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Buenos Aires — A trial has begun in federal court in New York to determine how much Argentina’s state-owned oil and gas company YPF owes investors after its nationalization, and which could signal a victory for Burford Capital Ltd., a litigation funder that financed an investor lawsuit against Argentina and which won a favorable ruling in March.
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During this week’s three-day trial in front of Judge Loretta A. Preska, Argentina and the investors will present their arguments regarding the amount of the award. Burford said in an April statement that the award could be worth more than $7.5 billion.
The three-day process over the expropriation of the oil company in 2012 could result in an award of between $4.99 billion and $16.1 billion, but which will depend on the applicable interest rate decided by the judge.
“Why is the trial so important? Because of the $16.1 billion that Argentina could pay for the expropriation of YPF, $7.6 billion depend on the applicable interest rate that Judge Preska will decide: between 0 and 8%,” economist Sebastián Maril posted on social networks on Tuesday.
It is “the largest economic sentence against a sovereign country in the history of US courts,” he added.
An adverse ruling for YPF
On March 31, the judge of the Southern District of New York, Loretta Preska, ruled against Argentina in the lawsuit brought by Burford Capital over the nationalization of YPF in 2012. After eight years of litigation, she ruled that Argentina - and not the company - should pay compensation after arguing that the plaintiffs were entitled to a summary judgment for breach of contract.
The judge also determined that the amount of compensation to be paid would be decided in a new judicial proceeding, arguing that it had not been possible to determine the date on which the country activated the takeover bid for the company.
During the three-day process, Judge Preska, who replaced Thomas Griesa in the New York courts, will hear both parties before defining the amount to be paid. To a large extent, the difference will depend on the interest rate applicable for the delays, and the date on which it is determined that the country took control of YPF’s shares.
Burford bought the rights to litigate the expropriation of YPF from the Petersen Group, a shareholder of the oil company.
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How the expropriation played out
In 2012, the Argentine government expropriated 51% of the shares of YPF that belonged to Spanish energy company Repsol. The decision was made by then president Cristina Fernández de Kirchner, who said the objective was for the state to control the company in order to guarantee the country’s energy self-sufficiency.
The expropriation was carried out by declaring YPF as a company of public utility subject to expropriation.
The operation was controversial and generated a diplomatic crisis between Argentina and Spain, since the Spanish government considered this action as an aggression against its interests. For its part, the Argentine government argued that Repsol had not invested enough in YPF and had not fulfilled its commitments to increase oil and gas production.
As part of the expropriation, Argentina paid $5 billion compensation to Repsol.
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