In many instances, investment treaty arbitration, if available, can prove to be more advantageous than litigating in the domestic courts.

Common advantages include:

  • The dispute being decided by an independent panel of arbitrators outside the territory of the state against which a claim is pursued (often referred to as the “respondent-state”);
  • The dispute being decided by reference to public international law rather than the local law of the respondent-state; and
  • The dispute taking less time to conclude, particularly if ultimate success and recoveries in the domestic courts are only likely to be achieved following multiple proceedings and appeals.

Against the backdrop of the Credit Suisse rescue in March 2023, partner Alejandro Garcia, senior associate Ilyas Bulut and associate Marco Piccolo explain the protection afforded by investment treaties and the advantages of making such claims.


What happened to the Credit Suisse AT1 bonds?

In March 2023, UBS reached an agreement to rescue Credit Suisse, brokered by the Swiss authorities. The Swiss regulator allocated the losses arising from the rescue to holders of Credit Suisse’s Additional Tier 1 (AT1) capital bonds. This move was deemed to be somewhat controversial by many market participants, who considered that AT1 bonds would take precedence over equity in a bank’s capital structure.

Necessarily, much of the initial focus was on Swiss law causes of action and remedies available to aggrieved AT1 bondholders. However, certain international agreements protecting investments (“Investment Treaties”) to which Switzerland is a party, may offer AT1 bondholders parallel or alternative routes to recovery. Such avenues for redress may be available on the basis that the Swiss regulator’s actions may have been inconsistent, as some voices have argued, with the country’s obligations under such treaties.


Protections under Investment Treaties

Like most countries, Switzerland has entered into Investment Treaties, including bilateral and multilateral treaties (as well as other instruments containing investment protections such as free trade agreements). In total, Switzerland is a party to 110 Investment Treaties, including instruments concluded with Argentina, Chile, China, Colombia, Costa Rica, Croatia, the Czech Republic, the Dominican Republic, Egypt, Hong Kong, Hungary, Kuwait, Latvia, Libya, Lithuania, Malaysia, Mexico, Oman, Peru, Qatar, Saudi Arabia, Singapore, Slovakia, Slovenia, Thailand, Turkey, the UAE and Uruguay, among others.

A significant number of Investment Treaties concluded by Switzerland share the following important characteristics:

  • They protect all types of assets (including bonds).
  • They grant protections against disproportionate, discriminatory or arbitrary treatment by the Swiss state (ie all the executive, judicial and legislative authorities of Switzerland), its bodies and agencies.
  • They impose an obligation on Switzerland to accord fair and equitable treatment to foreign investments, protecting them against substantial changes to the “rules of the game” under which an investment was originally made.
  • They provide guarantees against illegal expropriation and measures that have the effect of expropriation (so-called indirect expropriation).
  • They allow an affected foreign investor to sue Switzerland directly before an international arbitral tribunal, thus avoiding having to resort to national courts. This ensures the neutrality and independence of those who will resolve the dispute.
  • The breach of the protections contained in Investment Treaties generally confers on the affected party the right to secure compensation not only for the losses suffered but also for loss of profits.
  • The protections offered by Investment Treaties are based on public international law. In practice, this means the protections it provides are immune from any legislative changes (including constitutional changes) that could take place in Switzerland.
  • If a foreign investor affected by a breach of the protections under an Investment Treaty obtains a favourable decision (award) and requires its enforcement, the process is facilitated by two international treaties that Switzerland has concluded:
    • the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the New York Convention); and
    • if the arbitration has been pursued at ICSID, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (known as the ICSID Convention). This is a specific dispute resolution mechanism for investment cases created under the auspices of the World Bank.

If the actions of the Swiss government (including any of its organs) in connection with the Credit Suisse AT1 bonds were discriminatory or disproportionate, many commentators view these as potentially amounting to a violation by Switzerland of its obligations under Investment Treaties. On this basis, even if the Swiss government’s actions were legal under the emergency legislation that was passed to structure the takeover (which favoured shareholders over AT1 bondholders), and a write-down of the AT1 bonds was provided for under the terms of the bonds, an investment treaty claim could remain viable based on how the state treated the bondholders and their investment. What is more, an investment treaty claim may circumvent any difficulties AT1 bondholders may encounter in any claims before the local Swiss courts.


Stewarts’ experience

Our investment treaty arbitration and securities litigation teams undertake high-value and complex disputes between investors and states and related litigation before the English courts, such as enforcement actions and challenges. Our team has deep experience and understanding of the conduct of investment treaty arbitration proceedings, including under the ICSID, UNCITRAL, LCIA, PCA and SCC rules.

We have represented and advised both investors (including insolvent companies) and states in disputes around the world. Acting for both sides gives us a rounded perspective that is strategically beneficial to our clients. Our lawyers also draw upon their experience sitting as arbitrators, and the team is adept at working across jurisdictions with local counsel, experts and third-party funders, managing the process as required.

Our reputation as specialists in the field is confirmed through our ranking in leading directories, Chambers and Partners, The Legal 500 and Who’s Who Legal, with members of our team included in The Legal 500’s ‘powerlist’ of the leading arbitration lawyers in London. Those directories highlight our team’s excellence and unwavering commitment to our clients.

Similarly, on the securities litigation side, we act in some of the most high-profile securities cases in the UK and around the world, including bondholder claims. We bring that expertise and experience to such investment treaty claims.

Our expertise in advising investors and states is complemented by the firm’s reputation as a market leader in entering into innovative fee arrangements (including third party funding) to manage risk or suit the economics of our clients’ businesses.



You can find further information regarding our expertise, experience and team on our International Arbitration and Securities Litigation pages.

If you require assistance from our team, please contact us.



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