MANHATTAN (CN) - A New York federal appeals court on Friday overturned a $16.1 billion judgment previously ordered against Argentina for nationalizing the large energy company YPF in 2012.
YPF is the largest oil and gas company in the country, and although it was originally state-owned, it was privatized during the 1990s wave of neoliberal policies.
The Second Circuit ruling Friday reversed part of a lower court's 2023 judgment favoring minority shareholders in the state-owned oil company YPF, whose shares were nationalized by Argentina in 2012.
After eight years of litigation in the Southern District of New York, U.S. District Judge Loretta Preska ordered Argentina to pay shareholders $16.1 billion - "an award that equals approximately 45% of the Republic's entire national fiscal budget for 2024," the appeals panel noted. But on Friday, the Second Circuit ruled the contract claims are not cognizable under Argentina's civil code and public law governing expropriation.
"We hold that plaintiffs' breach of contract damages claims against the Republic are not cognizable under Argentina's civil codes and public law governing expropriation, and accordingly reverse the district court's entry of judgment for plaintiffs on those claims," U.S. Circuit Judge Denny Chin wrote in the panel's majority opinion.
Argentina's president, Javier Milei, celebrated the ruling on Friday as a complete victory for the South American nation, posting on the social media platform formerly known as Twitter in all capital letters, "We won the YPF lawsuit!!!"
"The Chamber has just completely overturned the ruling against Argentina: the best possible outcome (and with less than 15% probability of occurring). This means that Argentina does not have to pay ANYTHING of the approximately current USD 18BILLION (a little more than the IMF loan was in 2024)," he wrote.
"It's historic, unthinkable, the greatest legal achievement in national history. TMAP," he added, concluding with the acronym for "Todo Marcha Acorde al Plan," which translates to "Everything Goes According to Plan."
Chin, a Barack Obama appointee, concluded in the panel's opinion that the General Expropriation Law's preclusions of third-party lawsuits were likely intended to "mitigate the fallout from the exact kinds of claims brought by plaintiffs here."
"As these cases illustrate, GEL article 28 precludes private suits brought in the wake of expropriation based on existing contractual obligations to the extent fulfillment of those obligations would 'impede,' or interfere with, the expropriation," Chin wrote. "It instead channels those disputes into the compensation-setting mechanism set forth elsewhere in the GEL. Perhaps Plaintiffs could have sought compensation by bringing a claim against the Republic under the GEL's procedures."
U.S. Circuit Judge Jose Cabranes dissented, writing in an opinion that the majority minimized "factual realities," including complex arrangements meant to assure "private investors - many of whom were based in the United States - that they would be protected in the event the Republic decided to renationalize the country's largest oil and gas company if the economic and political winds ever shifted, just as they did in the early 2010s."
"We owe special consideration and respect to a District Court that has closely evaluated every aspect of the facts and, importantly, the governing law of Argentina," the Bill Clinton appointee wrote.
Cabranes and Chin sat on the panel with U.S. Circuit Judge Beth Robinson, a Joe Biden appointee.
In her 2023 ruling awarding $16.1 billion, Preska found that Argentina did not "automatically" incur the obligation to make an offer to other shareholders. But she said Argentina should have done so in practice because it used the shares to take control of YPF. By gaining control, Argentina avoided rules protecting minority shareholders and left them unable to sell their shares at a fair price.
In 2025, Preska ordered the turnover of 51% of its shares from YPF to help pay part of its $16.1 billion debt owed to minority investors.
Though Argentina had argued that the shares fell under the commercial activity exception of the U.S.'s Foreign Sovereign Immunities Act and were therefore immune from turnover, Preska determined what matters is where the resulting commercial activity takes place, not where the shares were used, and that the statute does not require such activity to be carried out solely by the foreign state.
Source: Courthouse News Service
