Second Circuit Reverses $18 Billion Judgment in Landmark Sovereign Litigation

On March 27, 2026, the U.S. Court of Appeals for the Second Circuit vacated an “unprecedented” $18 billion judgment (with interest) in a case arising out of the Argentine Republic’s partial expropriation of YPF S.A., the country’s largest energy company. After more than ten years of litigation, the Second Circuit held that plaintiffs’ breach of contract claims based on alleged violations of YPF’s bylaws were not cognizable under governing Argentine contract or corporate law, and, alternatively, that such claims were precluded by Argentina’s General Expropriation Law, which provides a comprehensive regime for expropriation-related claims. On X, Argentine President Javier Milei called this victory “the greatest legal achievement in national history.”

The case was closely watched in the litigation finance world because it was the largest asset on Burford Capital’s balance sheet—valued, even after Burford sold off substantial interests in the case, at over $1.7 billion. Burford is expected to substantially write down the value of the claims, and the outcome may deter litigation finance firms from taking on cases in U.S. courts that turn entirely on foreign law.

S&C represented the Republic in the last seven years of the district court proceedings and on appeal.

Background

Factual Background

Argentina’s president submitted a bill in April 2012 authorizing the expropriation of 51% of YPF shares owned by Repsol S.A., a Spanish oil company. The law was passed in May 2012. Repsol and various minority shareholders brought claims in Argentine courts and arbitral venues arising from the expropriation. All disputes were resolved through a 2014 global settlement in which the Republic paid Repsol $5 billion, and Repsol agreed to secure the discontinuance of minority shareholders’ timely filed claims.

Procedural Background

In April 2015, former minority shareholders (Petersen) filed suit in the U.S. District Court for the Southern District of New York, claiming that the Republic breached YPF’s bylaws by failing to tender for minority shares upon renationalizing YPF and that YPF failed to enforce the bylaws’ tender offer provisions. Burford financed Petersen’s claims, exercising rights it acquired for €15 million in Petersen’s bankruptcy proceedings in Spain. In November 2016, New York-based hedge fund and former minority shareholder, Eton Park, brought a tag-along suit. Eton Park was also financed by Burford.

At the outset, the Republic moved to dismiss for lack of jurisdiction under the Foreign Sovereign Immunities Act (“FSIA”), arguing that plaintiffs’ claims were premised on the Republic’s partial expropriation of YPF, a sovereign act entitled to immunity. In 2016, the district court retained jurisdiction, reasoning that plaintiffs’ claims fell within the FSIA’s “commercial activity” exception. The Second Circuit affirmed on interlocutory appeal. In deciding what was a purely jurisdictional question, the Court did not reach the merits or consider forum non conveniens or international comity. And though the Court agreed with the Republic that “[e]xpropriation is a decidedly sovereign . . . activity,” it ultimately found that the Republic was not immune from suit under the FSIA because plaintiffs’ claims were premised on the Republic’s failure to tender, not the “expropriation itself.”[1]

On remand, the Republic renewed its motion to dismiss on forum non conveniens grounds, which the district court denied. The court held that Eton Park’s choice of forum was entitled to substantial weight because it was based in New York, and the court discounted Argentina’s preference for the dispute to be resolved domestically. And although the court recognized that plaintiffs’ claims were governed by Argentine law, it anticipated that no “complicated questions of Argentine law [would] actually arise.”[2]

After three years of discovery, the parties cross-moved for summary judgment. In March 2023, the district court granted summary judgment to plaintiffs on their breach of contract claims against the Republic. In doing so, the district court rejected the Republic’s arguments based on Argentine contract, corporate and public expropriation law. It also interpreted New York law to require conversion of foreign-currency obligations to dollars based on the alleged breach date, not the judgment date, significantly increasing plaintiffs’ damages. The district court, however, dismissed plaintiffs’ breach claims against YPF, holding that YPF had no obligation to enforce the bylaws’ tender offer provisions. After a bench trial on damages, the district court entered final judgment for plaintiffs in September 2023, totaling approximately $16.1 billion.

The Republic appealed. Numerous amici supported the Republic on appeal, including Brazil, Chile, Ecuador, Uruguay, former Argentine Supreme Court Justices, a former Argentine Attorney General, a major Argentine bar association, distinguished law professors and others. The Second Circuit heard oral argument on October 29, 2025.

Post-Judgment Proceedings

While the appeal was pending, post-judgment proceedings moved forward in the district court. In particular:

Turnover Order and Appeal. In June 2025, the district court issued an order under New York’s “turnover” statute requiring the Republic to bring sovereign property in Argentina—the Republic’s majority stake in YPF—to the U.S. to satisfy the judgment. In reaching this result, the district court relied on a vacated Second Circuit decision holding that the FSIA abrogated execution immunity for sovereign assets located outside the United States[3]—even though the Second Circuit declined to reinstate that analysis after the U.S. Supreme Court vacated it. No other appellate court has adopted this view.

Supported by the U.S. Government, the Republic appealed the turnover order and secured a stay from the Second Circuit. On appeal, the Republic and U.S. Government argued that sovereign property abroad enjoys absolute execution immunity even after the FSIA’s enactment, and the U.S. Government further warned that the district court’s order would put U.S. property at risk of reciprocal treatment in foreign courts.

