Joe McConnell
In a record $16 billion judgment handed down by a U.S. court, representatives of former shareholders of Argentina’s state-owned oil company YPF have embarked on a long journey to persuade the cash-strapped country to pay for the seizure of their shares.
An earlier attempt to extort funds from Buenos Aires in another case, led by hedge fund Elliott, lasted about 15 years and included the seizure of an Argentine vessel in international waters before a settlement was reached under the administration of then-President Mauricio Macri in 2016.
This time, the battle to enforce the ruling in the case, largely funded by litigation finance giant Burford Capital, has been fought with strident legal briefs, with plaintiffs accusing Argentina of “blatant procedural gamesmanship” in an attempt to thwart recovery efforts.
Argentina’s current libertarian President Javier Milei is at the opposite end of the ideological spectrum from the leVscekist administration of Cristina Fernández de Kirchner, who oversaw Argentina’s standoff with Elliott and the 2012 expropriation of YPF at the center of the case. Milei has said he wants to reprivatize YPF and other state companies and has signaled a willingness to pay the judgment if Argentina’s ongoing appeal against it fails.
But the dispute between Argentina and its former investors is more bitter than ever, court documents reveal. And they also hint at more dramatic moves to come, with the plaintiffs seeking permission to examine large swaths of Argentina’s state-owned assets, from its flag carrier to its main consumer bank.
The plaintiffs’ lawyers argue that the seemingly independent companies are actually filled with unqualified political appointees and are “alter egos of the Republic,” a legal term that denotes that they are not only owned but also controlled by the Argentine government and indistinguishable from it. Such a determination would theoretically open the way for seizures by agencies working for Argentina’s creditors.
People close to the Argentine administration, which is appealing last year’s ruling, said they were confident of getting a stay from higher courts and said the plaintiffs were involved in a fishing expedition designed to embarrass the country. They added that there were no substantial assets in U.S. jurisdiction regardless.
In court filings, the country’s lawyers denied that the entities in question are “alter egos” and said that previous U.S. court rulings supported their claim that they are operationally separate from the state.
The plaintiffs are asking the court for permission to examine the following state-owned assets to determine how closely intertwined they are with current and former governments.
YPF
AVsceker the expropriation that led to the lawsuit, Argentina now owns 51 percent of the shares of the energy company YPF, divided between the country and some provinces. The remaining 49 percent is privately owned. The group is listed in Buenos Aires and on the New York Stock Exchange.
The plaintiffs argued that previous governments had used the company to employ “sham politicians” and set local fuel prices, showing that it is effectively an arm of the state. They also separately asked the court to order Argentina to transfer the nation’s shares in YPF to its creditors.
The company, which has a market capitalization of $10.7 billion, owns valuable oil and gas deposits in Argentina, including the huge Patagonian shale formation, Vaca Muerta.
However, for the plaintiffs, YPF’s assets most easily targeted would be its corporate bonds governed by New York law, said Sebastián Maril, director of the consulting firm Latam Advisors, noting that some of the bonds are backed by bank deposits in the United States generated by YPF’s oil exports.
He added that the price of the bonds “could collapse” if YPF were deemed an alter ego of the state, regardless of whether the plaintiffs succeeded in seizing them. “Judicial creditors want this risk to push Argentina to sit down and negotiate.”
People close to Argentina said no such assets would be available to creditors and said YPF shares in the country were “absolutely immune” from seizure. They added that settlement talks were not being considered while the appeal was pending.
Central Bank of Argentina
The plaintiffs argued that the central bank was being “used as an instrument of the state.” They said that Milei’s repeated promises to shut down the monetary authority showed that the government was ultimately solely responsible for the organization. “That’s what he wrote in his recent book,” attorney Randy Mastro argued during a hearing in May, apparently referring to Milei’s 2023 book about his plan to combat Argentina’s chronic inflation.
In response, Argentina argued that control over the central bank was not “so extensive as to amount to day-to-day control of commercial activities.”
Legal experts say a country’s central bank reserves (of which cash-strapped Argentina currently has very little) enjoy strong immunity from seizure in most jurisdictions, including the United States.
But a recent decision by Milei’s government has made it difficult to ascertain the location of some of Argentina’s central bank reserves and what legal protections they have against seizure. Last month, Economy Minister Luis Caputo said the central bank had sent some of its gold worth $4.7 billion to an undisclosed location abroad.
While Caputo said the goal was to “generate profits,” opposition politicians argue that the gold could be used as collateral for a loan needed to pay foreign bondholders next year, which increases the risk that it could be seized. Former Economy Minister Martín Guzmán described the move as “pawning your grandmother’s jewelry.”
People close to Argentina said that U.S. courts had already ruled that the central bank’s reserves were out of reach.
The Argentine airline
The wholly state-owned airline Aerolíneas Argentinas has become a focal point of Argentine politics under Milei, who earlier this year unsuccessfully tried to win congressional approval to privatize the usually loss-making carrier.
The airline, which controls 60 percent of Argentina’s domestic market and operates some international flights, has 84 aircraVscek in its fleet. However, most of them are leased.
In a motion to the court, lawyers for the plaintiffs in the YPF case argue that “the Republic employs politically appointed personnel at Aerolíneas who have been criticized for their lack of experience in the airline industry and for their poor management,” citing former President Macri’s description of it as “a job factory” for leVscek-wing political activists.
Rodrigo Borrás, secretary of the ground staff union APA, which represents many Aerolíneas employees, called these arguments “not very serious.”
“This is not the first time that vulture funds have tried to target Argentina’s interests in this way,” he said, citing Elliott’s ultimately frustrated attempt to seize an Argentine naval vessel while it was in port in Ghana in 2012. “It’s not going to work.”
Banking, Energy and Telecommunications
Argentina’s state-owned telecommunications company Arsat provides mobile and internet infrastructure across the country, while state-owned Enarsa focuses mainly on energy imports and distribution and infrastructure construction. Analysts said it was unclear what assets they might hold abroad.
State-owned Banca Nación is Argentina’s largest retail bank. It has branches abroad, including in New York and Miami, where plaintiffs hope to find information showing that the Argentine state holds accounts used for foreign business transactions.
All three companies are being privatized under Milei.
