YPF trial: Preska rejected suspending the transfer of shares to Burford Capital

Judge Loretta Preska, from the Southern District Court of New York, rejected the Argentine Government's request to suspend the transfer of YPF shares to the Burford Capital fund, in the context of the lawsuit over the 2012 expropriation. The ruling, which had been anticipated since last week, was announced this Monday and represents a new obstacle for the country's legal strategy.

Preska strongly criticized Argentina, accusing it of delays and of not complying with the requirements previously imposed to avoid the enforcement of the ruling issued in September 2023.

"The Republic is trying to evade its obligations"

"The Republic claims that irreparable harm will occur if the Court doesn't suspend its transfer order, but that harm is a direct consequence of its own actions", the judge stated in her decision. Preska emphasized that Argentina was granted an extension to facilitate the government transition, but did not make sufficient efforts to comply with the judicial conditions.

Consequently, she ordered the process of transferring 51% of YPF shares to proceed, as she had established in her previous decision, which could lead to a historic dispossession of state assets abroad.

Is contempt looming?

Argentina had already appealed the measure last week, anticipating a possible negative response from the court. However, after this rejection, the country is exposed to being declared in contempt if it doesn't comply with the order, a situation that will only be triggered if the plaintiffs formally request it.

Analysts warn that contempt in this context would be much more damaging than what occurred during Cristina Kirchner's government, since the country is now seeking to normalize its access to international financing.

"It's correct to exhaust judicial avenues, but damage control is also needed. Negotiating is not weakness, it's common sense," analyzed Sebastián Maril, CEO of Latam Advisors, in a conversation with Infobae.

The expropriation lawsuit and its ramifications

The main case dates back to the expropriation of 51% of YPF in 2012 by Kirchnerism, when the Argentine State took control of the shares held by Repsol. Burford Capital, a fund specialized in litigation, bought the litigation rights of the minority shareholders of Grupo Petersen and obtained a favorable ruling for USD 16 billion in 2023.

That ruling is being appealed, but the process is moving forward on parallel tracks. Meanwhile, the litigating fund is seeking to enforce the ruling and collect part of the compensation through the seizure of shares.

"The Court of Appeals has not yet set a hearing to address the substantive appeal, and it is unlikely to do so before 2026," warned Sebastián Soler, former Deputy Solicitor General of the Treasury, on his social media.

A two-stage strategy?

The Argentine Government is now seeking to strengthen its appeal before the Second Circuit, with the aim of halting enforcement and gaining time on the legal front. However, Preska did not agree to wait for that process and keeps her order for immediate enforcement.

The decision also challenges the doctrine of the U.S. Department of Justice, which had questioned the scope of Preska's order and its possible overreach in jurisdiction.

Meanwhile, the national Government will have to decide whether to negotiate or face new legal consequences, in an increasingly complex scenario for Argentina's interests abroad.