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Hong Kong Investors Launch Legal Challenge Over Credit Suisse Bond Annulment

Hong Kong investors gear up for a legal challenge against the Swiss government following the annulment of AT1 bonds issued by Credit Suisse. The implications for the bond market are substantial.

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Aqsa Younas Rana
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Hong Kong Investors Launch Legal Challenge Over Credit Suisse Bond Annulment

On the international stage, a brewing conflict has emerged between Hong Kong-based investors and the Swiss government, following the latter's decision to annul additional tier 1 (AT1) bonds issued by the Swiss banking giant, Credit Suisse. This unexpected move has not only disrupted the global bond market but also raised questions about a potential violation of the bilateral investment treaty between Hong Kong and Switzerland.

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Unprecedented Legal Challenge

Fangda Partners, a leading Chinese law firm, has publicly announced its plan to submit a notice of dispute on behalf of multiple family offices and individual investors in Hong Kong. The firm will initiate an arbitration process, marking the first-ever legal challenge by Hong Kong investors against the Swiss government over the cancellation of Credit Suisse's AT1 bonds. This step is scheduled to occur within the month, adding to the mounting pressure from investors globally who have been impacted by this issue.

Arbitration Under UNCITRAL Guidelines

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The upcoming arbitration request will be submitted under the guidelines of the United Nations Commission on International Trade Law (UNCITRAL). This international arbitration institution provides a framework for resolving disputes arising out of international commercial relationships, ensuring that the process is fair, efficient, and transparent.

Implications for the Bond Market

The annulment of the AT1 bonds has caused significant disruption in the bond market. The legal challenge faced by Credit Suisse and UBS has led to a temporary return to voice trading due to the closure of electronic platforms over the weekend. This upheaval is seen as 'astounding' by industry insiders, reflecting the magnitude of the situation and its far-reaching implications for bond traders and financial markets at large.

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