuwait, Oman, Philippines, Qatar, and Saudi Arabia. 

If you are not from any of the above jurisdictions, you may still qualify as a qualifying investor depending on your circumstances.

As an individual, you would typically need to hold citizenship or have the right of residency in one of the relevant jurisdictions. Under certain conditions, domicile factors linking you to a relevant jurisdiction might also qualify you as a qualifying investor. For entities, incorporation in one of the relevant jurisdictions would generally be required. In some cases, control by shareholders or owners who possess citizenship, residency, or domicile in a relevant jurisdiction, or substantial operations in that jurisdiction would be sufficient. Bondholders may access investment treaties of a relevant jurisdiction in certain scenarios, such as if they can be classified as having permanent residency in another country or if their bonds are held through offshore entities. We will need to evaluate your qualifying investor status based on the specific terms of a treaty from the relevant jurisdiction. 

A qualifying bondholder must have acquired the CS AT1 Bonds prior to March 19, 2023, and still hold those bonds as at March 19, 2023.

What are the costs associated with participating in the bondholder action? 

Holman Fenwick Willan is collaborating with recognised global third-party dispute funders who are looking to finance bondholders for legal expenses and disbursements, which include arbitration costs and possible security for costs related to any collective action against Switzerland. The funding available will depend on the number of bondholders who register to participate in the collective action and the estimated total losses incurred by those bondholders. The advantage for bondholders is that the funder plans to offer a funding arrangement to ensure that bondholders will not incur any expenses during the collective action, based on the terms established in a funding agreement with the bondholders. This means: 

1. If the claim does not succeed, bondholders will not incur any costs. 
2. If the claim is successful, the third-party dispute funder will have a right to a portion of the compensation awarded to be paid by Switzerland as determined by the arbitral tribunal.

How can I sign up to receive more information? 

If you want to be part of the CS AT1 Bond group action, please complete the signup process on this page promptly by clicking the ‘Register your interest’ button on this page. Our team will reach out to you. Registration is free. After signing up, you will receive updates about the situation and the progress of your claim.