April 17, 2012 7:10 PM

Latham, Cleary Have Deep Ties to Deals at Heart of Argentine Oil Nationalization

Posted by Brian Baxter


This week’s controversial move by the Argentine government to partially nationalize Yacimientos Petroliferos Fiscales (YPF), the local subsidiary of Madrid-based oil giant Repsol, has provoked an international imbroglio, with the Spanish government threatening retaliation over the plan.

The Wall Street Journal said in an editorial Tuesday that Repsol should fight for compensation from Argentina and its combative president Cristina Kirchner, who most recently made waves about wresting back the potentially oil-rich Falkland Islands—known as Las Malvinas to Argentines—from the U.K. Bloomberg reports that the bid by the Argentine state to take control of YPF is the largest natural resource renationalization since Russia seized control of Yukos in 2003.

Repsol has publicly valued its holdings in YPF, the largest oil and gas producer in Argentina, at roughly $18 billion—about $8 billion more than YPF’s market capitalization of $10.5 billion, a valuation already rejected by the Argentine government. And with YPF also accounting for about 35 percent of Repsol’s consolidated earnings, according to MarketWatch, Repsol shares sank 6 percent Tuesday as shareholders shuddered at the thought of Argentina snatching a controlling 51 percent stake in the business.

While Repsol has claimed that it will indeed seek compensation for YPF—with international arbitration one potential option—several media representatives for the company did not respond to requests for comment on the names of any outside law firms it may have lined up for the forthcoming battle. (Luis Suarez de Lezo Mantilla, Repsol’s general counsel and secretary, serves on YPF’s board of directors.)

When it comes to the Repsol’s involvement in Argentina, Latham Watkins and Cleary Gottlieb Steen Hamilton are two Am Law 100 firms likely to play important roles as the dispute between the company and Buenos Aires plays out in the months, and possibly, years ahead.

A Latham spokeswoman said the firm would not comment about its relationship with Repsol, which was fully privatized in 1997, and which purchased a 97.81 percent stake in YPF two years later. Repsol’s share of YPF has been whittled to 57 percent in the years since. Latham advised Repsol in one of the most substantial of those transactions in 2007, when Argentina’s Grupo Petersen agreed to buy 15 percent of YPF with a future option to increase its stake to roughly 25 percent.

Latham corporate partners Jose Luis Blanco and Ignacio Pallares, who joined the firm in 2006 from top Spanish firm Cuatrecasas, Goncalves Pereira when Latham opened in Barcelona and Madrid, have been key legal advisers to Repsol.

Blanco, who serves as managing partner of Latham’s Spanish offices, and Pallares represented the company in 2010 on the $7.1 billion sale of a 40 percent stake in its Brazilian unit to Sinopec, China’s state-owned oil company.

According to The American Lawyer‘s 2011 international arbitration scorecard, firms advising Repsol in various arbitration proceedings around the world include Argentine firm Perez Alati, Grondona, Benites, Arntsen Martinez de Hoz, Jr., Magic Circle firm Freshfields Bruckhaus Deringer, Paris-based Derains Gharavi, Spanish legal giant Uria Menendez, and Wilmer Cutler Pickering Hale and Dorr.

Latham and Cleary are considered top firms for international arbitration work. Like Latham, Cleary is also well-connected to previous YPF machinations, via both the firm’s ties the Argentine government, as well its representation of Argentina’s wealthy Eskenazi family, which controls Grupo Petersen.

Grupo Petersen turned to lawyers from Cleary, Spanish firm Garrigues, and Buenos Aires-based Brons  Salans for outside counsel on the 2007 transaction in which it acquired its initial YPF stake. When Grupo Petersen used its option to boost that stake last year, Cleary corporate partners Andres de la Cruz and David Aman and Garrigues partners Monica Martin de Vidales and Gonzalo Rivera Gomez handled the matter.

While the Eskenazi family had openly fretted that its stake in YPF could be swept up in Kirchner’s nationalization efforts, by Tuesday it was clear that Grupo Petersen’s 25.46 percent stake in the oil company would remain safe, although the Eskenazis could still find themselves at risk of default.

Cleary, which has been busy in recent months representing the Greek government on sovereign debt issues, has long counseled the Argentine government on its ongoing fight with creditors stemming from the country’s own debt default in 2001, which many considered a template for the Greek crisis. (Click here and here for the details on some of Cleary’s cases for Argentina from The American Lawyer‘s international arbitration scorecard.)

Several spokeswomen for Cleary did not respond to requests for comment from The Am Law Daily on Tuesday about whether the firm has assumed an advisory role in the YPF nationalization row.

Photo: Puerto Madero/Buenos Aires Skyline (Repsol-YPF Tower, foreground), Luis Argerich, Wikimedia Commons

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