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Argentina nationalized oil company YPF in 2012

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YPF investors say Argentina failed to make tender offer

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Case could affect Milei's bid to remake Argentine economy

By Jonathan Stempel

NEW YORK, Oct 29 (Reuters) - A U.S. appeals court will

on Wednesday consider whether Argentina must pay investors $16.1

billion after seizing control of state-owned oil company YPF

more than a decade ago.

The 2nd U.S. Circuit Court of Appeals in Manhattan will

review U.S. District Judge Loretta Preska's September 2023 award

to two minority shareholders of YPF.

Burford Capital has funded much of the litigation

and could receive billions of dollars if the investors prevail.

Argentina would likely appeal a loss to the U.S. Supreme Court.

The outcome is important to Argentina and its President

Javier Milei, whose party won a decisive victory in Sunday's

midterm legislative elections.

Argentina had warned a big judgment could cripple its

economy, which has long been overburdened by debt and

triple-digit inflation.

Milei, a free-market libertarian, has since becoming

president in December 2023 slashed public spending and jobs,

while reducing monthly inflation to 2.1% and giving Argentina

its first budget surplus in 14 years.

U.S. President Donald Trump has offered Milei a potential

$40 billion bailout, including a $20 billion currency swap and

$20 billion debt investment facility.

YPF SHAREHOLDERS CHALLENGED 2012 EXPROPRIATION

The appeal concerns Argentina's 2012 decision to expropriate

51% of YPF's shares from Spain's Repsol for about $5

billion, without making a tender offer to minority shareholders

Petersen Energia Inversora and Eton Park Capital Management.

Argentine President Cristina Fernandez de Kirchner at the

time said YPF, which had been privatized in 1993, should be

re-nationalized because it failed to produce enough oil and

natural gas to keep up with local demand.

Petersen and Eton Park, respectively YPF's second- and

third-largest investors, claimed that Argentina's actions caused

them billions of dollars in damages.

Preska found that Argentina breached its obligations, and

ordered that it pay $14.39 billion to Petersen and $1.71 billion

to Eton Park. Those sums reflected $8.43 billion of damages,

plus $7.67 billion of prejudgment interest at an 8% rate.

In its appeal, Argentina said the case didn't belong in a

U.S. court, that it did not waive its sovereign immunity and

that the damages were grossly inflated, with $16.1 billion

representing 45% of its overall budget for 2024.

Argentina also said Preska misapplied Argentine law, and

that principles of international comity, or the respect that

countries afford each other by limiting how far their laws

reach, justified a dismissal.

Petersen and Eton Park countered that Argentina's flagrant

breach of contract could be addressed in the United States, and

accused Argentina of years of delay in avoiding the

consequences.

ARGENTINA SEPARATELY APPEALING YPF TURNOVER ORDER

The appeals court typically takes at least a few months to

rule in complex cases.

Argentina is also appealing Preska's June 30 order that it

turn over the YPF shares to partially satisfy the $16.1 billion

judgment.

In August, the 2nd Circuit put that order on hold to allow

Argentina to appeal.

The U.S. government has not taken a position in Wednesday's

appeal.

It has opposed requiring Argentina to turn over its YPF

shares, saying it could interfere with foreign policy and expose

the United States to similar treatment in other countries'

courts.

The cases are Petersen Energia Inversora SAU et al v

Argentina, 2nd U.S. Circuit Court of Appeals, Nos. 23-7376,

23-7463 and 23-7614.

(Reporting by Jonathan Stempel in New York; Editing by Lincoln

Feast.)