LitFin Funds Treaty Claims Over Credit Suisse AT1 Write-Down

Litigation funder LitFin is backing multiple groups of investors seeking compensation over the CHF 17 billion write-down of Additional Tier 1 bonds imposed during Switzerland’s state-backed rescue of Credit Suisse, adding momentum to a growing wave of international claims challenging the treatment of bondholders.

The funding follows the filing of the first investor state arbitration against Switzerland arising from the AT1 decision, brought at the International Centre for Settlement of Investment Disputes by a group of 184 Japanese bondholders under the Japan–Switzerland Free Trade and Economic Partnership Agreement. The claim marks the opening salvo in what market participants expect to be a broader series of treaty-based proceedings by foreign investors affected by the write-down.

Swiss authorities ordered the complete write-down of Credit Suisse’s AT1 instruments in March 2023 as part of the emergency transaction that saw UBS acquire the failing lender, while Credit Suisse shareholders received equity consideration. The reversal of the conventional creditor hierarchy, in which AT1 holders are typically senior to equity, has drawn sustained criticism from investors and sparked litigation across multiple jurisdictions.

LitFin said it is funding several claimant groups pursuing compensation for losses linked to the write-down, reflecting what it described as increasing resistance among bondholders to the Swiss government’s approach and a willingness to pursue international legal remedies rather than domestic challenges alone. Treaty claims offer investors a route to allege breaches of investment protections, including fair and equitable treatment, outside the Swiss court system.

The ICSID filing by Japanese investors is expected to be closely watched by other AT1 holders, including institutional investors from Europe, Asia, and the Middle East, many of whom acquired the instruments on the assumption that equity would absorb losses first. Similar claims are anticipated under other bilateral and multilateral investment treaties to which Switzerland is a party.