05/09/22

SINGAPORE: Credit Suisse court spat with billionaire kicks off.

As published on businesstimes.com.sg, Monday 5 September, 2022.

Credit Suisse Group’s next legal battle unfolds in Asia on Monday (Sep 5) as a local subsidiary stands trial in Singapore accused by a billionaire client of negligence he says cost him as much as US$800 million.

Bidzina Ivanishvili, a Georgian tycoon who was once his country’s prime minister, is expected to testify via video link on the opening day of the trial, which comes just months after his victory in a related clash with the Swiss bank’s Bermuda life insurance unit.

The dispute with Ivanishvili adds to the problems the newly appointed chief executive officer Ulrich Koerner and chairman Axel Lehmann are keen to resolve as the bank reels from reputational hits in the last 2 years. The potentially expensive legal spat with the Georgian is one of many that still weigh on the bank’s costs, on top of likely restructuring charges amid a strategic review that could see the investment bank drastically reduced.

The trial will also be a test of whether the Zurich-based bank can insulate itself from blame for alleged compliance failures of an overseas unit, or in this case a Singapore-based trust through which Ivanishvili had hundreds of millions of dollars invested.

Credit Suisse has long argued that it and its units were in the dark about the fraud scheme perpetrated by convicted banker Patrice Lescaudron and also that Switzerland is the appropriate forum for any litigation. Lescaudron was convicted at the beginning of 2018 but was released from prison late that year on medical leave before he took his own life in 2020.

Credit Suisse Life (Bermuda), which handled some of Ivanishvili’s investments, unsuccessfully made the same argument that it wasn’t aware of Lescaudron’s activities in its case at the Bermuda Supreme Court in November. That line of reasoning was rejected by the judge, who ruled in March that the Bermuda unit had turned a “blind eye to Mr Lescaudron’s wrongdoing”.

Ivanishvili was awarded damages of more than US$600 million in the Bermuda dispute, which is being put into escrow pending the outcome of an appeal.

Still, it hasn’t all been losses for the bank in its battle with its client, who was the wealthiest of a clutch of rich individuals from Russia and neighbouring Georgia handled by Lescaudron.

The New Zealand High Court dismissed Ivanishvili’s case there in 2018, accepting the bank’s argument that Switzerland was the correct jurisdiction.

And though a last-minute appeal to cancel the Singapore trial was rejected in August, Credit Suisse’s lawyers successfully argued that any litigation in Singapore should be limited to CS Trust and not the bank.

Lawyers for the trust said in pretrial statements that “at all material times, the investment managers appointed by Mr Ivanishvili were responsible for and exercised all powers of investment management, to the exclusion of CS Trust”.

They said the unit “denies that it had failed to take any or any reasonable steps to protect and safeguard the assets of the Mandalay Trust” created for Ivanishvili’s investments.

Credit Suisse itself said it doesn’t comment on ongoing litigation matters.

Ivanishvili’s London lawyers have said the US$800 million in total they’re seeking is a sum derived from misappropriated assets as well as losses that wouldn’t have been incurred if the money had been prudently invested. They declined to comment ahead of the trial.

There was a modest overlap in the funds invested in Bermuda and Singapore and laws in both jurisdictions would prevent Ivanishvili from double-dipping in the event of victory in Singapore.

The Georgian is represented by a team led by Cavinder Bull from Singapore-based Drew & Napier. CS Trust is being defended by a team from Allen & Gledhill, led by Afzal Ali.