Success Story: Judge Validates the Compensation Scheme Proposed in the Petersen vs. Republic of Argentina Case
New historic ruling in favor of the Petersen companies, whose insolvency trustee and promoter of the lawsuit is Armando Betancor, Of Counsel of Kepler-Karst. The federal judge of the Southern District of New York, Loretta Preska, ruled that Argentina has to compensate the two Spanish companies that went bankrupt after the expropriation of YPF in 2012.
The judge has validated the compensation scheme proposed by the plaintiffs and, subject to final computations by the parties’ experts, the total damages, adding interest to date, could reach a total of approximately $14.3 billion for Petersen.
In addition, Judge Preska echoed the situation of the companies and the litigation funding agreement reached by the insolvency administration on behalf of the companies with Burford, after several interpellations and objections from Argentina about it.
The ruling comes six months after the Judge confirmed that there was a breach of contract by the Sovereign State when it expropriated Repsol’s shares in the oil company YPF.
Our Special Situations and Insolvency and Restructuring teams have proudly received the news. Armando L. Betancor Alamo, Of Counsel of the firm, together with the support of the rest of the Kepler-Karst team —Luis A. Barber Marrero (team co-leader and Partner), Rodrigo Olivares-Caminal (team co-leader and Of Counsel), Eduardo Frutos (Partner), Davinia Sánchez De la Cruz (Partner) and Guido Demarco (Consultant)— have managed both legal proceedings, the insolvency process in Spain and the lawsuit in New York, in coordination with four national and three American law firms, the latter representing the companies in the courts of New York.
Litigation Funding Agreement
Judge Preska echoed the situation of the companies and the litigation funding agreement reached by the insolvency administration on behalf of the companies with Burford, after several interpellations and objections from Argentina about it.
Thus, the Judge said: “The Court also rejects the Republic’s effort to inject Burford Capital into these proceedings. This remains a case brought by plaintiffs against a defendant for its wrongful conduct towards them, and the relevant question is what the Republic owes Plaintiffs to compensate them for the loss of the use of their money, not what Plaintiffs have done or will do with what they are owed. The Republic owes no more or less because of Burford Capital’s involvement. Republic owes no more or less because of Burford Capital’s involvement. Furthermore, the Republic pulled the considerable levers available to it as a sovereign to attempt to take what it should have paid for and has since spared no expense in its defense. If Plaintiffs were required to trade a substantial part of their potential recovery to secure the financing necessary to bring their claims, in Petersen’s case because it was driven to bankruptcy, and litigate their claimsto conclusion against a powerful sovereign defendant that has behaved in this manner, this is all the more reason to award Plaintiffs the full measure of their damages”.
As already mentioned by Armando in March, when Judge Preska ruled in favor of the Petersen companies in the breach of contract claim against the Argentine Republic for the expropriation of Repsol’s shares in the oil company YPF, in the trial that had been taking place in New York, this has been a long and hard process: “It was an arduous task that took many years, balancing two open fronts in Spain and New York. From the beginning we have set up an interdisciplinary and sophisticated team that has allowed us to get this far”.
Thanks to the diligent actions and an innovative strategy proposed by Mr. Betancor, the insolvent companies were able to pursue the lawsuit against Argentina in New York despite their insolvent condition. Everything was possible thanks to a litigation funding agreement that enabled the insolvent companies to meet the litigation costs in the US for almost 10 years.
In this regard, Betancor commented: “[w]e have been at the forefront from the beginning, with the litigation funding agreement that allowed us to defray the costs of the litigation, and to get this far. We are facing a historic ruling that will have international repercussions”.
The Story
In March 31st, 2023, after almost 10 years of judicial conflict, Judge Loretta Preska, of the Southern District of New York, ruled in favor of the Petersen companies after understanding that Argentina breached YPF’s bylaws by taking control of 51% of the company’s shares without having launched a public tender offer (PTB) for the shares of the remaining shareholders, as stated in Articles 7 and 28 of YPF’s bylaws.
For this reason, the judge ruled that Argentina must indemnify the Petersen companies for the damages caused as a result of the breach of contract. The ruling that concerns us now validates the compensation scheme set by the plaintiffs, which calculates a compensation of US$ 14.3 billion for Petersen. In order to determine it, the judge had to determine the exact date on which Argentina took control of YPF’s shares.
On the other hand, the judge also ruled that YPF did not breach the bylaws, since the bylaws did not impose on the company the obligation to take actions to restrain the Argentine Republic.
This Friday’s ruling is not final and Argentina has already announced that it will appeal it.
Armando Betancor, together with his team at Kepler-Karst, has led and managed the judicial process from Spain in coordination with three American and with four Spanish law firms representing the companies and the different parties involved in the U.S. and local courts proceedings.
