Background on the Dispute
The expropriation of Argentine oil company YPF in 2012 sparked a dispute between the Argentine state and investment funds Burford, Eton, and Bainbridge. Recently, the Milei-led government faced a significant setback in this ongoing legal battle.
Judge Preska’s Decision
U.S. judge Loretta Preska ruled against Argentina and rejected their request to suspend the decision that ordered them to transfer 51% of YPF shares to Burford Capital and Eton Park.
The Argentine government had appealed the ruling last week, prompting Judge Preska to call for an emergency hearing with the involved parties.
According to Argentine expert Sebastián Maril, Judge Preska argued in her resolution that Argentina continues to delay and evade its obligations resulting from the existing ruling, which remains unsuspended solely due to Argentina’s responsibility.
Despite this decision, the Argentine defense has three more days to present itself before a second instance in the court.
Judge Preska further stated that Argentina claims irreparable damage if the court does not suspend its ‘Turnover’ order, but any supposed harm stems directly from Argentina’s own actions in delaying and attempting to evade its obligations under the ruling.
As a result, she denied Argentina’s motion for an additional suspension. The current suspension extends until July 17, “with the limited purpose of providing additional time for parties to seek relief from the Court of Appeals,” she argued.
Legal and Financial Implications
Economist and former Argentine Secretary of Fuels, Cristian Folgar, explained to DFSUD that there is a legal argument by the state that “cannot engage in extralegal negotiation of an unfinalized ruling, as the ruling is currently under appeal and the Argentine state cannot negotiate with the funds.”
In 2023, the funds identified YPF shares as a payment guarantee due to their valuable asset status held by the Argentine state. In response, Judge Preska instructed Argentina to transfer the shares to the winning party as part of debt settlement.
However, in two years, this has not occurred. The reason is that “operationally, the judge can only enforce the ruling because YPF shares belong to the Argentine state and can only be transferred with a Congressional law authorizing it. Despite the judge’s order, the state cannot act due to legal constraints, and the judge lacks tools beyond enforcing the ruling.”
Folgar added that if Argentina eventually returns these shares, the market uncertainty lies in who receives those documents. If sold on the stock exchange or pursued for the remaining 100%, given the statute requiring any shareholder seeking more than 15% of YPF to aim for 100%, remains unclear.
Since it is the Argentine Congress that must authorize share transfers through legislation, Folgar noted alternative possibilities exist because “if Congress does not approve the share transfers, they simply cannot occur.”
Key Questions and Answers
- What is the dispute about? The disagreement stems from Argentina’s 2012 expropriation of YPF, an oil company. Investment funds Burford, Eton, and Bainbridge are seeking compensation.
- Who is Judge Loretta Preska? She is a U.S. federal judge who ruled against Argentina in this case, denying their request for a suspension.
- What did Judge Preska’s ruling entail? She rejected Argentina’s request to suspend the decision that ordered them to transfer 51% of YPF shares to Burford Capital and Eton Park.
- Why did Judge Preska deny the suspension? Argentina was found to be delaying and evading its obligations under the existing ruling, which remains unsuspended due to their responsibility.
- What are the legal and financial implications? The state cannot negotiate an unfinalized ruling, and share transfers require a Congressional law. Market uncertainty arises if Argentina returns the shares, as it’s unclear who would receive them and what their intentions might be.
