Milei Wins as Court Rejects $16B Verdict Against Argentina

The Legal Victory for Argentina

A U.S. federal appeals court delivered a significant ruling on Friday, stating that Argentina does not have to pay shareholders $16 billion for its 2012 takeover of YPF, the country’s largest oil company. This decision marks a major win for President Javier Milei and supports his efforts to implement a free-market economic overhaul.

Milei’s government, which is currently facing financial difficulties, would have struggled to meet this judgment while implementing a strict austerity program aimed at reforming Argentina’s economy. The ruling allows the Milei administration to continue building up its reserves of U.S. dollars, an essential step in stabilizing the economy and attracting foreign investments.

Milei’s Reaction and the Impact on Investors

In response to the court’s decision, Milei, who has close ties to the Trump administration, expressed his satisfaction on X. He called the ruling “historic, unthinkable, the greatest legal achievement in national history.” However, the decision had a negative impact on Burford Capital, the litigation financier that represented the investors. Shares of Burford Capital fell by 47% in New York on Friday.

Burford has indicated that the plaintiffs may seek a rehearing before a larger panel of judges or take their case to the Supreme Court. The firm also mentioned the possibility of pursuing investment treaty arbitration against Argentina. Christopher Bogart, CEO of Burford, described the Second Circuit’s decision as “very disappointing” and criticized it as a “remarkable abandonment of the rights of minority NYSE shareholders.”

Reversal of Previous Ruling

The U.S. Court of Appeals for the Second Circuit overturned a 2023 ruling by U.S. District Judge Loretta Preska, who had determined that two YPF shareholders were owed compensation for the 2012 expropriation. The appeals court argued that Preska misinterpreted Argentine law and that the shareholders’ claims lacked merit. The court noted that the $16 billion award equated to about 45% of Argentina’s fiscal budget in 2024.

This legal victory is rare for Argentina, which has faced numerous lawsuits in recent years after breaching contracts, from expropriating companies to defaulting on bonds. The ruling comes at a time when Milei’s government has seen a decline in approval ratings since a major victory in October’s congressional election, amid growing scandals involving top officials and a sluggish economy.

Expert Opinions on the Ruling

Sebastian Maril, director of Latam Advisors consultancy, stated that Argentina can now “see the light at the end of the tunnel” regarding a lawsuit that would have significantly impacted its public finances. He emphasized that in a country with fragile international reserves and limited access to capital markets, raising such a large sum would have been extremely challenging for Argentina.

Maril added that this was a decision that many were waiting for, as it could help stabilize the economy and attract more investments.

Background on YPF’s Expropriation

YPF was expropriated in 2012 under then-president Cristina Kirchner, a left-wing leader who is currently under house arrest due to corruption charges. The government compensated Spain’s Repsol, the former top shareholder of YPF, with $5 billion in bonds. However, smaller shareholders, including the now-closed U.S. hedge fund Eton Park Capital Management, claimed they were overlooked and filed a lawsuit in federal court in New York. Burford provided the financing for this case and would have received a portion of the award.

The Kirchner administration argued that underinvestment by private oil companies justified the state takeover, which was approved by Argentina’s Congress. Critics of the government, however, saw the YPF expropriation as an attempt to gain control over promising new oil and gas developments in the Vaca Muerta basin.

Milei’s Criticism and Future Outlook

While celebrating the ruling, Milei criticized his leftist opponents, particularly Axel Kicillof, the former economy minister under Kirchner and current rival as governor of Buenos Aires province. Milei stated that they had to “fix the messes” created by previous administrations.

He added that the court decision will remove uncertainties surrounding YPF, paving the way for more investments in Argentina’s already booming energy sector. Milei concluded that Argentina avoided one of the largest potential expenditures in its history thanks to strategic actions aligned with the public interest.