A US appeals court on Friday reversed a decision that mandated Argentina to compensate US$16.1 billion for the 2012 expropriation of oil company YPF. The 2nd US Circuit Court of Appeals in New York issued a ruling, determining that the lower court had erred in siding with former shareholders who alleged they suffered harm due to the nationalisation. The suit received backing from Burford Capital, a firm based in Britain that specializes in financing litigation for other companies.
Nonetheless, the parties retain one last option for appeal before the Supreme Court of the United States. The legal proceedings initiated in 2015 culminated in a first-instance judgment unfavorable to Argentina in 2023. US District Judge Loretta Preska mandated that the country compensate over US$16 billion, concluding that the nationalisation breached YPF’s bylaws, which stipulate a tender offer to minority shareholders. On Friday, the New York appeals court determined that Preska had misinterpreted Argentine law. President Javier Milei expressed his enthusiasm on social media, stating: “We won in the YPF lawsuit… !!! The Court of Appeals has fully reversed the ruling against Argentina: an optimal outcome.” He subsequently launched a critique, targeting Buenos Aires Province Governor Axel Kicillof – a former economy minister responsible for the YPF nationalisation and a prospective candidate for the opposition in upcoming presidential elections – regarding his management of the situation.
In 2012, Argentina undertook the expropriation of 51 percent of YPF shares, which were previously under partial control of the Spanish energy conglomerate Repsol. Two years later, the Spanish oil company was awarded US$5 billion in damages; however, smaller shareholders such as Petersen Energía Inversora and Eton Park Capital Management, who collectively held a 25.4 percent stake, received no compensation and subsequently filed a lawsuit in 2015. In 2015, the firms initiated legal proceedings, claiming that the nation failed to initiate a public tender offer for shares to these two entities, which represented YPF’s second and third largest investors, as mandated by the company’s bylaws.
Argentina has consistently maintained that the obligation to pay the settlement – US$18 billion with interest, as it asserts – would inflict significant damage on the nation’s financial stability. The settlement would have constituted a significant portion of its foreign currency reserves. YPF, a prominent national company, was established in the early 20th century as a government-owned organization. The privatization occurred in 1993 during the presidency of Carlos Menem, ultimately leading to Repsol’s acquisition of control. Then-president Cristina Fernández de Kirchner re-nationalised YPF in 2012, contending that it failed to generate sufficient oil and gas to meet national demand. Had the US$16.1 billion judgment been upheld, a significant portion of the funds would have been allocated to Burford Capital.