Law firm challenges Swiss court over delay in Credit Suisse AT1 write-down case, filing shows

A Zurich law firm representing investors challenging the write-down of Credit Suisse's CHF 16 billion AT1 bonds has filed a complaint with the Swiss Federal Supreme Court, citing delays by the Federal Administrative Court in addressing the investor claims. The complaint, filed on behalf of approximately 800 clients holding around $2 billion in AT1 bonds, alleges a lack of "discernible activities" by the administrative court since spring 2024, despite the investors' right to an expeditious review. This move aims to pressure the administrative court to advance the case, which is unprecedented in scale and complexity for the Swiss judiciary system, following the controversial write-down that upended traditional debt recovery practices.

Analysis

A Zurich-based law firm, grosz I poledna, acting for Pallas which represents approximately 800 clients holding around $2 billion of the CHF 16 billion in written-down Credit Suisse Additional Tier 1 (AT1) bonds, has filed a complaint with the Swiss Federal Supreme Court. This action challenges the Federal Administrative Court in St. Gallen over perceived significant delays in addressing investor claims against market regulator FINMA, alleging no "discernible activities" have occurred since spring 2024. The underlying lawsuit stems from the controversial March 2023 decision to write down these bonds to zero during the UBS (UBSG.S) rescue of Credit Suisse, a move that shocked markets by upending the traditional creditor hierarchy. While the St. Gallen court attributes the slow pace to the case's unprecedented scope, high number of parties, and legal complexities, this escalation to the Supreme Court aims to compel faster proceedings, with investors still awaiting access to key documents initially hoped for in late 2023. The original AT1 write-down caused significant market disruption; although the AT1 market has since shown signs of recovery, including successful issuances by UBS, this ongoing legal battle underscores the persistent complexities and quest for resolution following the Credit Suisse crisis, maintaining a degree of uncertainty around Swiss regulatory actions and creditor treatment.

Key Decisions for Investors

• Investors should monitor the Swiss Federal Supreme Court's response to this complaint, as it will signal the judiciary's approach to procedural expedition and potentially influence the timeline for the substantial AT1 bondholder claims.
• Evaluate these procedural developments for any broader implications on the perception of legal and regulatory risk within the Swiss financial system, particularly concerning creditor rights in future bank resolution scenarios.
• For those with exposure to AT1 instruments or involved in complex financial litigation, note the persistent delays and legal challenges as a characteristic of resolving disputes arising from major systemic events like the Credit Suisse collapse, which may temper expectations for swift resolutions.