Is the YPF Case a Wake-up Call for Funders and Investors?

In late March 2026, the U.S. Court of Appeals for the Second Circuit in Petersen Energía Inversora S.A.U. v. Argentine Republic reversed a record-breaking $16.1 billion judgment against the Republic of Argentina – a judgment that had been entered in 2023 by U.S. lower courts to compensate former shareholders of the oil company Yacimientos Petrolíferos Fiscales (“YPF”) for Argentina’s 2012 renationalisation of YPF. The decision, reached by a 2:1 vote, vacated one of the largest damages awards ever imposed on a foreign state by a U.S. court. Self-styled anarcho-capitalist President Javier Milei described the decision as the "greatest legal achievement in [Argentine] national history."

The case has attracted considerable interest globally, not least because Burford Capital, a New York- and London-listed litigation funder, provided the capital for the claimants in the YPF lawsuit. The decision of the U.S. appellate court offers important lessons for lawyers on navigating sovereign disputes and assessing litigation. This article examines what happened and what comes next for funders and investors in international disputes.

Background

YPF was Argentina’s state oil company until it was privatised in the 1990s. As a condition of privatisation, YPF’s bylaws guaranteed minority shareholders a buyout right if the Argentine Government ever sought to renationalise the company. In 2012, then-President Cristina Kirchner’s Peronist administration seized a 51% stake in YPF from then-majority shareholder, the Spanish extractive company Repsol. Following years of dispute, Argentina agreed to pay Repsol about $5 billion in bonds but offered nothing to the minority shareholders. In 2015, the minority shareholders (including the Petersen Group and Eton Park Capital) commenced legal action against YPF in U.S. courts.

The 2023 Judgment

The claimants sought recourse in the U.S. District Court for the Southern District of New York. According to the claimants, the New York courts had jurisdiction over the matter because the bylaws required that any acquisition of more than 49% of YPF’s shares was to be undertaken in accordance with NYSE and SEC procedures.

After years of lumbering litigation (including a four-year tussle over the Foreign Sovereign Immunities Act), Judge Loretta Preska ruled in 2023 that Argentina had breached YPF’s tender-offer provisions and was liable to the former shareholders for damages. She entered a judgment of approximately $16.1 billion (including interest) against Argentina, reflecting the value the investors would have received had Argentina made the required buyout offer. This eye-watering figure was one of the most substantial awards ever issued against a sovereign state in a U.S. court. The award was equal to 2.5% of Argentina’s GDP, which was approximately $645 billion at the time. Argentina appealed, maintaining that it should not be bound by YPF’s corporate bylaws when exercising sovereign powers.

Enforcing Judge Preska's Award

Argentina challenged the award and, in doing so, refused to pay. The claimants were left with a difficult enforcement landscape; Argentina’s central reserves, diplomatic assets (including real estate), and military property were all excluded from attachment on grounds of immunity. The ideal solution? The disputed shares themselves. YPF is a commercial entity (albeit state-owned) and therefore a logical target for enforcement, made all the more relevant by its central role in the dispute. The claimants sought the ‘turnover’ of the shares into a U.S.-held account for execution. This was a bold move, effectively seeking to hand over majority ownership of an SOE to foreign private shareholders. The claimants succeeded initially; however, Argentina (with the support of the U.S. Government) appealed the turnover order and secured a stay of turnover proceedings. The turnover application is no longer relevant in light of the 2026 reversal.

The 2026 Reversal

While the parties fought the enforcement battle on the side, Argentina’s appeal returned to court. Oral submissions were heard throughout October 2025 and, on 27 March 2026, the Second Circuit reversed the district court judgment and dismissed the claims. The appeals panel held by majority that Judge Preska had misinterpreted Argentine law by treating YPF’s bylaws as a privately enforceable contract against the government. In the Second Circuit’s view, the investors’ breach-of-contract claims were "not cognizable under Argentina’s civil codes or under the public law governing expropriation." Accordingly, the $16.1 billion award was vacated in its entirety.

