Repsol sues Argentina over giant YPF seizure

MADRID/NEW YORK Tue May 15, 2012 6:59pm EDT

A man waves a flag with the YPF logo in front of the Argentine Congress in Buenos Aires April 25, 2012. REUTERS/Marcos Brindicci

A man waves a flag with the YPF logo in front of the Argentine Congress in Buenos Aires April 25, 2012.

Credit: Reuters/Marcos Brindicci

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MADRID/NEW YORK (Reuters) - Repsol YPF SA (REP.MC), the large Spanish oil and gas company, on Tuesday sued Argentina for seizing control of formerly state-owned energy company YPF SA (YPFD.BA), in which Repsol held a majority stake.

The lawsuit, filed in the U.S. District Court in Manhattan, is part of Repsol's effort to recover more than $10 billion from Argentina over the seizure in a case that could drag on in arbitration and the courts for years.

Argentina also faces tens of billions of dollars of other U.S. litigation, largely tied to its sovereign debt default one decade ago.

Representatives for the government were not immediately available late Tuesday for comment.

In the complaint, Repsol and the money manager Texas Yale Capital Corp, which holds YPF American depositary receipts, claimed that Argentina reneged on its promise to tender for Class D shares of YPF if it ever took back control of the company.

Argentine president Cristina Fernandez announced the planned seizure of a 51 percent stake in YPF from Repsol on April 16, contending that the Spanish company did not invest enough and allowed oil production and exploration to decline.

Argentine lawmakers approved the seizure earlier this month.

Repsol's total stake prior to the seizure was 57 percent. YPF shares have fallen 50 percent this year, and 31 percent since the seizure was announced, causing losses for other investors.

"Argentina's failure to launch a tender offer despite having retaken control over YPF constitutes a breach of its contractual obligations to other shareholders," the complaint said.

Repsol and Texas Yale seek compensatory damages, a requirement that Argentina launch a tender offer, and other remedies.

Texas Yale is based in Spicewood, Texas.

Earlier Tuesday, Repsol said it had told Fernandez of a dispute under the Treaty for Investment Promotion and Protection agreed between Spain and Argentina -- a necessary step for arbitration at the World Bank's International Center for Settlement of Investment Disputes.

Six months must pass before ICSID will consider arbitration in any dispute, to allow negotiations between the two parties.

Repsol Chairman Antonio Brufau has said his company's claim would be based on an estimated $18 billion total value for YPF.

Spanish government and European Union officials have said they will act against Argentina over the expropriation.

Analysts, however, have said the options are limited. They have noted that Argentina has ignored past ICSID fines and that the country's capacity to settle is unclear because it remains shut out of world capital markets. Argentina may also argue that the YPF seizure was in the public interest.

Even if Repsol were to prevail at the ICSID, lawyers familiar with similar cases said it was unlikely it could recover a payout. About one-fourth of global cases handled by the ICSID have been against Argentina.

"The ICSID takes years in its rulings, but we are talking about the most important case in its history," said one lawyer, who asked not to be named. "I wouldn't be surprised if there was interest in speeding up the process although it is going to be long and involved."

In March, U.S. President Barack Obama said he would suspend trade benefits for Argentina because it had failed to pay more than $300 million in compensation awards in two disputes.

Repsol shares closed down 1.34 percent at 13.62 euros.

The case is Repsol YPF SA et al v. Argentina, U.S. District Court, Southern District of New York, No. 12-03877.

($1 = 0.785 euro)

(Reporting By Carlos Ruano in Madrid and Jonathan Stempel in New York; Additional reporting by Hilary Burke in Buenos Aires; Writing by Sarah Morris and Jonathan Stempel; Editing by Dan Lalor, Jane Merriman and Jim Marshall)

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