What's Happening?
Drew & Napier, a prominent Singaporean law firm, is preparing to file claims against the Swiss government to seek compensation for Asian bondholders affected by the writedown of Credit Suisse AT1 debt.
This legal action follows a Swiss court ruling that deemed the writedown of these bonds, which occurred during a government-facilitated rescue of Credit Suisse by UBS Group AG, as unlawful. The firm represents approximately 560 bondholders from Japan, Hong Kong, and Singapore, aiming to recover losses amounting to around $300 million. The Swiss Federal Administrative Court's decision has been seen as a pivotal step in addressing the grievances of these bondholders, who argue that the writedown was unjust, as typically, shareholders should absorb losses before bondholders.
Why It's Important?
This legal action underscores significant tensions in international finance, particularly concerning the treatment of bondholders in crisis situations. The outcome of this case could set a precedent for how similar cases are handled in the future, potentially influencing the stability and attractiveness of investing in AT1 bonds. For the bondholders, a successful claim could mean substantial financial recovery, while for Switzerland, it could lead to diplomatic and financial repercussions. The case also highlights the importance of bilateral investment treaties, which provide protections against unfair treatment and expropriation, and could encourage other affected parties to pursue similar claims.
What's Next?
The legal proceedings are expected to be lengthy, with the potential for appeals and further negotiations. Drew & Napier has already initiated the process by sending trigger letters to the Swiss government, as required by the investment treaties. The firm remains optimistic about the prospects of success, and litigation-funding firm Omni Bridgeway Ltd has agreed to cover the legal fees for the investors. The case will be closely watched by international investors and legal experts, as its outcome could influence future investment strategies and legal frameworks.
