(The Center Square) - Members of Congress and advocacy organizations are urging the U.S. Supreme Court to hear a $16.1 billion case tied to Argentina nationalizing a private oil company that Americans invested in.
The case, Petersen Energia Inversora v. Argentina, focuses on Argentina oil company YPF. The company went public on the New York Stock Exchange in 1993, part of an effort to encourage foreign investment that went on to bring in billions of dollars from investors.
American investors sank money into the oil company after it went public. However, in 2012, the Argentine government took control of the oil company and broke off an agreement to pay out investors in their shares.
Investors sued, arguing that the Argentine government breached their contract and earned a $16.1 billion damages award against Argentina in a United States court. However, a federal court in the United States struck down that judgment because the case was heard before a panel of American judges, instead of in Argentina.
Mike Fragoso, an attorney with Torridan Law, said Argentina went back on its promise by allowing the government to buy out the company in a move that harmed foreign investors.
“No sane investor is going to invest in Argentina unless they have some sort of protection against nationalization,” Fragoso told The Center Square in an interview.
Fragoso said Argentine courts could not be responsible for handling the civil conflict because they have a vested interest in the outcome of the case.
“You can't trust the government to just breach the contract to then adjudicate the breach of the contract,” Fragoso said.
The Foreign Sovereign Immunities Act is a key piece of legislation at the center of this case. The act, adopted in 1976, allows American citizens to bring legal action against foreign countries or entities within those countries.
The U.S. Second Circuit Court of Appeals said this legislation did not apply in the case over Argentina’s oil company. Lawyers for Republican Action for Argentina, the only Americangroup to support the Argentine government in the case, said the high court accepting the case would give too much authority to the American judicial system.
The lawyers argued that American investors did not state a proper claim under the Foreign Sovereign Immunities Act, which requires a recognized commercial interest to be at risk before proceeding with legal action.
“The statutory exceptions cannot legitimately be transformed into vehicles for judicial enforcement of rights whose asserted foundation lies in corrupt governmental conduct rather than in an independently cognizable commercial obligation,” lawyers of Republican Action for Argentina wrote in a brief to the high court.
Republican Action for Argentina did not respond to The Center Square’s requests for a comment in time for publication.
Fragoso warned that allowing the current ruling to stand could give foreign nations broad authority to host legal proceedings in countries with their own laws.
“A more hostile, less friendly country could just need to jigger their domestic laws a little bit,” Fragoso said. “Like China could just pass a law that says critical litigation involving critical industries has to be handled in Chinese courts.”
U.S. Sen. Eric Schmitt, R-Mo., cited an example of litigation in Missouri over China’s alleged hoarding of personal protective equipment during the beginning of the COVID-19 pandemic. He said a case like that could be brought to a Chinese court and judged using foreign laws.
“U.S. courts should hold the foreign state liable in the same manner and to the same extent as a private individual,’” Schmitt wrote in a brief to the high court.
Lawyers from Republican Action for Argentina argued the case is not representative of the Foreign Sovereign Immunity Act and would undermine its implementation. The lawyers said Congress did not give judicial authority to adminster the law further.
“The judiciary should not create an additional jurisdictional route merely because the dispute is economically significant or the underlying allegations are serious,” lawyers for the group wrote.
Fragoso argued that Republican Action for Argentina simplifies the issue and justices on the high court should clarify the extent of the Foreign Sovereign Immunity Act.
“They're going to have to deal with these kinds of questions at some point. It really can't be the case that Congress authorizes explicitly these kinds of suits and then a bunch of lower courts monkey with the statute,” Fragoso told The Center Square. “These are things that haven't been addressed in a while that need to be addressed.”
Commented