The Second Circuit’s reasoning centred on the primacy of Argentine law and sovereign authority in the YPF dispute. Writing for the majority, Judge Denny Chin noted that Argentina’s General Expropriation Law ("LGE") provides the exclusive procedure for private parties to obtain compensation due to expropriation and that LGE Article 28 prohibits private lawsuits that would interfere with an official expropriation. In short, Argentina’s 2012 takeover of YPF was an act of state authorised by domestic law and could not simultaneously give rise to a New York-law contract claim for damages. The Second Circuit pointed out that such disputes should instead be handled through the compensation mechanism set out in Argentine domestic law. During oral argument, Judge Chin remarked that the case “does feel like it should have been litigated in Argentina,” underscoring the discomfort with U.S. courts adjudicating a dispute so rooted in another country’s public law.

Litigation Funding Industry Implications

Funders such as Burford have strong business models with diverse investment portfolios including hundreds of cases. Funders are aware of the high risks that can come from funding massive single-case claims, especially against sovereign states. Industry analysts note that the YPF setback highlights the volatility and lengthy timelines in big-ticket litigation. This will likely prompt funders to re-evaluate their risk models, further diversify their portfolios, and plan for protracted enforcement battles when pursuing sovereign cases. As would be expected from an experienced litigation funder, Burford structured the YPF claim as additional to its strong-performing core business from the outset of the case and was not reliant on any cash outcome for its operations.

Broader Context: Sovereign Disputes and Forums

The Second Circuit's decision carries an implicit message: disputes arising from a country’s public acts (like expropriation) may be more appropriately handled by that country’s own courts or through international arbitration, rather than litigated in foreign courts. Indeed, Argentina asserted during the appeal that U.S. courts should “not reach out to decide cases that belong in other countries.” This aligns with a general trend in cross-border disputes that, if a state consents to an investor–state arbitration mechanism, it cannot later invoke sovereign immunity to dodge the process or resist an arbitration award. Just weeks before the YPF award was overturned, the UK Supreme Court had confirmed that a state’s accession to the ICSID Convention constitutes a waiver of sovereign immunity for the purpose of enforcing arbitration awards.

Potential ISDS Claim

Whilst President Milei enjoys a bump in approval ratings, the claimants are now left exploring their options. There is a brief window to seek a rehearing or to petition the U.S. Supreme Court, although further U.S. appeals may be a long shot. The claimants have signalled that an investment treaty arbitration could be pursued under bilateral investment treaties, effectively moving the fight to an international forum such as ICSID. In an investor–state arbitration, Argentina’s consent via treaty would mean sovereign immunity is largely waived, removing one of the key obstacles that complicated the U.S. court proceedings.

If the claimants succeed in bringing an investor–state arbitration, it will essentially reboot the YPF dispute in a neutral venue. Arbitration has its own limitations and, while the level of damages may differ from those available in U.S. courts, it can provide a more straightforward route to recovery. While no claims have yet been commenced, the claimants confirmed that they are considering their options under investment treaties between Spain and Argentina, and the United States and Argentina.

What is clear is that, for now, the Second Circuit’s ruling has drawn a line under the U.S. proceedings, forcing the claimants to consider alternative avenues for their redress.

Conclusion

The dramatic turn of events in the YPF case is a powerful reminder of the importance of choosing the right forum in sovereign-related claims. The saga of a dispute now 14 years in the running trundles further along, all owing to a forum choice 11 years past.

Investors choosing projects with inherent political risk are well-advised to structure deals with dispute resolution in mind, including by insisting on arbitration clauses over submission to domestic courts, or ensuring access to investment treaties that defer to international arbitration in the event of a dispute. Even with such precautions, pursuing a sovereign state can be a long, fraught process: a trial victory may take years to achieve and is not always a done deal – as the claimants have found, even a landmark award can still be overturned on appeal, and even the most favourable award can still prove difficult to enforce.