Argentina awaits the Supreme Court after the YPF case is closed at first instance

Judge Loretta Preska has formally ended the case in the New York federal court where it began. She vacated her 2023 judgment ordering Argentina to pay more than US$16 billion over the YPF expropriation. She also incorporated the Second Circuit’s decision overturning that judgment.

The Supreme Court matters because Burford Capital has petitioned it to review the appeals ruling. Burford funds the litigation and acquired rights from former minority shareholders Petersen and Eton Park. It calls the appeals decision gravely mistaken and exceptionally important.

The Supreme Court is not required to accept the petition. It receives 7,000 to 8,000 petitions each term and usually hears about 80 cases. It has no deadline to decide, so the dispute remains unresolved while the petition is pending.

In the U.S. court system, first instance means the court that initially hears and decides a dispute. Closing the case there means that trial-level proceedings have ended. The judge’s earlier judgment is no longer operative after being vacated, so that court has no active award left to enforce.

That does not necessarily end every possible appeal. In this case, the Second Circuit Court of Appeals overturned Preska’s judgment on March 27. Preska then incorporated that ruling and formally closed the case at first instance. The appeals court also cancelled the order requiring Argentina to hand over its YPF shares.

Burford has asked the Supreme Court to review the Second Circuit’s decision. The Supreme Court may decline, and it has no deadline to decide. Thus, the first-instance case is closed, but the wider dispute may continue through higher-court review.

The financial scale was extraordinary. Preska’s judgment initially ordered Argentina to pay more than US$16 billion, and the total later exceeded US$18 billion with interest. That made it the largest judgment ever imposed on a state by a U.S. court.

The dispute came from Argentina’s 2012 expropriation of 51% of oil company YPF under Cristina Fernández de Kirchner’s government. Burford Capital funded claims connected to former minority shareholders Petersen and Eton Park. The award therefore concerned alleged losses linked to the state’s takeover and the legal rights attached to those shareholdings.

The historical significance is now paired with uncertainty. The Second Circuit overturned the judgment on March 27, and Preska vacated it. Burford is seeking Supreme Court review, but the Court accepts only about 80 of 7,000 to 8,000 petitions per term.

The Second Circuit overturned the judgment because it found the plaintiffs’ legal theory unavailable under Argentine expropriation law. Judges Denny Chin and Beth Robinson held that the relevant law precluded claims such as those brought by the plaintiffs. José Cabranes dissented.

The court also rejected the idea that YPF’s bylaws created a contract supporting damages. In its view, the bylaws did not provide the contractual basis needed for the plaintiffs’ claim. Because the judgment fell, the related order requiring Argentina to hand over its YPF shares was vacated too.

The full Second Circuit declined to rehear the case in June. Preska then incorporated the appellate ruling, vacated her judgment, and closed the case at first instance. Burford disputes the appeals decision and has asked the Supreme Court to review it.

Burford Capital is the company financing the litigation. It acquired the rights of former minority shareholders Petersen and Eton Park, allowing it to pursue the dispute connected to their claims. Its financial role gives it a direct interest in the outcome.

Burford is challenging the Second Circuit’s ruling, which overturned the award and cancelled the YPF-share transfer order. The appellate majority said Argentine expropriation law precluded the plaintiffs’ claims and that YPF’s bylaws were not a contract supporting damages. Those conclusions removed the legal basis for Preska’s judgment.

Burford described the appeals ruling as gravely mistaken, wholly unprecedented, and exceptionally important. It asked the Supreme Court to review the case in early October. The Court is not obliged to accept the petition, and it usually hears only about 80 cases from thousands of annual petitions.

If the Supreme Court refuses to hear the case, the Second Circuit’s decision will remain in force. Preska’s award against Argentina will stay vacated, and the order requiring Argentina to hand over its YPF shares will remain cancelled. The first-instance case is already formally closed.

The Supreme Court does not have to accept Burford’s petition. It receives between 7,000 and 8,000 petitions each term and usually accepts about 80. It also has no deadline for deciding whether to take a case, so the timing is uncertain.

Burford has another legal route underway. It has brought proceedings before the World Bank’s International Centre for Settlement of Investment Disputes. The article does not state what outcome that separate proceeding may produce. Argentina’s official sources say the government will continue defending the state’s interests.

Expropriation is a government’s taking of private property or control for the state. In this dispute, Argentina expropriated 51% of YPF in 2012 under Cristina Fernández de Kirchner’s government. The takeover affected the company and the interests of shareholders who did not control the state’s decision.

Minority shareholders can seek legal remedies when they argue that a government action harmed their investment or breached a legal obligation. Here, former minority shareholders Petersen and Eton Park were connected to the claims, and Burford acquired their rights. The case turned on whether Argentine law and YPF’s bylaws supported damages.

The Second Circuit ruled that Argentine expropriation law precluded claims such as the plaintiffs’ and that the bylaws were not a contract creating such damages. That ruling overturned Preska’s award. Burford is asking the Supreme Court to review the decision, while pursuing a separate World Bank proceeding.