MercoPress. South Atlantic News Agency

YPF 2012 nationalization case reaches US Supreme Court: US$ 2.5bn at stake

The seven Justices of the US Supreme Court will hear the appeal from the Argentine government against the decision of an intermediate court

The US Supreme Court will hear this Friday an appeal against an intermediate court decision accepting jurisdiction over Argentina and its majority state-owned oil giant YPF, in a case relating to YPF’s 2012 re-nationalization by Argentina, then under the rule of ex-president Cristina Fernandez.

In August last year the judgment of the US Court of Appeals for the Second Circuit allowed a suit against Argentina and YPF to proceed. The claimants in the case (Petersen Energia Inversora and Petersen Energia) are a pair of Spanish entities that invested in YPF before its re-nationalization in 2012.

The claimants argue that Argentina’s direction of the company since the nationalization (and the state’s decision not to distribute dividends) led them to bankruptcy. (The events surrounding YPF led to an ICSID case between Argentina and Spain's Repsol that was eventually settled)

The claimants and the US litigation are funded by Burford Capital, which allegedly invested in a percentage of the litigation rights.

The Court of Appeals had held that the jurisdiction of US courts over the case was not defeated by Argentina’s sovereign immunity, since Argentina’s actions were commercial in nature. The respondents’ petition for a re-hearing was denied on August 30, 2018, and the case returned to a lower court.

Now, in a petition for a writ of certiorari filed on October 31, 2018, Argentina claims that the Court of Appeals’ decision was wrong and accentuated a split among appellate courts in the US with respect to the proper scope of the “commercial activity” exception to foreign states’ immunity under the US Foreign Sovereign Immunities Act (FSIA).

According to Argentina, the conduct impugned by Petersen was too “inextricably intertwined” with a sovereign act (i.e., YPF’s nationalization) to be considered commercial.

Argentina also argues that the Second Circuit’s jurisprudence undermines the FSIA’s exception to foreign immunity in cases of expropriation in breach of international law. In the state’s view, “a plaintiff aggrieved by an expropriation need not show it was unlawful; it may now simply characterize the immediate consequences of an expropriation as ‘commercial activity’ to invoke the jurisdiction of a U.S. court.”

Some 2.5bn dollars plus interests are at stake, which if the final ruling expected to be announced next week is contrary to Argentina's interests, the country will have to abide and eventually pay.