Argentine Republic v. Petersen Energia Inversora, S.A.U.
23-7370
2d Cir.Oct 16, 2023Background
- Plaintiffs Petersen Energia Inversora, S.A.U. and Petersen Energia, S.A.U. (Spanish companies) owned ~25% of YPF S.A. ADRs purchased on NYSE, secured by loans; Argentina was a minority shareholder and adopted YPF bylaws at privatization requiring a cash takeover bid (tender offer) to acquire control (Sections 7 and 28).
- Argentina issued Emergency Decrees and enacted Law 26,741 in April–May 2012 to intervene in and ultimately expropriate a 51% stake in YPF; Argentine officials publicly stated they would not make a tender offer.
- Petersen defaulted, lenders foreclosed, and Petersen entered Spanish bankruptcy; a bankruptcy receiver approved a financing arrangement with Prospect/Burford to fund litigation (Prospect paid €15.1M and would receive a portion of recovery); plaintiffs retained King & Spalding counsel.
- Plaintiffs sued Argentina and YPF in SDNY for breach of YPF’s bylaws (failure to make or enforce the tender-offer requirement), anticipatory breach, related claims (including good faith/fair dealing and promissory estoppel), and damages tied to depressed share value and ensuing bankruptcy.
- Defendants moved to dismiss raising FSIA immunity/personal jurisdiction, act-of-state doctrine, champerty (assignment) under NY Judiciary Law § 489, lack of standing without Chapter 15 recognition, forum non conveniens, and failure to state claims. The court granted the motions in part and denied them in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| FSIA commercial-activity exception (jurisdiction) | Bylaw obligations (tender-offer procedures with U.S. performance steps) are commercial; Argentina/YPF’s failure had a direct U.S. effect (SEC/NYSE notices, ADRs) | Dispute is sovereign expropriation outside U.S. and immune | Held: Third clause of §1605(a)(2) applies — acts were commercial in connection with expropriation and caused a direct U.S. effect; jurisdiction denied to be dismissed. |
| Act of state doctrine | Plaintiffs seek enforcement of corporate bylaws and commercial obligations, not invalidation of sovereign acts | Defendants: suit impermissibly questions validity/effects of Argentina’s sovereign expropriation/intervention | Held: Doctrine inapplicable — outcome does not require declaring Argentina’s acts invalid and bylaws could coexist with expropriation. |
| Identity/assignment & champerty; Chapter 15 standing | Plaintiffs: litigation financed by Prospect but agreement does not assign claims; receiver may sue; Chapter 15 recognition not required for independent claims under §1509(f) | Argentina: arrangement is champertous assignment; YPF: foreign representative lacks U.S. standing without Chapter 15 recognition | Held: Facts do not establish champerty on the face of the complaint and the bankruptcy exception to Chapter 15 covers independent claims; motions denied. |
| Forum non conveniens | Plaintiffs prefer SDNY given U.S. contacts, risk of prosecution of counsel in Argentina | Argentina: Argentina is adequate forum; witnesses/documents located there; balance favors Argentina | Held: Argentina failed to show an adequate alternative forum and private/public factors do not strongly favor dismissal; motion denied. |
| Failure to state claims (breach, good faith, promissory estoppel) | Plaintiffs allege breach and anticipatory breach of bylaws, separate bad-faith campaign claims, and reliance on prospectus statements | Defendants: factual causation, force majeure/preemption by public law, duplicative claims (implied covenant/promissory estoppel) | Held: Breach and anticipatory breach claims survive; implied covenant claim against YPF and promissory estoppel against both defendants dismissed as duplicative; implied covenant claim against Argentina survives to the extent it alleges a pre-breach campaign to depress share value. |
Key Cases Cited
- Republic of Argentina v. Weltover, 504 U.S. 607 (1992) (establishes direct-effect test under FSIA commercial-activity exception)
- Kensington Int'l Ltd. v. Itoua, 505 F.3d 147 (2d Cir. 2007) (FSIA is sole source of jurisdiction over foreign states)
- Atlantica Holdings v. Sovereign Wealth Fund Samruk-Kazyna JSC, 813 F.3d 98 (2d Cir. 2016) (identifying the gravamen for FSIA commercial-activity analysis)
- Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69 (2d Cir. 2010) (foreign sovereign’s decision not to perform contractual obligations is an act outside the U.S.)
- Hanil Bank v. PT. Bank Negara Indon., 148 F.3d 127 (2d Cir. 1998) (commercial-activity connection requires substantive link)
- De Csepel v. Republic of Hungary, 714 F.3d 591 (D.C. Cir. 2013) (repudiation of contract by foreign state falls within FSIA commercial exception)
- Braka v. Bancomer, S.N.C., 762 F.2d 222 (2d Cir. 1985) (act-of-state barred contract claims when relief would compel violation of foreign law controlling the obligation)
- Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682 (1976) (act of state does not reach purely commercial obligations)
- W.S. Kirkpatrick & Co. v. Envtl. Tectonics Corp. Int'l, 493 U.S. 400 (1990) (act-of-state doctrine arises only when outcome turns on validity of foreign sovereign act)
- Konowaloff v. Metropolitan Museum of Art, 702 F.3d 140 (2d Cir. 2012) (act-of-state is an affirmative defense that can justify dismissal when shown on the face of the complaint)