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NY Court Rules Against Argentina in YPF Expropriation

U.S. District Judge Loretta Preska has ruled today against the Argentine state in a lawsuit over the expropriation of YPF, although YPF obtained a favorable ruling for not being held liable for enforcing a tender offer to minority shareholders included in the company’s bylaws. 

In 2012, through a law passed by Congress, Argentina expropriated YPF shares held by the Spanish multinational Repsol, at the time the majority shareholder, to take control of the Argentine company. 

According to the ruling, the lawsuit began in 2015 and was filed by two Argentine companies, “Petersen Energia Inversora” and “Petersen Energía.” Between 2008 and 2011, they bought shares of YPF listed in Wall Street (called ADRs) until it held 25% of the company. 

The lawsuit filed by the companies was presented against Argentina for not making a tender offer when Repsol’s shares were expropriated, thus giving them an exit from the company. They also sued YPF for failing to enforce the obligation to make a tender offer, which according to the plaintiffs was explicitly stated in the bylaws of the Argentine oil company. 

Later, in November 2016, Eton Park Capital Management filed its own lawsuit in the same sense that Petersen did. Eton Park and Petersen held about 29% of YPF shares between them.

Despite having initiated the lawsuit, Petersen sold the trial rights to Burford Capital Limited, which is the one that now maintains the current litigation against the country. Eton Park sold Burford 75% of their trial rights too. 

Tender offers are legal clauses that obligate an investor to make the same offer (for price and term of purchase) to all shareholders. These types of public takeover bids usually protect minority shareholders, because they allow them to receive the same sale conditions if the majority shareholders decide to sell the company

The court found the Argentine state liable for failing to make a tender offer but exempted YPF from liability for failing to “enforce” the obligation that, according to the plaintiffs, was contained in the bylaws of the company. 

However, the court rejected one of the arguments supporting Argentina’s defense that the current claimants should not be admitted because they are not current holders of the shares. 

“The Court rejects the Republic’s argument that Plaintiffs lack standing because they are not currently security holders. The Republic’s argument misapprehends Plaintiffs’ claims”, wrote Judge Loretta Preska in the sentence. She used Argentine law to analyze the case. 

According to Sebastián Maril, director of Latam Advisors and one of the Argentine experts who follows the case in detail, the court ruling sends  a message to all governments that want to expropriate companies that are listed on the US stock exchange. 

“They can do it, but they have to pay all the shareholders who want to exit the company if they do it,” Marill told the Herald

The amount of compensation has not yet been defined.

What’s next

Looking ahead, according to Maril, the first thing to be expected is a statement from Burford announcing the steps to be taken following Preska’s decision. According to the Argentine analyst, they could request the seizure of Argentine assets, although he warns that Argentina no longer has assets to seize. 

Source : BuenosAiresHerald