Brazil, Chile, and other major South American economies are calling on a US appellate court to reverse a record-breaking $16bn judgement against Argentina. The country was found to have violated shareholder rights last year when it expropriated the national oil company YPF.
The decision by a New York court is causing problems for the new administration of Argentine President Javier Milei. The Argentine government has claimed that the amount — 45 percent of the country’s budget for 2024 — is too large to be paid. A US federal court, it argues, should not have jurisdiction.
Argentina filed an appeal to the US Court of Appeals Second Circuit last October. Brazil, Chile and Uruguay have now joined the challenge. They all signed briefs that claim that allowing this judgment to stand would be an interference by the US in the legal affairs of other sovereign states.
The nations expressed their concern in a document filed last week. “Brazil, Uruguay, and other countries are deeply concerned that the district courts misapplied doctrines designed to protect foreign litigants against the burdens associated with litigating in the United States and safeguard against misapplication of foreign laws.”
The statement added that the “people of the region shouldn’t be forced to suffer the economic consequences of an unjust judgment, which is a flagrant misapplication of the law in force and was entered by a judge who never had the right to exercise jurisdiction”.
Separately, Chilean and Ecuadorian lawyers warned that the “threat of increasing and wide-ranging judgments from US courts based only on the most tenuous connection to the US” could “chill the participation” of South American companies in US capital markets, and “in conducting business with US domiciled businesses”.
In its brief submitted to the Supreme Court in 2019 in response to a challenge filed before the trial, the US government – then led by Donald Trump – wrote that it had “a contravailing interest to ensure that foreign states who enter US markets in the capacity of commercial actors are not immune from lawsuits relating to violations of their contractual obligations”. The US government also pointed out that YPF shares were traded on the New York Stock Exchange.
In a ruling earlier this year, Loretta Preska effectively denied Argentina’s attempt to delay enforcement of the judgement. Argentina’s attorneys had argued to the court that Argentina’s “direeconomic circumstances” (including widespread poverty, renegotiation with the IMF of debt facilities, inability to gain access to international capital markets, and inflation approaching 200%) should be considered by the court.
Since then, the parties have clashed about the disclosure of Argentinean assets. Lawyers for the claimants asked Preska to compel production of documents which would purportedly disclose the location of funds and properties that could potentially be seized in accordance with the judgment.
The $16bn landmark award, the highest ever in Manhattan’s Federal Court, was also the biggest-ever win for the litigation financing industry. It finances claims in exchange for a portion of the final judgment if the plaintiffs are successful.
Burford Capital is a litigation financing firm that has been criticized by business organizations who say its business model encourages frivolous and burdensome lawsuits.
Burford, which is listed in the US and UK, told its shareholders that it was unlikely the full amount would be recovered. Burford’s cut of $16bn amounts to about $6bn.