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A US appeals court has overturned a ruling that found Argentina liable to pay $16bn to former shareholders of the oil major YPF, in a triumph for the country and a blow to litigation funder Burford Capital.
Judges in New York’s federal appeals court ruled on Friday that a lower court was wrong to find Argentina liable, a sum that the judges said accounted for about 45 per cent of its entire national fiscal budget for 2024.
Burford Capital, the litigation funder, had backed the shareholders’ claims and would have taken a share of the award. Its stock fell as much as 54 per cent in the wake of the ruling, its biggest intraday decline since July 2020. Burford did not immediately respond to a request for comment.
The shareholders’ claims “are not cognisable as a matter of Argentine law”, the judges found.
Argentina’s President Javier Milei posted on X that the appeals court’s ruling was “the best possible scenario”.
The decision “clears up the doubts and uncertainties that hung over YPF’s future, strengthening the predictability needed for the development of strategic projects and the consolidation of Argentina’s energy sector”, he said in a statement.
US-listed shares in YPF rose more than 6 per cent after the ruling.
The case stems from Argentina’s 2012 expropriation of a 51 per cent stake in YPF owned by Spain’s Repsol under then-president Cristina Fernández de Kirchner.
Her government characterised the move as an effort to reverse a sharp decline in domestic energy production, but did not launch a tender offer to minority shareholders, arguing that doing so would be prohibitively costly.
The lawsuit was brought by minority shareholders Petersen and Eton Park, which argued that the failure to make that tender offer breached the company’s bylaws and entitled them to compensation.
Petersen, which had financed its roughly 25 per cent stake in YPF with debt, collapsed after the nationalisation and later sold its litigation rights to Burford Capital, which went on to fund and pursue the case.
The lower court finding in 2023 was one of the biggest-ever judgments against a foreign sovereign by a US court.
That court had found that the Argentine government breached YPF bylaws in the way it carried out the renationalisation and must compensate Petersen and Eton Park.
The case has since become a political flashpoint in Argentina, with Milei using it as an example of what he has described as the costly legacy of interventionist policies by previous left-leaning governments.
Milei has repeatedly blamed former economy minister Axel Kicillof, who oversaw the nationalisation and is now the governor of Buenos Aires province and one of the country’s high-profile opposition leaders, for the liability.
Friday’s ruling “entirely vindicates Argentina’s position”, said Robert Giuffra, co-chair of Sullivan & Cromwell, who represented the Argentine government in the case.
“Litigation funder Burford purchased these claims for just €15mn and was seeking to turn the US courts into a casino by using its own made-up interpretation of Argentine law,” he added.
Argentina’s energy outlook has shifted markedly since the 2012 nationalisation. Oil and gas output has surged in recent years, driven by the development of vast shale reserves in the Vaca Muerta formation, helping to boost exports and underpinning expectations that the sector could become a key engine of growth.
Sebastian Soler, a former assistant attorney-general in the previous government, said Friday’s ruling vindicated Argentina’s longstanding legal strategy in the YPF case.
“The Court of Appeals rules in favour of our country based on the same arguments under Argentine law that were raised from the very start of the case, when the defence was being handled by the previous government,” he said.
“The merit of the current government lies in having reiterated those same arguments on appeal.”
The Burford-backed investors could attempt an appeal to the US Supreme Court, but that could drag the case out for years.
Source:
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