On 16 July 2026, the Second Circuit affirmed in Creditincome Ltd. v. Swiss Confederation (No. 25-2733) the dismissal, for lack of subject matter jurisdiction, of claims brought against the Swiss Confederation by holders of USD 372 million in Credit Suisse Additional Tier 1 instruments, led by AllianceBernstein funds. The plaintiffs sued in the Southern District of New York over the March 2023 order that wrote down USD 17.3 billion in AT1 liabilities to zero as a term of the UBS takeover. Writing for a panel that included Judges Chin and Merriam, Judge Calabresi held that Switzerland's "brokering" of the merger was not a "commercial activity" within the meaning of the Foreign Sovereign Immunities Act, so the direct-effect clause of Section 1605(a)(2) never comes into play and Switzerland retains its immunity (slip op., pp. 3, 21).
A merger negotiated by the state, on both sides of the table
The facts, taken from the complaint, gave the plaintiffs their best argument and, in the end, their worst. Swiss authorities considered receivership and temporary nationalization before settling on what they themselves called a "commercial solution": brokering a takeover of Credit Suisse by UBS (slip op., p. 5). Switzerland decided as early as November 2022 that only UBS could be considered as a buyer, demanded that Credit Suisse prepare a takeover scenario, and then conducted the negotiations itself, dealing with each bank on behalf of the other while Credit Suisse was excluded from the talks that fixed its own sale terms (slip op., pp. 5-6). On 15 March 2023 the Swiss National Bank extended CHF 50 billion in liquidity loans, and Swiss officials told Credit Suisse: "You will merge with UBS and announce Sunday before Asia opens. This is not optional" (slip op., p. 6). Emergency ordinances of 16 and 19 March authorized CHF 200 billion in further liquidity with tailor-made bankruptcy preferences, waived shareholder approval of the merger, gave UBS a loss guarantee of up to CHF 9 billion, and empowered regulators to order the AT1 write-down, which was executed the night the merger was announced (slip op., pp. 7-8). The plaintiffs' theory was that virtually everything Switzerland did, from the matchmaking to the loans, is what investment banks do for a living; the write-down order was an act in connection with that commercial activity, and its direct effect landed in New York, where the AT1s were held and cleared through the Depository Trust Company (slip op., p. 8).
Held to their own pleading
The panel narrowed the case before deciding it. Because the complaint identified Switzerland's "brokering" of the takeover as the only commercial activity connected with the write-down order, the sole question was whether that brokering, taken as a whole, was commercial (slip op., pp. 13-14). That framing mattered. It meant the plaintiffs could not detach the market-like components, the loans and the dealings with UBS, from the sovereign ones, the coercive directives and the emergency ordinances, and rest jurisdiction on the former alone.
On the components, the decision is more generous to the plaintiffs than the district court had been. Judge Calabresi accepted that the loans and guarantees "may well be best characterized as commercial in nature": that they were non-tradeable does not distinguish them from letters of credit and other instruments private parties issue routinely (Hanil Bank v. PT Bank Negara Indonesia, 148 F.3d 127), and scale alone does not make an act sovereign, as the court has applied the exception to sums such as the USD 62.3 billion at stake in Attestor Master Value Fund LP v. Republic of Argentina (113 F.4th 220, 229). What the facts showed was that no private party would, not could, lend at that speed and scale, because none would be committed to resolving the Credit Suisse crisis; and that, the court reasoned, goes to purpose, which Section 1603(d) instructs courts to disregard (slip op., pp. 15-17).
The brokering failed as a whole because of what surrounded the loans. Switzerland "did more than simply advise a client or broker a deal"; it coerced Credit Suisse into selling itself, maintained a "peremptory posture" from November 2022 through closing, and legislated the deal's obstacles away, abrogating shareholder votes and creating bankruptcy preferences by decree (slip op., pp. 17-20). Under Republic of Argentina v. Weltover (504 U.S. 607, 614), the question is whether the state acted "in the manner of a private player within" the market. A state that strongarms the seller "in a manner that only a sovereign could" and finishes the deal by ordinance is not playing in the market; it is overriding it (slip op., pp. 19-20).
