Directors Benedict Teo and Mahesh Rai featured in ALB article on Credit Suisse AT1 bonds claims lawsuits

06 Jul 2023

Directors Benedict Teo and Mahesh Rai were invited by Asian Legal Business (ALB) to share more about the lawsuit filed by Asia-based bondholders against Swiss financial supervisory authority FINMA over its write-down of Credit Suisse's AT1 bonds.

Drew is collaborating with Swiss lawyers from Nater Dallafior to help two groups of around 90 bondholders in the Asia-Pacific region bring administrative law challenges based on Swiss legal principles.

The bondholders are seeking, among other things, to set aside FINMA’s direction to Credit Suisse to write-down and cancel all AT1 bonds.

Benedict explains that the challenge rests on the basis that FINMA’s exercise of its discretion to order Credit Suisse to write down the AT1 bonds was improper and/or invalid, on the grounds that, among other things, it violated the principle of proportionality and was issued in bad faith.

Addressing contractual rights concerns, Benedict highlighted the significance of the emergency ordinances issued by the Swiss government to give FINMA a "clearer legal basis" to order the write-down - speak volumes to the viability, or lack thereof, of the contractual conditions justifying FINMA’s decision. He further notes that even Credit Suisse appeared to have disputed that a “Viability Event” had been triggered to warrant a write-down.

Benedict, Mahesh and their team will be filing supplemental submissions and would expect FINMA and Credit Suisse to respond to the appeals. The outcome of this case, depending on the grounds presented by the Swiss Federal Administrative Court, may provide valuable guidance on how regulators handle similar situations in respect of AT1 bonds in the future.

You may read the full article on p.6-7 of the June 2023 issue of ALB here or on ALB’s website here.