Argentina’s $16 Billion Payment Would Disrupt Global Legal Order

President Donald Trump threw Argentina a $20 billion lifeline last month to avert an economic crisis. In a stark counterpoint, weeks later, the US Court of Appeals for the Second Circuit heard arguments in a crucial judge’s appeal of a judge’s order requiring Argentina to pay almost as much to a litigation funder—a staggering $16.1 billion plus interest.

The judgment is alarming not only for its impact on Argentina and on US efforts to stabilize that economy, but also for its threat to erode the foundations of international legal relations and global commerce. The Second Circuit should reverse the decision and demonstrate respect for the law, courts, and decisions of a foreign sovereign.

The dispute stems from Argentina’s expropriation of an Argentine company under Argentine law. It never belonged in a US court. The litigation is a cautionary tale of opportunism.

In 2012, Argentina legally re-nationalized its national energy company, YPF SA, paying the Spanish company Repsol SA $5 billion for its majority stake. Minority shareholders who pursued claims in Argentina benefited from the settlement.

But two others, Petersen Energia Inversora SAU and Eton Park Capital Management, didn’t seek local redress and later sold most of their interests for pennies to Burford Capital, a litigation funder.

Burford paid 15 million euros ($17.3 million) to resurrect these zombie claims, reframing a domestic dispute under Argentine law as a US contract claim. From that flimsy foothold, the US District Court for the Southern District of New York in2023 transformed a domestic policy decision in Buenos Aires into the largest money judgment against a sovereign nation in US history and a windfall for Burford.

This year, the court went further, ordering Argentina to transfer its entire YPF stake—book-entry shares in Buenos Aires—to Burford to partially satisfy the judgment.

The order violates Argentine law and disregards the principle of sovereign equality: Courts of one nation don’t seize or sit in judgment on another state’s property, especially assets within that state’s territory. It would be akin to a Chinese court ordering the US to ship the gold from Fort Knox to Shanghai to pay private creditors—Washington’s response would be swift and furious.

By allowing the case to proceed in New York, the district court ignored fundamental guardrails that prevent judicial overreach.

The act-of-state doctrine bars US judges from second-guessing a foreign sovereign’s regulatory choices. International comity counsels deference to foreign courts to resolve local disputes. Forum non conveniens ensures cases are heard where facts and evidence lie. Properly applied, these doctrines would have kept this dispute in Buenos Aires, where it belongs.

The legal principles at stake here are the operating rules of a system built on the equality of sovereign states. When respected, diplomacy and commerce function without fear that judges in one country will upend the legal order of another.

If ignored, private disputes become diplomatic clashes, cross-border economic flows face new risks, and property abroad becomes a target for retaliation. Countries including Brazil, Chile, France, Israel, Italy, and Ukraine—as well as the US itself—have intervened in the litigation to voice their concerns.

The political context surrounding this case is relevant. The bilateral relationship between the US and Argentina is one factor, but larger geopolitical forces add reasons for judicial prudence. The US has been down this road before, and it hasn’t ended well.

In the 20th century, US courts expanded their extraterritorial reach, most prominently in antitrust cases with treble damages. In United States v. Aluminum Co. of America, Judge Learned Hand articulated the “effects doctrine,” under which a sovereign may impose liability for foreign conduct when its harmful effects are felt within its territory.

Foreign objections were muted when the US was dominant. Today, the EU, China, Brazil, and others use similar doctrines against US firms. In a world of more evenly distributed power and weakening international institutions, national courts should avoid rulings that resemble judicial imperialism.

Argentina argued that the Second Circuit should overturn the district court’s muddled judgment just days after President Javier Milei, a close ally of Trump, won a surprise midterm victory that boosted investor confidence. Upholding the New York judgment could again put Argentina’s economy at risk.

During oral arguments held on Oct. 29, two of three appellate judges asked whether the case belonged in a US court at all. How would Americans feel, one asked, if matters of US law involving a US company and the US government were decided by an Argentine court?

A reversal by the Second Circuit would be the correct legal outcome—and an act of judicial restraint that would strengthen the international rule of law and protect US interests in a world where reciprocity is the norm.

The case is Argentine Republic v. Petersen Energia Inversora, S.A.U., 2d Cir., No. 23-7370, oral arguments 10/29/25.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Anne-Marie Slaughter is president and CEO of New America and a former law professor at Harvard University and Princeton University.

William Burke-White is a professor of law at the University of Pennsylvania, where he teaches public international law, international investment law, human rights, and climate change.

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