BNY Mellon Dodges Repsol's $50 Million Suit
Litigation is still raging over the Republic of Argentina's 2012 expropriation of Repsol SA's controlling interest in the Argentina oil company YPF SA. But one front in the court battle closed on Thursday, when a judge tossed Repsol's claims that YPF and Bank of New York Mellon Corp. wrongfully blocked it from casting votes at a meeting of YPF shareholders.
In a 29-page decision, New York Supreme Court Justice Eileen Bransten in Manhattan ruled that Repsol didn't have standing to sue YPF and BNYMellon over the shareholder vote. Repsol had sought $50 million in damages, alleging that its stake in YPF had been wrongfully diminished and that it missed out on an opportunity to appoint two directors to YPF's board.
On the losing end of the ruling were Repsol's attorneys at Butzel Long, led by Robert Sidorsky. Mauricio Espana and Hector Gonzalez of Dechert represented BNYMellon. Chadbourne & Parke's Thomas Hall represented YPF.
Repsol, a Spanish oil company, acquired a controlling interest in YPF back in 1999. The Argentine government nationalized YPF in April 2012 and expropriated most of Repsol's interest, leaving Repsol a minority shareholder with voting rights in 6 percent of YPF's shares. A shareholder vote to appoint YPF directors was scheduled for June 4, 2012, not long after the expropriation. The deadline for submitting proxy cards was 5 p.m. on May 30, 2012.
On the day of the deadline, Repsol launched a surprise maneuver to increase its influence in the election and appoint Repsol-friendly directors. It explained that, as part of a financing agreement, it had a security interest in YPF shares owned by a company called Petersen Energia SA. Petersen had defaulted under the terms of the financing agreement, so Repsol said it could vote in Petersen's shoes. Repsol claimed that, with the added benefit of the Petersen shares, it could appoint three directors and two alternate directors to YPF's board.
At 2 p.m. on May 30, 2012, Repsol gave its voting instructions to BNYMellon, which served as the collateral agent for the Petersen shares. BNYMellon said it would only carry out the voting instructions if YPF gave its blessing. YPF told BNYMellon not to carry out the voting instructions. BNYMellon informed Repsol of the denial sometime after the 5 p.m. deadline.
In a July 2012 complaint, Repsol's lawyers at Butzel Long alleged that "because of YPF's improper disallowance of Repsol's voting instructions and BNY's refusal and failure to vote the pledged [shares] in accordance with those instructions, Repsol [was] only able to appoint one director and one alternate director."
That argument didn't get far with Bransten. She ruled in Thursday's decision that the controlling agreements didn't give Repsol the right to sue over the Petersen shares. And, in any event, BNYMellon is shielded from liability as long as it acted in good faith, Bransten ruled.
Back in August, Repsol won a ruling from New York Supreme Court Justice Shirley Werner Kornreich that could help it block YPF's effort to develop the expropriated oil and gas assets. Repsol is also pursuing Spanish litigation against companies that benefited from the expropriation, including Chevron Corp, as the Financial Times reported here.