Post-Judgment Discovery. In July 2025, the district court ordered the Republic to produce communications from the personal devices and accounts of current and former high-ranking Argentine officials, including cabinet-level ministers. The Republic appealed but complied in the interim by seeking consent from the officials. Plaintiffs then moved for sanctions and a contempt finding in the district court on the basis that the Republic did not produce communications from the officials who did not consent. The district court scheduled an evidentiary hearing on plaintiffs’ motion for April 2026 and also expanded the hearing’s scope to cover the Republic’s knowledge of the location of gold reserves of Argentina’s central bank.

Before that evidentiary hearing went forward, the Republic moved for a stay of post-judgment discovery pending resolution of the merits appeal, which the district court denied but the Second Circuit granted in March 2026. The U.S. Government again supported the Republic, cautioning that burdensome and intrusive discovery of foreign sovereigns could impact U.S. foreign relations and lead to reciprocal adverse treatment of the U.S. and its officials in foreign courts.

The Second Circuit’s Decision

In its March 27, 2026, decision, the Second Circuit reversed the district court’s $18 billion judgment against the Republic. Reviewing plaintiffs’ Argentine law claims de novo, the Second Circuit reversed on two independent grounds: plaintiffs’ breach of contract claims are not cognizable under (1) Argentine contract or corporate law, and (2) Argentina’s public law framework governing expropriations.[4] The Second Circuit also vacated the district court’s turnover order and affirmed the dismissal of the claims against YPF.[5]

Argentine Contract and Corporate Law. The Court held that plaintiffs’ claims are not cognizable under Argentine contract law because no bilateral contract existed. The Court explained that (i) Argentine law, like U.S. law, requires reciprocal obligations for a breach of contract claim, and (ii) corporate bylaws generally do not create such obligations because, as internal governance documents, they instead establish “multilateral rules between the corporation and its shareholders.”[6]

The Court rejected plaintiffs’ argument that, even assuming corporate bylaws do not generally create bilateral obligations, YPF’s bylaws do here by creating a specific contractual promise to minority shareholders. The Court reasoned that although the tender offer provisions reference the Republic, they do not establish reciprocal obligations because they merely set a higher tender offer threshold for the Republic, fail to identify minority shareholders as counterparties, and do not specify any mutual exchange of promises.[7]

In addition, the Court emphasized that plaintiffs and their experts failed to identify any Argentine precedent supporting shareholder-versus-shareholder damages claims based on bylaws violations.[8] The Court concluded that no such claims exist; instead, Argentine law provides corporate-law mechanisms—such as shareholder challenges to invalid resolutions—for enforcing bylaws, mechanisms that other YPF minority shareholders pursued in Argentina.

Argentine Expropriation Law. The Court held that, even if a contractual obligation existed, plaintiffs’ claims are independently barred by Argentina’s General Expropriation Law (GEL). The Court rejected plaintiffs’ attempt to characterize their claims “as an ordinary breach of contract dispute,” emphasizing that their claims arise from an expropriation and “therefore necessarily implicate the Republic’s public law regime in addition to its private law civil codes.”[9]

The Court also found that the GEL “establishes a comprehensive procedure for resolving claims arising from expropriation” and “explicitly forecloses” third-party actions that “impede the expropriation or its effects.”[10] The Court concluded that plaintiffs’ claims—which had “subject[ed] the Republic to protracted litigation,” “impos[ed] costs on the Republic beyond those assessed in connection with the expropriation itself,” and “ultimately render[ed] the Republic’s control of the shares uncertain”—“undoubtedly ‘interfere[d] with’ the act of expropriation,” even if “the tender offer requirement did not literally bar the expropriation.”[11] Thus, third-party claims, like plaintiffs’, that interfere with an expropriation must be resolved through the GEL’s “compensation-setting mechanism.”[12]

Forum Non Conveniens and Comity. In light of its merits ruling, the Court declined to reach the Republic’s arguments under forum non conveniens and international comity. Noting the deferential standard of appellate review of such arguments, the Court nevertheless acknowledged that the case presented “serious forum-related issues.”[13]

Implications

The Second Circuit’s decision established an important precedent for how U.S. courts approach cases involving questions of foreign law. While few cases in U.S. courts turn so completely on such questions, the Court’s view that, in light of the de novo review standard, it was obliged to engage deeply with the complexities of Argentine law in this case demonstrates that U.S. courts will undertake this task when required.

Although the Second Circuit declined to rule on the Republic’s forum non conveniens and comity arguments, the Court’s recognition of the case’s “serious forum-related issues” may signal increased scrutiny by U.S. courts of foreign disputes involving limited connections to the U.S. Allowing the claims here to proceed to summary judgment and trial ultimately placed the Second Circuit in the difficult position of effectively sitting as an Argentine appellate court.

In reversing the underlying judgment, the Second Circuit left unaddressed the district court’s rulings (1) concluding that U.S. courts can execute on foreign-sovereign property located outside the United States, and (2) allowing overly broad discovery in post-judgment proceedings against a sovereign.

Finally, this decision underscores the risks associated with third-party litigation financing. While such financing enabled plaintiffs to pursue their claims, the ultimate reversal of an $18 billion judgment after more than a decade of litigation illustrates the inherent uncertainty of such investments. The Court’s decision may therefore serve as a cautionary example to those considering financing claims brought in U.S. courts based entirely on foreign law.