Argentina asks US Supreme Court to rule on extent of its sovereign immunity

The Republic of Argentina has petitioned the US Supreme Court to hear an appeal against an intermediate court decision accepting jurisdiction over the state and its majority state-owned oil & gas giant YPF, in a case relating to YPF’s 2012 re-nationalisation by Argentina.

In August this year, we reported on the judgment of the US Court of Appeals for the Second Circuit that allowed a suit against Argentina and YPF to proceed. The claimants in the case (Petersen Energia Inversora and Petersen Energia) are a pair of Spanish entities that invested in YPF before its re-nationalisation in 2012.

The claimants argue that Argentina’s direction of the company since the nationalisation (and the state’s decision not to distribute dividends) led them to bankruptcy. (The events surrounding YPF led to an ICSID case between Argentina and Repsol that was eventually settled, as we reported here.)

The claimants and the US litigation are funded by Burford Capital.

The Court of Appeals had held that the jurisdiction of US courts over the case was not defeated by Argentina’s sovereign immunity, since Argentina’s actions were commercial in nature. The respondents’ petition for a re-hearing was denied on August 30, 2018, and the case returned to a lower court.

Now, in a petition for a writ of certiorari filed on October 31, 2018 (available here), Argentina claims that the Court of Appeals’ decision was wrong and accentuated a split among appellate courts in the US with respect to the proper scope of the “commercial activity” exception to foreign states’ immunity under the US Foreign Sovereign Immunities Act (FSIA). According to Argentina, the conduct impugned by Petersen was too “inextricably intertwined” with a sovereign act (i.e., YPF’s nationalisation) to be considered commercial.

Argentina also argues that the Second Circuit’s jurisprudence undermines the FSIA’s exception to foreign immunity in cases of expropriation in breach of international law. In the state’s view, “a plaintiff aggrieved by an expropriation need not show it was unlawful; it may now simply characterize the immediate consequences of an expropriation as ‘commercial activity’ to invoke the jurisdiction of a U.S. court.”

Skadden, Arps, Slate, Meagher & Flom LLP in New York represents Argentina in the Supreme Court proceedings. The claimants’ response to Argentina’s petition is due by early December; we will report more as we hear more.