US supports Argentina in lawsuit against the nationalization of YPF

Joe Biden had already done so, and now Donald Trump will do so as well. The United States government announced, through the Department of Justice, that it will file a brief with the New York Court of Appeals in defense of Argentina’s position in the YPF case. The intention is to warn of the legal risks posed by forcing the Argentine government to transfer its 51% stake in the oil company to the plaintiffs following the oil company’s nationalization in 2012. On Tuesday, the Court of Appeals preemptively suspended the order issued by Judge Loretta Preska and gave Argentina time to organize its arguments and request a definitive suspension.

The Justice Department’s brief is expected to broadly replicate arguments previously presented by the Biden administration in November of last year, also in support of Argentina, but which were ignored by Judge Preska. The White House argued at that time that the transfer of the Argentine state’s shares in YPF to the plaintiffs would violate U.S. rules on sovereign immunity. It also opens the door for Argentina to take similar measures in the future against U.S. companies or assets. Preska effectively ordered a privatization of YPF with assets that are listed on the Buenos Aires Stock Exchange and not traded in the United States.

The lawsuit over the nationalization of part of YPF in 2012 is currently the greatest legal threat facing Argentina. In 2014, the Argentine government agreed to pay Repsol $5 billion for the 51% of the shares it had expropriated from the Spanish energy company in 2012. In 2023, Preska ordered the country to pay $16 billion in compensation to the Burford and Eton Capital funds. The argument was that the Argentine government violated YPF’s bylaws when it purchased the Repsol shares by not offering the same conditions to the other minority shareholders. Leading the lawsuit was the Petersen group, owned by the Argentine Ezkenazy family, which, after going bankrupt, sold its rights in the YPF lawsuit to Burford Capital, a fund that that buys the rights to litigation from bankrupt companies to pursue large-sum claims.

On Monday, Preska gave the Argentine government 72 hours to transfer its shares in YPF as part of payment to Burford Capital and Eton Capital, under threat of being held in contempt. A day later, the Court of Appeals for the Second District of New York City, at Argentina’s request, preemptively stayed Preska’s order. “The Court is granting a temporary administrative stay of the District Court’s transfer order pending the resolution of the stay request by a three-judge panel,” the Clerk of the Court of Appeals stated.

The Milei administration now hopes that explicit support from the White House will unblock a judicial situation from which there seems to be no way out. The Argentine government lacks the money the judge is demanding, a sum that comes close to the financial bailout recently granted by the International Monetary Fund. Additionally, the government cannot transfer YPF shares without congressional authorization.

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