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Argentina appealed award over YPF nationalization

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Judges question whether dispute belonged in United States

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Litigation funder Burford's shares tumble

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Case could affect Milei's bid to remake Argentine economy

(Recasts first paragraph; adds details from oral arguments,

Burford share price, paragraphs 2-7, 14-18)

By Jonathan Stempel

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

Wednesday signaled a willingness to set aside a $16.1 billion

judgment against Argentina for seizing control of state-owned

oil company YPF in 2012, because the case didn't

belong in the United States.

Two judges on a three-judge panel of the 2nd U.S. Circuit

Court of Appeals in Manhattan expressed sympathy for Argentina's

argument that the case should have been heard at home, where

local judges could interpret local law.

Argentina is seeking to overturn U.S. District Judge Loretta

Preska's September 2023 award to two former shareholders of YPF,

Petersen Energia Inversora and Eton Park Capital Management, for

alleged losses stemming from YPF's nationalization.

"It does have a feel like this should have been in

Argentina," Circuit Judge Denny Chin told Paul Clement, a lawyer

for Petersen.

"Here we are trying to figure out what these Argentina

cases, Argentine statutes are saying," Chin added. "The judgment

is against the republic for actions taken as a republic. If you

were to flip it and put the United States in their shoes in

Argentina, how would we be feeling about letting an Argentine

court decide issues against the United States under American

law?"

If the $16.1 billion award were set aside--which a lawyer

for Argentina said has grown to $18 billion with interest--it

would be a defeat for UK-based Burford Capital, which

is funding the litigation and would receive much of the award.

Burford's share price fell as much as 15% in New York after

Chin and Circuit Judge Jose Cabranes questioned whether the

lawsuit belonged elsewhere. Circuit Judge Beth Robinson also sat

on the panel.

ARGENTINA, MILEI FEAR BIG AWARD COULD HURT ECONOMY

Argentina and its President Javier Milei, whose party won a

decisive victory in Sunday's midterm legislative elections,

believe a big award could cripple the country's economy, which

has long been overburdened by debt and triple-digit inflation.

Milei, a free-market libertarian, has been slashing public

spending and jobs, reducing monthly inflation and has given

Argentina its first budget surplus in 14 years.

He also has support from U.S. President Donald Trump, who

offered a potential $40 billion bailout, including a $20 billion

currency swap and $20 billion credit line.

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 Petersen and Eton Park,

respectively YPF's second- and third-largest investors.

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.

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.

ARGENTINA SEPARATELY APPEALING YPF TURNOVER ORDER

Robert Giuffra, a lawyer for Argentina, told the appeals

court the judgment was "literally life-threatening to the

country," and said Preska "made up an unprecedented remedy, not

authorized by Argentine law."

He also said the damages were inflated, representing 45% of

Argentina's overall budget for 2024, saying it would be like

ordering the United States to pay more than $2 trillion based on

an equivalent percentage of federal spending.

Clement countered that "given Argentina's checkered economic

past and its penchant for nationalism," YPF investors needed

protections in case the country pursued a re-nationalization,

and which they might not find in Argentine courts.

"When you're seeking significant compensation from a foreign

sovereign," Clement said, "there is some reason to think that

you're not going to get as fair a shake than if you sue here."

The appeals court did not say when it will rule. It

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 took no position in Wednesday's appeal.

It 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.)