The restrictive theory behind the statute
For readers outside the United States, the FSIA is best understood as one codification of a rule of customary international law. The restrictive theory of sovereign immunity, which shields acta iure imperii but not acta iure gestionis, displaced the absolute theory over the course of the twentieth century as states became market actors. The United States adopted it in the 1952 Tate Letter and legislated it in 1976; the United Kingdom followed with the State Immunity Act 1978; the International Court of Justice confirmed the customary status of immunity rules in Jurisdictional Immunities of the State (Germany v. Italy) (2012); and the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property restates the framework in a treaty that has yet to enter into force. Creditincome is a reminder that the hard part of the restrictive theory was never the principle but the characterization exercise, and that the outcome can turn on the level of generality at which the conduct is described, a difficulty the Second Circuit itself acknowledges, citing Pablo Star Ltd. v. Welsh Government (961 F.3d 555, 561). Described act by act, Switzerland's rescue contained loans a bank could have made; described as a course of conduct, it was an exercise of public power. Civil-law courts applying the same distinction face the same instability, and nothing in the customary rule dictates the choice of lens.
What the panel did not decide
The opinion is deliberately narrow. The court did not reach whether the write-down order was "in connection with" the brokering, nor whether the effect in New York was "direct" (slip op., p. 10 n.3). It expressly declined to endorse the district court's reading of Weltover as requiring that commercial activity involve "only" powers exercisable by private citizens, leaving open how mixed courses of conduct should be treated in a future case where the sovereign elements are less dominant (slip op., p. 12 n.5). And it rejected the Eighth Circuit's approach in Missouri ex rel. Bailey v. People's Republic of China (90 F.4th 930), which treated China's seizure of mask factories as the act of a private market player: "That is not the law of this circuit" (slip op., p. 19 n.8). That disagreement is the most plausible hook for a petition for certiorari, for which the window runs to mid-October 2026. As of this writing, neither the plaintiffs nor the Swiss government has commented publicly on the judgment.
The dispute has not ended; it has been reallocated
Immunity determined the forum, not the merits, and the same write-down is being tested elsewhere under standards that owe nothing to the FSIA. In Switzerland, where immunity is irrelevant because the state is before its own courts, the Federal Administrative Court annulled FINMA's write-down order on 1 October 2025 for want of a contractual or regulatory trigger event (case B-2334/2023); FINMA and UBS have appealed to the Federal Supreme Court, which granted suspensive effect, so the bonds remain worthless pending final judgment. The Creditincome plaintiffs cannot benefit from that route: they missed the thirty-day Swiss deadline to challenge the order, as the Second Circuit notes (slip op., p. 9 n.2). On the treaty plane, Switzerland has reportedly received at least nine notices of dispute under investment treaties, and in December 2025 a group of 184 Japanese investors commenced ICSID arbitration under the Japan-Switzerland Economic Partnership Agreement, where consent to jurisdiction comes from the treaty and the measure will be judged against fair and equitable treatment and expropriation standards rather than any commerciality test. UBS itself faces investor litigation in the Southern District of New York over the collapse, with no immunity issue because the defendants are private. Each of these tracks warrants separate treatment, and we will return to them.
What to take into the next drafting session
Three practical points follow. For litigators, the pleading defined the battlefield: by naming the brokering as the only relevant commercial activity, the plaintiffs handed the court a course of conduct saturated with sovereign acts. Complaints invoking the commercial activity exception should plead alternative and narrower courses of conduct, framed at the level of generality that favors jurisdiction. For those who structure investments in bail-in instruments, the effective protections sit outside the secondary-market forum: the administrative clock of the issuer's home state, thirty days in this case, and treaty coverage, which depends on the nationality of the holding vehicle and is worth auditing before the next banking crisis rather than after. For everyone advising on state rescues, Creditincome signals that U.S. courts will read a coercive, decree-backed intervention as sovereign even where slices of it look like banking, so the realistic remedies against the state itself lie in the issuer's own courts and in investment arbitration. Whether that allocation leaves bondholders adequately protected is the question the pending arbitrations will begin to answer.
Sources: Second Circuit judgment, 16 July 2026 · FINMA release on the appeal, 15 October 2025 · Swiss Federal Administrative Court judgment, B-2334/2023 · IISD/ITN on the ISDS claims against Switzerland
Photo: Ank Kumar, CC BY-SA 4.0, via Wikimedia Commons.