The dispute stems from Argentina's 2012 renationalization of YPF S.A., the country's largest oil and gas company, when the government expropriated a 51% stake from Repsol without conducting a mandatory tender offer to minority shareholders as required by YPF's corporate bylaws. Petersen Energía, owned by an Argentine family, held about 25% of YPF's shares, while New York hedge fund Eton Park owned roughly 3%. Both had purchased their stakes assuming they would be protected from renationalization under the bylaws.
Writing for the panel, Circuit Judge Chin concluded that corporate bylaws don't create bilateral contractual obligations between shareholders under Argentine law, explaining that they instead provide 'multilateral rules between the corporation and its shareholders that dictate the internal governance of the corporate entity.' The court also found that Argentina's General Expropriation Law bars third-party lawsuits that would 'impede the expropriation or its effects,' noting the damages award equaled 45% of Argentina's entire 2024 national budget.
The litigation began in 2015 when Petersen sued in Manhattan federal court, with Eton Park joining in 2016. District Judge Loretta Preska initially granted summary judgment for the shareholders in 2023 after finding Argentina violated its bylaw obligations. The case proceeded through eight years of litigation and a bench trial on damages before the district court entered the massive judgment in September 2023.
The Second Circuit's reversal eliminates what would have been one of the largest sovereign debt judgments ever entered by a U.S. court. The decision could discourage similar contract-based claims against foreign governments while highlighting the limits of using corporate bylaws to enforce investment protections. Circuit Judge José Cabranes dissented from the majority opinion.