Argentina scored a major victory as a US appeals court reversed a ruling ordering it to pay US$16.1 billion over the seizure more than a decade ago of state-run oil company YPF SA.
The Manhattan judge who issued the award wrongly ruled in favour of former shareholders who said they were harmed by the nationalisation of the Argentine oil company, the US Second Circuit Court of Appeals said Friday in a two-to-one ruling.
Litigation funder Burford Capital Ltd financed the suit and would have taken a large share of the award, which swelled to more than US$18 billion with interest. Burford’s US shares plunged as much as 54 percent on Friday. The firm didn’t respond to multiple requests for comment.
The appeals court ruling marks a significant victory for President Javier Milei and helps clear the government’s path to a return to international markets at some point. He had refused to negotiate with the plaintiffs, creating a stand-off that could have muddied future bond sales in this legal saga.
“It’s historic, unthinkable, the greatest judicial victory in national history,” Milei posted on X. Argentina has said the judgment is equivalent to nearly half its 2024 government Budget and argued that paying it would be economically ruinous.
The Burford-backed plaintiffs could try to appeal to the full Second Circuit or the US Supreme Court, processes that could drag on for months or even years. The ruling for now shuts down efforts by Burford to collect on the judgment and puts its chances of ever being paid in greater doubt.
US District Judge Loretta Preska issued the award in 2023, after finding the nationalisation violated YPF’s by-laws requiring a tender offer to shareholders. The Second Circuit said Preska misinterpreted Argentine law.
Even before the appeals court’s ruling, Burford had been struggling to collect on the judgment, filing cases around the world to try to attach Argentine government assets.
Friday’s order likely moots a ruling by Preska requiring Argentina to turn over its 51-percent stake in YPF to satisfy the judgment. That order was put on hold by the higher court and is the subject of a separate appeal. The US Justice Department has opposed allowing Burford to seize YPF shares, warning US overseas assets could be vulnerable to similar orders by foreign courts.
US Circuit Judge Denny Chin, writing for the majority of the three-judge appeals court panel, said that the case turned on “the narrow legal question” of whether Argentina’s laws would have permitted the claim in its own courts.
“Notwithstanding the Republic’s knowing and flagrant violation of the promises it made to foreign investors, the answer to that question is no,” Chin wrote. The judge had also expressed scepticism about the case during oral arguments in October.
“It does have a feel like it should have been litigated in Argentina,” he said at the time. “How would we be feeling about letting Argentina decide on issues against the US?”
US Circuit Judge José Cabranes dissented, praising Preska’s “meticulous care” in considering the case and suggesting foreign investors could not have expected fair treatment in Argentine courts.
Burford had been hoping that the outstanding judgment would be a continuing obstacle to Argentina accessing international capital markets, eventually forcing the nation to settle.
Argentina did eventually settle claims by Elliott Management’s Paul Singer, who engaged in a 15-year legal battle with the country over its 2001 sovereign debt default.
by Bob Van Voris, Bloomberg
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