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Brazil, Chile and other large South American economies have called for a US appeals court to overturn a record $16bn judgment against Argentina, which was found last year to have violated shareholders’ rights when it expropriated national oil company YPF.
The ruling by a New York judge has become a problem for Argentine president Javier Milei’s new administration. It has argued that the sum — which amounts to 45 per cent of the nation’s annual budget for 2024 — cannot possibly be paid by the cash-strapped country and that a US federal court should not have jurisdiction over the claims.
Argentina appealed the judgment to the US Court of Appeals for the Second Circuit New York in October last year. It has now been joined in its challenge by fellow South American countries Brazil, Chile, Uruguay and Ecuador, all of which signed on to briefs claiming that allowing the judgment to stand would amount to US interference in other sovereign states’ legal affairs.
“Brazil and Uruguay are acutely concerned that the district court misapplied crucial doctrines that are designed to ensure respect for the prerogatives of foreign sovereigns and their courts, protect foreign litigants from the burdens of litigating in the United States, and safeguard against the misapplication of foreign law,” the nations wrote in a filing last week.
They added that “the people of the region should not be forced to endure the economic consequences of a judgment that flagrantly misapplies the governing law, entered by a court that never should have exercised jurisdiction in the first place”.
In a separate brief, lawyers for Chile and Ecuador warned that “the threat of increased and wide-roaming judgments by US courts, based on only the most tenuous connections to the US” might “chill participation” by South American corporations in US capital markets and “in conducting commerce with US domiciled companies”.
Earlier this year, Judge Loretta Preska in effect denied an attempt by Argentina to delay the enforcement of the judgment. Argentina’s lawyers had argued that the country’s “dire economic circumstances, including widespread poverty, the renegotiation of debt facilities with the IMF, the inability to access international capital markets and inflation that is now approaching 200 per cent” should be taken into consideration by the court.
The parties have since clashed over the disclosure of Argentine assets, with lawyers for the claimants asking Preska to compel the production of documents that would purportedly reveal the location of funds or properties that could be seized as part of the judgment.
The landmark $16bn award — the highest in the history of Manhattan’s federal court — was also the largest-ever victory for the litigation finance industry, which bankrolls claims in return for a slice of the judgment, if plaintiffs ultimately prevail.
The claims brought against Argentina by Eton Park and Petersen, two investors who had bought into YPF when it was privatised in the 1990s, were partially backed by Burford Capital, a leading litigation finance firm that has attracted criticism from business organisations who claim its business model proliferates burdensome and frivolous lawsuits.
US- and UK-listed Burford, whose cut of the $16bn would be about $6bn, has told shareholders it is very unlikely that the entire sum will be recovered.
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