HFW Plans to File CS AT1 Lawsuit Against Switzerland
The global law firm Holman Fenwick Willan (HFW) plans to file a lawsuit against the Swiss government at the World Bank’s international arbitration court. The firm represents plaintiffs from Singapore, China and the Middle East.
London-headquartered HFW has announced that it will file a claim with the International Center for Settlement of Investment Disputes (ICSID), a multilateral arbitration institution affiliated with the World Bank and based in the United States.
According to a statement, the plaintiffs are former holders of Credit Suisse AT1 bonds that were rendered worthless in April 2023 by order of the Swiss government and the Swiss Financial Market Supervisory Authority (Finma).
The Singapore-based clients reportedly held AT1 bonds worth more than $80 million, while bondholders from China and the Middle East held bonds worth $300 million.
More Lawsuits Expected
The law firm anticipates further lawsuits related to Credit Suisse’s AT1 bonds being filed with ICSID. Several legal actions have already been initiated against Finma or the Swiss government in various jurisdictions.
Unlike a conventional class action suit, which can benefit a group of eligible claimants, bondholders in the HFW case must be individually named and identified as plaintiffs. The case is being led by Shaun Leong, an HFW partner based in Singapore.
It is believed to be the first lawsuit filed with ICSID in connection with the collapse of Credit Suisse. Previously, US asset manager AllianceBernstein filed a lawsuit in New York in January, reportedly representing claims worth $370 million.
Shareholders Favored Over Bondholders
In March 2023, the Swiss government instructed Credit Suisse to write down its AT1 bonds to zero as the bank was being taken over by UBS. This move inflicted losses on bondholders, even though they traditionally rank ahead of shareholders, who, in contrast, received UBS shares. Credit Suisse's debt, totaling around 16 billion Swiss francs ($20 billion) was wiped out.
Significant Losses for Asian Investors
Asian investors are believed to have been among the largest holders of Credit Suisse bonds. In 2019, the Swiss bank issued a S$750 million ($583 million) AT1 bond, 98 percent of which was sold to investors in Asia.
According to the attorneys, the Swiss government’s decision violated its obligations under bilateral investment treaties designed to protect foreign investments.
Case Arrangement
HFW expects to file the case next month. Only bondholders from China, Hong Kong, the United Arab Emirates, Japan, South Korea, Kuwait, Oman, the Philippines, Qatar and Saudi Arabia are eligible to join the group action, as these countries have bilateral investment treaties with Switzerland.
The firm notes that third-party funding for the litigation can be arranged. The proceedings are expected to last between three and five years. Under a funding agreement, bondholders would not need to cover litigation costs themselves; however, funders would receive a share of any awarded compensation. This share is estimated to average around 25 percent.
Claims against the Swiss state are subject to a three-year statute of limitations, meaning proceedings must be initiated by April 2026 at the latest.
