Is Argentina allowed to seize YPF?

Argentina's expropriation of its former state oil company attracted international condemnation - but

Argentina's expropriation of 51 per cent of the shares of YPF, the formerly state-owned oil company, has generated almost universal criticism.  Indeed, Antonio Brufau, Repsol’s executive chairman, has labelled Argentina’s action as “manifestly illegal and gravely discriminatory”, and has emphasised Repsol’s intention to use international arbitration to gain proper compensation if it is not freely offered by Argentina. Such language is undoubtedly useful for Repsol as a means of generating support for its position, but an examination of precisely what international law says about expropriation is illuminating as to the potential losses that Repsol now faces.

Whether or not Argentina’s action violates international law is an important question for Repsol, as the standard of compensation differs for legal and illegal expropriations. Consequently, if Repsol can establish that Argentina has violated international law it potentially stands to gain considerably greater compensation than if the law has been observed.

It is important to note, however, that expropriations are not inherently illegal under international law. The ability to take property from private entities is simply one of the benefits of being a state. The important question, then, is whether Argentina has adhered to the applicable standards in performing the expropriation. Currently available information suggests that it has.

Firstly, an expropriation must be undertaken for a public purpose. Argentina’s expressed goal of regaining national energy self-sufficiency and ensuring the viability of an important industry clearly satisfies this requirement, and there is as yet no indication of any alternative motive.

Secondly, the expropriation must be non-discriminatory. If, for example, the Argentine government had taken Repsol’s shares in YPF and redistributed them to a private Argentine entity, Repsol may have been able to argue discrimination. Such an action would have indicated that Repsol’s foreign nationality was a motivating factor in the expropriation. However, the expropriated shares are being retained in government hands, YPF’s remaining shareholders include other foreign entities, and Argentina has offered plausible arguments as to why YPF’s performance was insufficient for the needs of the country. Absent new evidence, then, Repsol will have difficulty substantiating its allegation that the expropriation is "discriminatory".

Thirdly, the expropriation must be performed in accordance with due process of law. Argentina is undertaking the expropriation through the passage of legislation and there has been no accusation that Repsol will be deprived of any legal rights it has to challenge the expropriation in Argentine courts. Consequently, there is no current evidence that Argentina is violating this requirement.

Finally, an appropriate level of compensation must be paid for any expropriated property. This is the point on which the greatest uncertainty remains, as the Argentine government has not yet stated how much compensation it intends to pay to Repsol. Moreover, there are clear political pressures within Argentina to minimise the amount of compensation that Repsol receives. If Argentina bows to these pressures, and offers Repsol an amount indefensible as an estimate of the market value of the company, it will likely be found to have acted illegally. However, the efforts that have so far been made by Argentina’s representatives to link lowered compensation payments to such things as potential hidden debts and environmental liabilities indicates that Argentina is well aware of this issue, and is unlikely to propose an amount of compensation that is not at least facially plausible as a market valuation of the expropriated shares.

Of course, while it is important for Argentina that its actions be found to be legal, simple legality will not protect it from all the potential negative consequences of such a prominent expropriation. Perceptions matter in attracting foreign investment, and Argentina will need significant foreign investment if it is to achieve its goal of a return to energy self-sufficiency. For this reason, as attractive as it may be to the Argentine government to minimise the compensation it offers to Repsol, this is unlikely to be in Argentina’s long-term best interest. A single act of expropriation is unlikely to deter foreign investors, even when it is as large as Argentina’s expropriation of YPF. However, a perception that the Argentine government will not treat foreign investors fairly will deter them, and any indication that the government is more interested in minimizing the compensation it pays to Repsol than in fixing a fair price for Repsol’s shares in YPF will have precisely that effect. In the long term, such a valuation may well cost Argentina more money than it saves.

The second part of this post can now be found here.

View at sunset of the port next to the gas plant of YPF in Buenos Aires. Photograph: Getty Images

Tony Cole is a senior lecturer at Brunel Law School

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I can’t follow Marie Kondo's advice – even an empty Wotsits packet “sparks joy” in me

I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

I have been brooding lately on the Japanese tidying freak Marie Kondo. (I forgot her name so I typed “Japanese tidying freak” into Google, and it was a great help.) The “Japanese” bit is excusable in this context, and explains a bit, as I gather Japan is more on the case with the whole “being tidy” thing than Britain, but still.

Apart from telling us that we need to take an enormous amount of care, to the point where we perform origami when we fold our underpants, which is pretty much where she lost me, she advises us to throw away anything that does not, when you hold it, “spark joy”. Perhaps I have too much joy in my life. I thought I’d give her loopy, OCD theories a go, but when I held up an empty Wotsits bag I was suffused with so many happy memories of the time we’d spent together that I couldn’t bear to throw it away.

After a while I gave up on this because I was getting a bit too happy with all the memories, so then I thought to myself, about her: “This is someone who isn’t getting laid enough,” and then I decided that was a crude and ungallant thought, and besides, who am I to wag the finger? At least if she invites someone to her bedroom no one is going to run screaming from it, as they would if I invited anyone to my boudoir. (Etym: from the French “bouder”, to sulk. How very apt in my case.) Marie Kondo – should bizarre circumstance ever conspire to bring her to the threshold – would run screaming from the Hovel before she’d even alighted the stairs from the front door.

I contemplate my bedroom. As I write, the cleaning lady is in it. To say that I have to spend half an hour cleaning out empty Wotsits packets, and indeed wotnot, before I let her in there should give you some idea of how shameful it has got. And even then I have to pay her to do so.

A girlfriend who used to be referred to often in these pages, though I think the term should be a rather less flippant one than “girlfriend”, managed to get round my natural messiness problem by inventing a game called “keep or chuck”.

She even made up a theme song for it, to the tune from the old Spiderman TV show. She would show me some object, which was not really rubbish, but usually a book (it may not surprise you to learn that it is the piles of books that cause most of the clutter here), and say, “Keep or chuck?” in the manner of a high-speed game show host. At one point I vacillated and so she then pointed at herself and said, “Keep or chuck?” I got the message.

These days the chances of a woman getting into the bedroom are remote. For one thing, you can’t just walk down the street and whistle for one much as one would hail a cab, although my daughter is often baffled by my ability to attract females, and suspects I have some kind of “mind ray”. Well, if I ever did it’s on the blink now, and not only that – right now, I’m not even particularly bothered that it’s on the blink. Because, for another thing, I would frankly not care to inflict myself upon anyone else at the moment.

It was all a bit of a giggle eight years ago, when I was wheeled out of the family home and left to my own devices. Of course, when I say “a bit of a giggle”, I mean “terrifying and miserable”, but I had rather fewer miles on the clock than I do now, and a man can, I think, get away with a little bit more scampish behaviour, and entertain a few more illusions about the future and his own plausibility as a character, when he is squarely in his mid-forties than when he is approaching, at speed, his middle fifties.

Death has rather a lot to do with it, I suppose. I had not actually seen, or touched, a dead body until I saw, and touched, my own father’s a few weeks ago. That’s what turns an abstract into a concrete reality. You finally put that to one side and gird up your loins – and then bloody David Bowie snuffs it, and you find yourself watching the videos for “Blackstar” and “Lazarus” over and over again, and reach the inescapable conclusion that death is not only incredibly unpleasant, it is also remorseless and very much nearer than you think.

And would you, dear reader, want to be involved with anyone who kept thinking along those lines? I mean, even if he learned how to fold his undercrackers into an upright cylinder, like a napkin at a fancy restaurant, before putting them in his drawer? When he doesn’t even have a drawer?

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 05 February 2015 issue of the New Statesman, Putin's war