Buenos Aires — New York’s Southern District Judge Loretta Preska ruled Friday that Argentina will have to pay Burford Capital almost $16 billion as compensation for the wrongful expropriation of the country’s largest oil and gas company, YPF, in 2012. This decision comes after several months of discussions and negotiation between the litigating parties.
Preska had ruled March 31 that Argentina carried out the nationalization of a majority stake in YPF without following the company’s own statutes, which stated that minority shareholders should be treated on equal terms. The Cristina Fernández de Kirchner administration explicitly recognized not having followed those rules, Preska said, reiterating that 49% of shareholders did not receive an offer for their stake in the company.
“The Court finds that the Republic exercised indirect control over Repsol’s shares on April 16, 2012”, she wrote, adding that “Mr. Kicillof brazenly declared that it would be “stupid” to comply with “the law of YPF itself” or “respect its bylaws,” in a reference to former Economy Minister and current Buenos Aires province Governor, Axel Kicillof.
After eight years of litigation, Preska has determined that the Argentine sovereign —and not the company— should pay for the compensation, after arguing that the plaintiffs were entitled to payout on grounds of breach of contract.
Burford Capital acquired the rights to litigate against Argentina from former YPF shareholder Grupo Petersen, owned by the Eskenazi family, in 2015. Burford paid 15 million euros for those rights, in a transaction that was part of Petersen’s bankruptcy proceedings in Spain.
Grupo Petersen, for its part, had agreed to buy as much as 25% of YPF’s total shares from YPF in 2007. The first transaction was carried out that year, by which Petersen acquired 14.9% of total shares at a valuation of US$2.235 billion.
In December 2007, YPF was valued at US$15 billion. Today, as per its market cap on the New York Stock Exchange, it is worth US$11.3 billion.
Response from the Argentine Government
Presidential spokesperson Gabriela Cerruti stated via Twitter that “the Argentine government will immediately appeal Judge Loretta Preska’s ruling,” adding that President Alberto Fernández has already “discussed the matter with the Treasury Solicitor”.
She added that the Fernández administration will continue to defend “energy sovereignty and our state-owned company YPF against vulture funds.”
Business Community Reacts
Also via Twitter, Marcos Galperin, the CEO of Argentina’s largest company by market capitalization, MercadoLibre, slammed the government for having been “authoritarian and irresponsible” in having decided to expropriate YPF as it did.
When Was YPF Expropriated?
In 2012, the Argentine government expropriated 51% of YPF’s shares, which belonged to the Spanish company Repsol.
The decision was made by the then-president, Cristina Fernández de Kirchner, who claimed her objective was for the state to control the company, so as to ensure the country’s energy self-sufficiency, ending a reliance on imports that began during the administration of her husband, Néstor Kirchner.
The expropriation was carried out by declaring YPF a company of public utility subject to expropriation. The operation was not without controversy and generated a diplomatic crisis between Argentina and Spain, as the Spanish government considered this action an attack on its interests.
On the other hand, the Argentine government argued that Repsol had not invested enough in YPF and had not fulfilled its commitments to increase production. As part of the expropriation, Argentina compensated Repsol at the time with US$5 billion.