Credit Suisse: Asian AT1 holders initiate legal proceedings
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More than 500 investors from Singapore, Japan and Hong Kong have launched claims against Switzerland in relation to AT1 bonds that were cancelled when UBS took over rival bank Credit Suisse.
The bond holders are seeking compensation for losses incurred.
The investors are claiming around US$250 million (over CHF226 million), making it “the largest claim against Switzerland in treaty arbitration to date”, Singaporean law firm Drew & Napier said on Thursday.
Claimants believe Switzerland breached its investment treaty obligations “when it unilaterally cancelled additional obligations” known as Additional Tier-1 or AT1, Drew & Napier pointed out.
On March 19, 2023, UBS agreed to an emergency buyout of Credit Suisse, under pressure from the Swiss government, to prevent the rival bank from going under.
To facilitate the takeover, the Swiss financial regulator wrote down the value of bonds reserved for professional investors from $17 billion to zero. This triggered a wave of complaints.
The investors “have submitted trigger letters to Switzerland under various bilateral investment treaties between their home countries” and the Swiss Confederation. This is the first step before they can initiate arbitration proceedings, the law firm said.
The parties must now enter into negotiations over the next six months to try to resolve the dispute amicably, said Mahesh Rai, Drew & Napier’s senior counsel.
Under bilateral investment treaties, “Switzerland is obliged to protect the rights of investors and ensure that they are treated fairly”, according to the firm. Omni Bridgeway, a company offering financing and dispute resolution services, has entered into an agreement with the investors to cover the costs of this process, in exchange for a share of the damages recovered.
Drew & Napier is strongly encouraging other affected investors in Singapore, Japan and Hong Kong to join the proceedings “in early 2025 so that they can also be included in the claim”, said Rai.
The firm is “also seeking to initiate compensation proceedings” for investors in Thailand and the Philippines, “many” of whom continue to “express their interest in the action we are taking”.
Translated from French with DeepL/mga
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