U.S. Judge Loretta Preska authorized Burford Capital on Thursday to request the seizure of Argentine assets in the YPF expropriation trial, which the country lost in September. However, observers say seizure is a complex process and does not seem to be the plaintiff’s ultimate goal.

The conflict dates back to 2012, when Argentina expropriated 51% of the shares of oil and gas company YPF from Spanish multinational Repsol, the majority shareholder at the time. Three years later, Burford Capital bought the trial rights from the companies Petersen Energia Inversora and Petersen Energía, which belong to Argentina’s Eskenazi family, and Eton Park. 

Burford claimed in a lawsuit that Argentina failed to make a tender offer for the companies’ YPF shares. In September 2023, Preska ruled in their favor, ordering Argentina to pay a total of US$16.09 billion to the plaintiffs. The following month, Argentina appealed the ruling before New York’s Court of Appeals for the Second Circuit, and will present its first arguments on February 22. The original date was January 23, but the country requested an extension, which Preska granted.

In November, Preska ordered Argentina to pledge “alternative assets” as collateral to extend a temporary stay on asset seizure beyond December 5. The stay was later postponed to January 10 because of the change of government, at Argentina’s behest.

The new administration failed to pledge any assets. “On January 10 the government will not be able to leave YPF shares as collateral,” Treasury Attorney Rodolfo Barra told the newspaper Clarín in an interview. “But it will negotiate other options because there is a willingness to pay the US$16 billion left by the controversial re-nationalization.”

This willingness has yet to be expressed in the legal proceedings.

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Now, four months after Preska’s final ruling and with no Argentine assets provided as collateral, the judge stated that a “reasonable period of time” had passed to lift the stay. 

Argentina, through the Sullivan & Cromwell law firm, argued that Burford’s requirement to lift the stay is “unnecessary and premature” as the plaintiff has yet to identify any specific assets. However, Preska argued that she was merely ruling on the question of when the plaintiffs may seize Argentine assets, not on which properties could be seized.

As per the U.S. Foreign Sovereign Immunities Act, the assets would need to meet three conditions: state ownership, use for commercial activity within the United States, and use for the commercial activity upon which the case is based.

“The three conditions put together represent a very significant hurdle for plaintiffs,” Sebastián Soler, lawyer and former deputy attorney of the Treasury during Alberto Fernández’s presidential administration, wrote on X. “Of course, that doesn’t mean they won’t try anyway. Or that they will try it simply as a harassment strategy, even if they know that the seizure cannot succeed.”

Sebastián Maril, CEO of Latam Advisors LLC, who has been following the case closely, told the Herald that the plaintiffs could try to seize a variety of assets, including those that Preska authorized Burford to request as collateral, which included part of the country’s equity interest in YPF and Paraguay’s upcoming payment for the Yacyretá binational dam. 

Courts beyond US

Maril believes the plaintiffs could go to courts outside the US to request seizures of Argentine assets in other countries. “Anything they want to seize, these people will discuss it,” he said. However, he said that the process of seizing Argentine properties abroad could be long.

In its presentation to Preska, Argentina also argued that the country is in “dire economic circumstances” as a reason to avoid asset seizure. Preska said that her Court “sympathizes” with Argentina’s situation, but that this argument demonstrates that it will not take steps toward payment. 

Argentina also argued that the judgment is on appeal, but Preska responded that this fact did not preclude asset seizure.

Maril believes the plaintiffs do not seek to seize assets, but rather to force an out-of-court negotiation. “The longer Argentina delays this, the more adamant the beneficiaries will be about not offering a discount,” he said. Argentina is already losing close to US$2.5 million a day in interest, he pointed out. The case could take years in the Court of Appeals and, potentially, in the Supreme Court.

President Javier Milei also chimed in. In an interview, he said he would create a new tax to pay for the judgment, which he jokingly called the “Kicillof tax,” a jab at Buenos Aires governor Axel Kicillof. Kicillof was in charge of the takeover as vice economy minister in 2012.