A US appeals court will study on Wednesday whether Argentina must pay investors US$16.1 billion after taking control of the state oil company YPF more than a decade ago.
The United States Court of Appeals for the 2nd Circuit, based in Manhattan, will review the ruling handed down in September 2023 by District Judge Loretta Preska in favor of two minority shareholders of YPF.
Burford Capital has funded much of the litigation and could receive billions of dollars if investors win. Argentina is likely to appeal a loss to the US Supreme Court.
The result is important for Argentina and its president, Javier Milei, whose party won a decisive victory in Sunday’s midterm legislative elections.
Argentina had warned that a major ruling could paralyze its economy, long burdened by debt and triple-digit inflation.
Milei, a free-market libertarian, has slashed public spending and jobs since becoming president in December 2023, while reducing monthly inflation to 2.1% and giving Argentina its first budget surplus in 14 years.
US President Donald Trump has offered Milei a possible US$40 billion bailout, including a US$20 billion currency swap. and a US$20 billion debt investment mechanism.
YPF shareholders challenged 2012 expropriation
The appeal refers to Argentina’s decision in 2012 to expropriate 51% of the shares of YPF from the Spanish company Repsol for about US$5 billion, without making a public takeover offer to minority shareholders Petersen Energía Inversora and Eton Park Capital Management.
The then Argentine president, Cristina Fernández de Kirchner, said that YPF, privatized in 1993, It had to be nationalized again because it did not produce enough oil and natural gas to satisfy local demand.
Petersen and Eton Park, YPF’s second and third investors respectively, alleged that Argentina’s actions had caused them billions of dollars in damage.
Preska considered that Argentina had breached its obligations and ordered it to pay US$14.39 billion to Petersen and US$1.71 billion to Eton Park. These sums reflected US$8.43 billion in damages, plus US$7.67 billion in late payment interest at a rate of 8%.
In its appeal, Argentina said that the case did not belong in a US court, that it had not waived its sovereign immunity and that the awards were grossly inflated. since US$16.1 billion represented 45% of its global budget for 2024.
Argentina also said that Preska wrongly applied Argentine law, and that the principles of international comity, or the respect that countries grant each other by limiting the scope of their laws, justified a rejection.
Petersen and Eton Park disputed that Argentina’s blatant breach of contract could be addressed in the United States, and accused Argentina of years of delays to avoid consequences.
Argentina separately appeals YPF restitution order
The appeals court usually takes at least a few months to rule on complex cases.
Argentina has also appealed the order issued by Preska on June 30 by which he was ordered to hand over the YPF shares to partially satisfy the sentence of US$16.1 billion.
In August, the 2nd Circuit stayed that order to allow Argentina to appeal.
The US government has not commented on Wednesday’s appeal.
He has opposed requiring Argentina to hand over its YPF shares, claiming that it could interfere in foreign policy and expose the United States to similar treatment in the courts of other countries.
The cases are Petersen Energia Inversora SAU et al. v. Argentina, United States Court of Appeals for the 2nd Circuit, Nos. 23-7376, 23-7463 and 23-7614.
