According to Reuters, investors who own Credit Suisse bonds worth more than 4.5b Swiss francs ($5b) have filed a complaint against the Swiss regulator for its decision to wipe out their interests during the emergency government-planned takeover last month.

The legal firm Quinn Emanuel Urquhart & Sullivan, which is defending the bondholders, said that the action was the first of several to seek compensation for clients who, based on the firm, had their property rights wrongfully taken away when larger rival UBS acquired Credit Suisse.

A lawsuit has been launched in relation to the Swiss decision to wipe out $18b of Credit Suisse’s Additional Tier 1 (AT1) debt in a rescue last month. This unexpected decision stunned markets and alarmed lawyers.

The appeal was launched on April 18 in the Federal Administrative Court in St Gallen, north east Switzerland, against FINMA, the Swiss Financial Market Supervisory Authority that imposed the write-down.

“FINMA’s decision undermines international confidence in the legal certainty and reliability of the Swiss financial center,” said Thomas Werlen, Quinn Emanuel’s Swiss managing partner.

“We are committed to rectifying this decision, which is not only in the interests of our clients but will also strengthen Switzerland’s position as a key jurisdiction in the global financial system.”

FINMA refused to comment, and Credit Suisse did not respond.

Event of viability

FINMA said last month that its decision to inflict heavy losses on some bondholders was legal, as bond prospectuses and emergency government legislation allowed for full write-downs in a “viability event.”

AT1 bonds were created in the aftermath of the global financial crisis to ensure that investors, not taxpayers, bear the cost of risk if a bank fails.

Bondholders have sought legal counsel since the bailout upended a long-standing practise of favouring bondholders over shareholders in debt collection, and several cases have already been launched in Switzerland over the terms of the transaction.

The Federal Administrative Court stated that it was still receiving complaints but refuses to identify claimants or comment on the number of complaints filed by bondholders or their lawyers.

In the opinion of lawyers, some investors have been trading the notes at penny prices in a so-called litigation play, wagering that successful legal claims will enhance values in the future.