Credit Suisse AT1 investors pursue compensation via investment treaties – TheBanker.com

Credit Suisse Bondholder Dispute: Implications for Sustainable Development Goals

SDG 16: Peace, Justice, and Strong Institutions

The legal actions initiated by Credit Suisse Additional Tier 1 (AT1) bondholders test the principles of justice and institutional accountability. The pursuit of compensation through established legal channels underscores the importance of the rule of law in global finance.

• Access to Justice: International bondholders are leveraging Investor-State Dispute Settlement (ISDS) mechanisms, as outlined in bilateral investment treaties, to seek legal remedy for their financial losses.
• Institutional Accountability: The challenge against the Swiss state questions the transparency and fairness of regulatory decisions, highlighting the need for accountable institutions to maintain public and investor trust.
• Rule of Law: According to legal experts like Robert Kovacs of Withers, these investment treaties provide a “direct right” to compensation, reinforcing the role of international legal frameworks in upholding investor protections and ensuring predictable outcomes.

SDG 8: Decent Work and Economic Growth

The resolution of the $20.7 billion bond write-down has significant consequences for financial stability and the broader investment climate, which are essential for sustainable economic growth.

1. Investor Confidence: The unprecedented write-down and subsequent legal dispute can affect investor confidence in the stability of the global banking sector and the reliability of regulatory frameworks.
2. Financial Market Stability: A predictable and just resolution is crucial for maintaining the stability of capital markets, which funnels investment into productive sectors that support economic growth and job creation.
3. Investment Climate: The outcome will set a precedent for how sovereign states handle financial distress, influencing the future flow of international investment essential for economic development.

SDG 17: Partnerships for the Goals

This case highlights the complex dynamics of global financial partnerships and the international agreements that govern them.

• Global Public-Private Partnerships: The dispute between international investors and the Swiss government exemplifies the challenges inherent in cross-border financial partnerships and the need for robust governance structures.
• International Agreements: The reliance on ISDS clauses within investment treaties demonstrates the critical function of international law in facilitating and protecting global capital flows, a key component of SDG 17.
• Systemic Coherence: The proceedings emphasize the need for coherence between national financial policies and international investment law to create a stable and predictable environment for achieving global development objectives.

Analysis of the Article in Relation to Sustainable Development Goals

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 16: Peace, Justice and Strong Institutions
  • The article directly relates to this goal by focusing on legal mechanisms for resolving disputes. It discusses how international bondholders are using “investor-state dispute settlement mechanisms” and “investment treaties” to seek compensation from the Swiss state. This highlights the pursuit of justice and the functioning of legal institutions at an international level to hold a state accountable for its actions.
• SDG 17: Partnerships for the Goals
  • The article touches upon the theme of global financial stability, which is a key component of this goal. The $20.7bn wipeout of Credit Suisse bonds is a significant event in international finance, and the subsequent legal challenges affect investor confidence and the stability of the global financial system, which relies on coherent and predictable policies and treaties.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.
   • The article is a clear example of this target in action. The bondholders are not resorting to arbitrary means but are utilizing established legal frameworks—specifically “investor-state dispute settlement mechanisms” and “investment treaties”—to seek legal recourse. The mention of a “direct right to compensation” underscores the principle of accessing justice through the rule of law.
2. Target 16.6: Develop effective, accountable and transparent institutions at all levels.
   • The legal action against the Swiss state is an attempt to ensure accountability. The bondholders are challenging the state’s decision to wipe out their investments, thereby testing the accountability and transparency of the institutions that made and executed this decision.
3. Target 17.13: Enhance global macroeconomic stability, including through policy coordination and policy coherence.
   • The situation described—a major bond wipeout by a globally significant bank—directly impacts macroeconomic stability. The reliance on international investment treaties for resolution highlights the need for policy coherence in global finance to maintain investor trust and prevent systemic shocks.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• The article does not mention official UN indicators, but it implies ways to measure progress towards the identified targets.
• For Target 16.3 (Access to Justice): An implied indicator is the existence and use of international dispute resolution mechanisms. The article’s focus on the “investor-state dispute settlement mechanisms” as the “best hope” for bondholders demonstrates that such avenues for justice exist and are being actively used. The filing of a “collective action on behalf of 200 Credit Suisse AT1 bondholders” serves as a data point for this indicator.
• For Target 16.6 (Accountable Institutions): An implied indicator is the number of legal challenges filed against state actions in international tribunals. The collective action being led by the law firm Withers against the Swiss state is a direct measure of stakeholders using legal systems to hold public institutions accountable for their decisions in the financial sector.

4. Table of SDGs, Targets, and Indicators

Source: thebanker.com