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A group of international bond investors is formulating plans to sue Switzerland in a U.S. court to seize losses suffered by Credit Suisse in a state-orchestrated bailout.
According to people familiar with the matter, the case is being heard by the law firm of Quinn Emanuel. Quinn Emanuel has sued Swiss financial regulator Finma over its decision to destroy $17 billion in Credit Suisse bonds when UBS took over the bank six months ago.
Lawyers at Quinn Emanuel are laying the groundwork to sue Switzerland in the United States, arguing they have a better chance of persuading a judge to waive the country’s sovereign immunity.
The lawsuit could be filed before the end of the year, but it’s uncertain whether it will proceed, according to people involved in the discussions.
“Essentially, the claim seeks compensation for the destruction of (the investors’) property rights,” said a person familiar with the plan. The claimants will “seek expropriation recourse.” . . Pass the write-down order,” they added.
The case centers on the Swiss government’s decision in March to introduce an emergency law allowing Finma to write down $17 billion of Credit Suisse’s additional tier one bonds. The decision upends the traditional hierarchy among bank creditors, as Credit Suisse shareholders will still stand to make $3.4 billion from the takeover.
Within weeks of the deal, Quinn Emanuel and London-based law firm Pallas filed separate Swiss lawsuits against Finma over the decision. Quinn Emanuel represents plaintiffs in a $6 billion AT1 claim, while Pallas’s clients claim about $2 billion.
Any U.S. lawsuit would not include the same claims made by plaintiffs in the Finma case, people familiar with the matter said.
The Swiss government did not immediately respond to a request for comment. Quinn Emanuel declined to comment.
The law firm has a history of dragging nation-states through the courts, particularly Argentina, which has been engaged in a long legal battle over sovereign bonds it issued as part of its post-financial crisis debt restructuring.
Quinn Emanuel won a London High Court case in April in which Argentina was ordered to pay more than 1.3 billion euros to compensate investors for debt tied to the country’s economic growth. losses suffered.
Argentina paid $9.3 billion to creditors in 2016 after defaulting on nearly $100 billion in 2001, triggering the so-called “sovereign debt trial of the century.”
It is uncommon for sovereign states to be prosecuted for expropriation, as many countries have reciprocal investment treaties. However, in many countries where AT1 investors reside (notably the United States), Switzerland is not a party to investor-state treaties.
Quinn Emanuel represents a group that includes retail and institutional investors who have long held AT1’s bonds, as well as some hedge funds that speculatively bought the bonds at deep discounts in the final months before the Swiss bank’s collapse.
UBS’s takeover of Credit Suisse was designed by Swiss authorities to prevent the collapse of the 167-year-old bank from turning into a wider European banking crisis.
But the acquisition, dubbed the “deal of the century” by Swiss politicians, has triggered a series of lawsuits from Credit Suisse investors, who have lost billions of dollars.
Former Credit Suisse employees considered suing Finma, accusing them of losing more than $400 million in bonuses due to AT1 write-offs.
Separately, equity investors have filed multiple claims against UBS with the Zurich Commercial Court.
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