Brazil backs Argentina in fight over US$16-billion US YPF judgment

Argentina’s appeal of a US$16.1-billion US court judgement over its 2012 nationalisation of oil company YPF SA won the support of four neighbouring South American countries, including regional giant Brazil, who say the “deeply flawed” ruling threatens them all.

Brazil and Uruguay filed a so-called “friend of the court” brief Friday in the federal appeals court in New York where Argentina is challenging the September judgement by US District Judge Loretta Preska. Chile and Ecuador filed a separate brief in the case.

According to Argentina, the suit brought on behalf of YPF shareholders shouldn’t have been decided by a court in New York. In their filing, Brazil and Uruguay agreed, saying Preska had usurped Argentina’s rights as a sovereign nation, including the ability to nationalise domestic companies.

The people of Argentina and nearby countries “should not be forced to endure the economic consequences of a judgement that flagrantly misapplies the governing law,” by a court that lacked authority to decide the case, Brazil and Uruguay said. Chile and Ecuador said the judgement “threatens to disrupt long-standing commercial relations” between the countries and the United States.

The YPF suit was financed by Burford Capital, which stands to collect US$6.2 billion if the judgement is upheld and enforced. The country previously fought Paul Singer’s Elliott Management for 15 years in litigation over its 2001 sovereign debt default before reaching a US$4.7-billion settlement.

Brazil supported Argentina in that fight as well, though the politics of the countries have changed in recent years. Brazil, the most populous country and largest economy in South America, currently has a leftist government led by President Luiz Inácio Lula da Silva, who has promoted an interventionist approach to the economy. A left-wing president, Gabriel Boric, also took office in Chile in 2022.

In contrast, Argentina's President Javier Milei, who took office in December on a libertarian platform, is strongly opposed to heavy-handed government intervention and has in the past criticised Lula. The nationalisation at issue in the case took place under the left-wing Argentine government of Cristina Fernández de Kirchner.

A lawyer for Burford didn’t respond to a request for comment.

Preska last month authorised Burford, which acquired the YPF shareholder claims for US$16.6 million in 2015, to begin collecting the judgement after Argentina failed to pledge assets while it pursues its appeal.

The case is Argentine Republic v. Petersen Energia Inversora SAU, 23-7370, 2nd US Circuit Court of Appeals (Manhattan).