MADRID (Reuters) - Repsol (REP.MC) has started the process to claim more than $10 billion compensation from Argentina for seizing the Spanish oil group’s stake in Argentine energy company YPF (YPFD.BA), in an arbitration case that could drag on for years.
Repsol said on Tuesday it had told Argentina’s president, Cristina Fernandez, of a dispute under the Treaty for Investment Promotion and Protection agreed between Spain and Argentina — a necessary step for arbitration at the World Bank’s International Center for Settlement of Investment Disputes.
Six months must pass before ICSID will consider arbitration in any dispute, a period designed to allow negotiations between the two parties.
Argentina took control of YPF last month by expropriating a 51 percent stake from Repsol, whose total stake was 57 percent. Argentina has said there were reasons for it to not pay the amount Repsol wanted.
Repsol chairman Antonio Brufau has said it would base its compensation claim on a total value for YPF of $18 billion.
The Spanish government and European Union officials have said they will take measures against Argentina over the expropriation. Analysts say their options are limited, not least since Argentina has ignored past ICSID fines.
Also, Argentina is shut out of world debt markets, making it harder to bring international pressure to bear on it.
In any case at the ICSID Argentina is likely to argue it is in its public interest to expropriate YPF.
Even if Repsol were to win at the ICSID, lawyers familiar with such international cases said they believed it was unlikely the dispute would end with a payout. About a quarter of all global cases handled by the ICSID have been brought against Argentina, which has a poor track record of complying with its judgments.
In March, U.S. President Barack Obama said he would suspend trade benefits for Argentina because it had failed to pay more than $300 million in compensation awards in two disputes.
The lawyers told Reuters Repsol’s legal team, which includes lawyers from Buenos Aires and New York, was considering a number of options in terms of legal action over the YPF expropriation but the ICSID would be the main one.
“The ICSID takes years in its rulings but we are talking about the most important case in its history and I wouldn’t be surprised if there was interest in speeding up the process although it is going to be long and involved,” said one lawyer, who did not wish to be named.
Repsol shares closed down 1.34 percent at 13.62 euros.
($1 = 0.7789 euro)
Reporting By Carlos Ruano; Writing by Sarah Morris; Editing by Dan Lalor and Jane Merriman