Repsol Starts Legal Process Over Seized Argentina Unit
MADRID - Repsol YPF SA Tuesday begun a legal battle against Argentina's seizure of its local unit last month, the Spanish oil company's first move to try to secure payment through arbitration for its nationalized operations.
The oil company said it had notified Argentina that it is contesting the government's compliance with an investment protection agreement.
The warning is a first and necessary step to face-off with the Argentine government at the World Bank's International Centre for Settlement of Investment Disputes.
The arbitration center will be responsible for resolving the dispute if the Argentine government and Repsol don't reach an agreement in six months.
"With the notification, Repsol formally announces the start of immediate legal actions under international law," the company said in a statement. "Argentina has violated different rules in the treaty, starting with the obligation to not nationalize or expropriate any Repsol investments."
Most observers predict that the nationalization of YPF, Repsol's seized Argentine unit, is likely to end in arbitration as the government has essentially shut the door on any potential negotiations with the oil company.
Many political observers said the decision by Argentine President Cristina Kirchner to seize YPF on April 16 seemed geared at boosting her nationalist credentials.
A recent poll suggested that the nationalization of Repsol's 51% stake in Argentina is already paying political dividends, with the government's approval ratings bouncing higher after the seizure.
The economic and diplomatic ties between Spain and Argentina have been strained after the seizure, and Madrid has appealed to the European Union for backing.
A spokesman for the European Commission said Tuesday that the EU may bring a complaint against Argentina at the World Trade Organization over import tariffs the country has placed on several goods.
A complaint from the commission, which is responsible for trade policy for the 27-nation EU, wouldn't directly challenge the nationalization of YPF but officials say the nationalization has focused attention on lingering objections governments have had to Argentina's trade policies.
Last week, Repsol said its net profit in the three months ended March 31 including YPF increased 3.5% to EUR792 million. However, its net profit would have climbed 12.4% to EUR643 million without YPF when adjusted to exclude the Argentine unit.
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