The judge Loretta Preska ruled today against Argentina in the trial for the expropriation of YPF. Although the ruling does not contain the amount of the penalty that Argentina must pay to Burford Capitalestimates that the Argentine lawyers made at the trial indicate that the penalty could reach US$16,000 million.
Burford Capital It is a law firm that bought the right to sue YPF’s minority shareholders. On March 31, he had obtained a favorable ruling from Preska, in which the North American judge indicated that the Argentine State should have made an exit offer to the minority shareholders of YPF when it decided to expropriate the company in 2012. In that same ruling, Preska indicated that YPF had no legal responsibility and freed the company from legal consequences.
After that ruling, hearings were held in the last week of July to determine how much Argentina should pay Burford for not having made that offer in 2012. There were mainly three arguments under discussion: the date that was used as a reference for the takeover of the company by the Argentine State, the interest rate that the country must pay for the penalty and the P/E ratio that determines the value of the shares.
In a 25-page ruling, the judge agreed with three arguments made by Burford. Preska considered that the date on which the Argentine State takes control is April 16 (and not May 7 as Argentina argued), the interest rate that should be applied is 8% (and not a maximum of 3% as Argentina intended) and that the P/E ratio, a fundamental component of the formula that determines the value that the country must pay for the shares, must be the highest and most beneficial for Burford.
Regarding each of the arguments under discussion, the Judge wrote:
- “The Court considers that Argentina exercised indirect control over Repsol’s shares on April 16, 2012. It did so through an intervention decree.”
- “The Court also considers that a simple interest of 8% is appropriate and that it should apply from May 3, 2023.”
In addition, it validated the calculations made by the Burford Capital financial expert to estimate the Price/Earning ratioa fundamental component of the formula that determines the amount to be paid by Argentina.
According to official sources, Ambit, Argentina is preparing to appeal to the Second Circuit Federal Court of Appeals. This was ratified by the presidential spokesperson, Gabriela Cerruti, through social networks.
Robert Giuffraa partner at the Sullivan & Cromwell firm, which represents Argentina in the case, told Ambit About today’s ruling:
“The Republic respectfully disagrees with the district court’s unprecedented and erroneous decision and intends to appeal the ruling to the United States Court of Appeals for the Second Circuit. The ruling on damages reflects the district court’s fundamental misunderstanding of applicable Argentine law and exacerbates other serious errors in Argentine law that the court already committed in earlier instances of the case. This litigation, which deals with the rights of former shareholders of an Argentine company under the bylaws of that Argentine company, should not be processed in a US court, particularly when current Argentine law requires that this type of dispute over Argentine law They must be decided by the Argentine courts. No Argentine court has allowed former minority shareholders to bring a claim against another shareholder for damages for breach of contract, based on alleged violations of the bylaws of an Argentine company. “We are confident that the Second Circuit will correct the district court’s fundamental errors.”
Why the date is so important
The date is fundamental because it determines which quarters are taken as a reference to estimate the company’s net income and the P/E ratio, two key components of the formula that estimates the value that must be paid for the shares.
If April 16 was used as a reference, as Preska finally established, the last quarter of 2008 entered the account, a period that still recorded the impact of the 2008 crisis on YPF’s balance sheet and that increased the amount to be paid for the actions. In addition, it also determined the Price/Earnings ratio, which the plaintiffs calculated at 27 and Argentina valued at a ratio of 17 or 18.