In a significant legal development, the U.S. government has expressed its support for Argentina in a dispute concerning a $16.1 billion judgment related to the country’s stake in the oil and gas company YPF. The Department of Justice submitted a statement of interest to U.S. District Judge Loretta Preska, urging her not to compel Argentina to relinquish its 51% ownership in YPF as part of the judgment settlement.
The case centers around a judgment awarded to Petersen Energia Inversora and Eton Park Capital Management, stemming from Argentina’s controversial 2012 seizure of the majority stake in YPF, previously held by Spain’s Repsol without offering to buy out minority investors. The U.S. government maintains that requiring Argentina to turn over its shares would violate principles of sovereign immunity and could disrupt U.S. foreign policy.
In its Wednesday night letter, the Justice Department reiterated its longstanding position that U.S. courts lack the authority to seize foreign sovereign property located outside the United States. This assertion is rooted in the Foreign Sovereign Immunities Act (FSIA), which protects foreign nations from being subjected to lawsuits or judgments in U.S. courts without their consent.
The Justice Department emphasized that enforcing such a judgment against Argentina would create an inconsistency where foreign property within the United States would receive greater protection than property located within the foreign country itself. This scenario could set a dangerous precedent, potentially exposing U.S. assets to similar actions in foreign jurisdictions.
Burford Capital, representing the investors seeking enforcement of the judgment, has indicated that they expect to recover between 35% and 73% of their respective damages from Argentina. However, Burford clarified that the Justice Department’s letter addressed a narrow legal question and did not reflect a broader stance on the merits of the case.
Argentina is currently appealing Judge Preska’s September 2023 ruling that awarded the substantial judgment against it. The country is grappling with severe economic challenges, including an inflation rate exceeding 200% annually and rising poverty levels above 50%. Under President Javier Milei’s administration, Argentina has implemented drastic public spending cuts aimed at curbing inflation, although these measures have exacerbated an ongoing recession.
The potential for improved relations between Argentina and the incoming administration of President-elect Donald Trump may offer some hope for Argentina’s ongoing negotiations regarding its $44 billion loan program with the International Monetary Fund (IMF). These discussions could be revisited in the coming year, particularly if diplomatic ties strengthen.
The Justice Department’s intervention in this case highlights the complexities surrounding international law and sovereign immunity as they relate to commercial disputes. As this litigation unfolds, it will draw attention not only from legal experts but also from international observers concerned about how such rulings might influence future cross-border investments and disputes.
As of now, it remains uncertain when Judge Preska will issue her ruling on this matter. The outcome could have far-reaching implications for Argentina’s economy and its relationship with international investors, as well as for how U.S. courts handle similar cases involving foreign sovereign entities in the future.
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