As part of an ongoing $16.1 billion legal fight, a US federal judge granted Argentina a temporary halt on transferring its majority stake in YPF, the country’s largest energy business.
The judgment, issued on Monday by US District Judge Loretta Preska in Manhattan, postpones the enforcement of a prior order that would have obliged Argentina to sell its 51% stake in YPF by July 15. The new date is July 17, giving the government time to appeal the verdict.
The issue originates from Argentina’s 2012 nationalisation of YPF, in which the state expropriated shares from Spanish oil firm Repsol without first making a tender offer to other shareholders.
The move sparked legal action from Petersen Energia Inversora and Eton Park Capital Management, both minority shareholders at the time.
Burford Capital, a litigation financier based in the United States, now represents those interests and stands to benefit significantly from any recovery.
Background of the legal battle
In September 2023, the plaintiffs won, with Judge Preska ordering Argentina to pay Petersen $14.39 billion and Eton Park $1.71 billion.
However, Argentina has yet to comply with the decision, claiming intent to appeal and United States Foreign Sovereign Immunities Act (FSIA) protections.
Plaintiffs contend that Argentina’s persistent avoidance of payment and the businesslike nature of the YPF stake purchase court order have entailed a court-ordered turnover.
Nevertheless, the Argentine government argues that a binding YPF transfer would breach international law, hinder diplomatic relations, and violate the inviolability of its sovereignty.
In its defence, Argentina has made stark comparisons, suggesting that if the ruling were to be followed, a foreign court would be able to force the US to repatriate its gold to settle a legal misunderstanding.
The official contention is that the government’s YPF shares are critical to preserving its grip on national energy assets and should be safe.
Economic implications in a crisis
The decision comes at a critical time for Argentina, whose economy is under severe strain. President Javier Milei’s administration is implementing a thorough economic makeover, with the goal of stabilising inflation, reducing government spending, and rebuilding foreign reserves.
Giving up its controlling ownership in YPF could jeopardise those efforts by reducing control over a key revenue-generating asset.
The YPF stake is more than simply symbolic; it is a practical component of Argentina’s overall strategy to manage its energy sector and attract investment.
Turning over the shares, even temporarily, may cause market uncertainty and dissuade foreign investment. Argentina has cautioned that such a step may be permanent, even if it later wins its appeal.
Legal stakes beyond borders
The case could even ripple outside of Argentina’s economic angst, affecting the way US courts tackle disputes where sovereign nations and state-owned enterprises clash.
Such a seizure of the YPF shares might trigger a new line of lawsuits in which American courts force foreign nations to cede vital national interests to pay for damages.
The crux of the appeal is the interpretation of the FSIA, which, in general, shields foreign nations from US courts unless certain exceptions apply.
One of those exceptions is going to be the crux in deciding extraterritorial enforcement of judgments against sovereigns.
The turnover date has been extended until July 17, and Argentina will continue its appeals in US courts. The temporary relief gives the Milei administration some breathing room, but the fundamental legal and budgetary issues remain unsolved.
As investors closely monitor YPF’s future and Argentina’s economic direction, the decision of this lawsuit has the potential to impact the investment climate for emerging markets, as well as challenge the limits of sovereign immunity in international law.
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