The United States government is preparing a new statement of support for Argentina in the trial for the 2012 expropriation of YPF.

Senior officials in the Donald Trump administration plan to intervene in the legal proceedings being conducted by Judge Loretta Preska in New York, who ordered the transfer of 51% of the shares of the flagship oil company (“turnover”) to the hedge funds Burford Capital and Eton Park, which won the lawsuit for US$16.099 billion.

Currently, following a dual filing by Argentina’s lawyers and a ruling by the Second Circuit Court of Appeals, the YPF stock transfer order has been suspended “indefinitely.” This measure applies to both the YPF expropriation case and the pending payment to the holdouts of the 2001 defaulted debt.

YPF: How the trial in New York continues

YPF is not involved in the trial or the New York process. Instead, it is one of the “spoils,” along with Vaca Muerta, in the dispute between private companies and the national government. YPF has no lawyers working on the case, nor is it involved in the negotiations or official presentations.

The representative of the Argentine State is the National Treasury Attorney’s Office, currently headed by Santiago María Castro Videla, who retains the firm of Cleary Gottlieb Steen & Hamilton LLP. The Attorney’s Office is responsible for advising the Executive Branch, representing and defending the national government in lawsuits, and directing the State Attorneys’ Corps. This office is currently under scrutiny by the Casa Rosada for improperly leaking and selling secret information to the other party.

The Court granted a temporary administrative stay of Loretta Preska’s initial order of June 30th, until a three-judge panel reviews and rules on the motion to stay the judgment. At the same time, the appeals panel must review and respond to the appeal. That panel has not yet been formed.

While the wait is pending — a ruling from the Court could take two years — the proceedings will continue, and several deadlines have been set for this: on the one hand, the hedge funds must file their opposition to the suspension request by July 17. Meanwhile, the appellant (Argentina) must file its reply by July 22. This was set by the Court itself.

The New York judges will have to give a definitive response to the trial: either uphold the judge’s actions, partially modify the ruling, or reverse it.

You may also be interested in: YPF case: timeline of events since Preska order

What the hedge funds argued

Burford’s main claim is that, according to Article 7 of YPF’s Bylaws, if someone purchased more than 15% of the company, they would have to offer the same to all shareholders, not just Repsol.

Furthermore, the London-based hedge fund claimed damages because after entering the company, the national government decided to suspend the distribution of dividends that had been agreed between Repsol and the Petersen Group, which caused the companies to default due to their inability to pay their debts.

Regardless of the outcome, the case will head to the U.S. Supreme Court, because neither side will accept a contrary decision. This is the Trump administration’s main concern.

YPF: Why the US government will intervene in the trial

The US government already appeared on November 6, 2024, in the YPF case as an amicus curiae (friend of the court) on behalf of Argentina. It did so through the Department of Justice to postpone the delivery of YPF shares as payment for the nation’s legal debts. Everything indicates it will do so again, and with solid arguments.

Days after President Trump’s second election victory — and while still under the Joe Biden administration — the U.S. Department of Justice ruled against the Burford fund’s request for the delivery of shares, stating that the plaintiffs’ request “violates U.S. sovereign immunity rules.”

Argument I: A US judge cannot hand over assets from another country

In the 2024 document, the Department of Justice warned that U.S. judges cannot seize or order the sale of property from another country if that property is not located in the United States .

And in this case, the YPF Class D shares he ordered delivered are registered with the Securities and Exchange Commission, and are not listed on Wall Street. Shares with the symbol YPFD are traded in Argentina, and those with the symbol YPF are traded in New York.

Argument II: The judge interferes with the rights of sovereign states

At the same time, as Argentina’s defense argued, Loretta Preska’s order to hand over the YPF shares violates U.S. federal law, particularly the Foreign Sovereign Immunities Act (FSIA), and the principles of international comity. Therefore, defense attorneys are warning of an “unconstitutional exercise of extraterritorial jurisdiction” by the judge.

As the Justice Department also warned, Preska’s ruling could “unduly interfere” with the legitimate rights of foreign states, as they freely dispose of assets within their own territories, and runs counter to U.S. foreign policy interests regarding reciprocity.

Argument III: forces Argentina to violate its national legislation

Another argument put forward by Cleary Gottlieb Steen & Hamilton is the irreparable damage and impossibility of legal compliance, since executing the “turnover” would force Argentina to violate its national legislation and irreversibly lose state control over YPF.

As already published in the Energy Report, any transfer of YPF shares would have to be approved by the National Congress through a specific law, because this is how it was renationalized, according to the country’s constitutional mandate.

In this case, it would be the national government or a legislator who would have to promote and present the text of a law that complies with the New York ruling. And if President Javier Milei decides to comply with the Preska ruling and does so by means of a Decree of Necessity and Urgency (DNU ), the shares — and control of the flagship oil company — would once again pass into private hands if that DNU is approved by Congress. Never before.

Argument IV: The fear of reciprocity

The fear of the then Joe Biden administration — and now that of the Trump administration — is that the enforcement of a forced embargo on Argentine companies (delivery of shares) would open up international jurisprudence that violates U.S. law, because at the same time it would allow — in a hypothetical future — some kind of reciprocity and Argentina could do the same — forcibly seize — a U.S. company or sovereign asset.

But this initial fear has now been compounded by a greater one: that — as previously stated — the case will be directed to the U.S. Supreme Court, and that the highest court will rule in favor of the hedge funds, setting a “harmful” precedent for American corporate democracy and capital market laws.

An ace up the sleeve: the appointment of an intermediary

Days ago, sources linked to the litigation in New York told this outlet that a US declaration in favor of Argentina was imminent. This declaration could be not only judicial but also political. For example, a message from Donald Trump on his own Truth Social network.

However, in recent hours, sources consulted have not ruled out the possibility that the US government could go a step further and propose to Judge Loretta Preska and the Court of Appeals the appointment of an “intermediary” agent to open a negotiation between the parties, paving the way for an out-of-court settlement, with a payment amount much lower than that determined in the initial ruling. Today, it is the national government that is closing the door to any attempt at dialogue to bring positions closer together.

Originally published on Ámbito