Buenos Aires Herald | 20 August 2024
US court rules against Argentina in Aerolíneas Argentinas expropriation trial
by Facundo Iglesia
A U.S. court ruled against Argentina on Tuesday in a case about the expropriation of the country’s flag carrier, Aerolíneas Argentinas, which took place in 2008.
The Columbia district court allowed the World Bank’s ICSID (International Centre for Settlement of Investment Disputes) to enforce a debt owed by the Argentine government to a group of Spanish companies for US$340 million. The rights to collect the debt were bought by a hedge fund, Titan Consortium.
A source in Argentina’s Treasury Attorney’s Office said that the ruling does not seem to be appealable, but added that the office would consult its international legal team over the coming days to define the next steps.
In late 2001, three companies in the Spanish Marsans group took over airlines Austral and Aerolíneas Argentinas, which had been privatized in 1987 and 1990 respectively (Austral was absorbed into Aerolíneas Argentinas in 2020). Marsans bought them via Spanish company Air Comet, which owned Interinvest, the Argentine holding company that owned the airlines.
The Argentine government expropriated Aerolíneas Argentinas and Austral in 2008. Marsans group filed a lawsuit accusing the country of unlawfully expropriating their investment by passing executive actions and legislation that confiscated their shares. This violated the treaty between the country and the company, they said. In July 2017, the ICSID ruled in the Marsans group’s favor.
The Spanish group also said that Argentina engaged in a series of acts constituting “a creeping expropriation” before the state takeover officially happened, according to the ICSID 2017 award. They accused the government of preventing the airlines from charging sufficient airfares, resulting in a “financial squeeze” that damaged the investment and the value of the companies to “force a distressed sale of the airlines.”
The ICSID ruled that Argentina failed to grant Marsans “fair and equitable treatment of their investments” and breached treaties by “unlawfully expropriating” their investments. The ICSID tribunal found that Argentina failed to respect an agreement establishing a mechanism to determine the price of the airlines’ shares. According to ICSID, the country should pay the Spanish group US$320 million plus an additional US$3.5 million in legal costs and interest.
Argentina appealed to have the award annulled, which the ICSID rejected on May 29, 2019. In August 2021, Titan Consortium initiated proceedings to enforce the award before the U.S. District Court for the District of Columbia. Titan had acquired the collection rights to the award from Burford Capital, which had an agreement with the claimants. Burford is also involved in other lawsuits against Argentina in international courts, such as the YPF expropriation case.
Argentina claimed that the right to enforce that award in the U.S. was subject to a three-year statute of limitations established in the Federal Arbitration Act. However, the Washington court ruled, instead, that the award was subject to the 12-year deadline applicable in D.C.
