Argentina’s nationalization of local oil company YPF S.A. has forced former majority shareholder Repsol to join the club of oil companies that have watched their South American operations get yanked out from under them like a magician removing a tablecloth from a smorgasbord. On April 16, after three months of sparring with Repsol, Argentine President Cristina Fernández de Kirchner announced that her government planned to take a 51 percent stake in YPF from Repsol. The Argentine Congress passed a bill authorizing the seizure on May 3.

Using a formula that a previous Argentine administration wrote into statutes for YPF, Repsol has said that it should be paid $10.5 billion for the expropriated holding. But Kirchner’s government has scoffed at that figure and has asked its Tribunal de Tasaciones to determine the value of the stake. As a result, Repsol has announced that it plans to file a complaint for damages with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C. Freshfields Bruckhaus Deringer, which has a long history of advising clients in ICSID battles against Argentina, is representing Repsol. (The firm declined to comment.)

A spokesman for Madrid-based Repsol, which still holds a 6.4 percent interest in YPF after the seizure, says that Repsol will base its claim on a 1991 bilateral agreement between Spain and Argentina, as well as YPF bylaws that stipulate what should happen were the government to seize assets. The company has until November to register its complaint with ICSID. In addition, Repsol and investment advisory firm Texas Yale Capital Corp. filed a class action on May 16 on behalf of all investors against Argentina in federal district court in New York. Repsol has hired Davis Polk & Wardwell as counsel for that suit.

Marney Cheek, a D.C.–based partner at Covington & Burling, is familiar with the issues that Repsol is facing. She represents Spanish investors in an ongoing arbitration case in Stockholm involving Russia’s nationalization of Yukos Oil Company. “Here we have Argentina passing a law that directly expropriates Repsol’s interests in YPF, so it is clear that compensation is due, and the case will be about how much is to be awarded,” says Cheek. “It’s a clear-cut case of expropriation by law.”

But even if the arbitrators side with Repsol and render an award, cashing that check will be no guarantee. Argentina is infamous at ICSID as not only the country facing the most claims, but as the country most likely to refuse to pay awards rendered [see "A Brave New World?"]. Since 1998, investors have filed 49 complaints against Argentina—all but three with ICSID. The majority deal with the privatization of state-run firms during the country’s economic crisis in 2001, when the Argentine peso was devalued.

According to the ICSID database, Argentina has been ordered to pay $460 million plus interest in five cases, while the country is appealing another six awards worth a combined $356 million. Thirteen other cases are pending, while the others were settled, thrown out, or rejected on appeal. Referring to the first five, Argentina has said it will not pay any of the awards until an Argentine court approves them, an interpretation of the ICSID Convention that few other countries share. On March 26, President Barack Obama announced that the United States would suspend Argentina’s trade preference status, which waives duties on up to 4,800 imports, because the company had not paid ICSID awards to U.S. companies Azurix Corp. and CMS Gas Transmission Company (now Blue Ridge Investments), which are owed a combined $298 million plus interest.

Ironically, the government of Venezuela—which has publicly denounced Western capitalism and has nationalized dozens of industries over the past five years—has in the past shown greater respect for international arbitration rulings. In February, state-run Petróleos de Venezuela S.A. paid Exxon Mobil Corporation $251 million for assets seized in 2007 after a ruling by arbitrators at the International Chamber of Commerce (ICC). And last November the Venezuelan government settled for $600 million with Mexican cement giant Cemex, S.A.B. de C.V., which filed for ICSID arbitration after its local operations were seized in 2008. Venezuela has been in 27 cases at ICSID—with two settled, three dismissed, 20 still pending, and one that resulted in a $14 million award that was paid.

Back in Madrid, Repsol is preparing for a case that will likely last years. And judging from Argentina’s record, the company may not see compensation for even longer, says Doak Bishop, a partner at King & Spalding in Houston who has argued 16 cases against Argentina before ICSID tribunals. “I expect Argentina to object to the jurisdiction, to ask for a lot of time to file memorials, and to make every argument they can think of,” Bishop says. “But unless there’s a change in administration, Argentina probably won’t pay in the end. It’s going to be a long and difficult process, but Repsol doesn’t have any choice but to go through it.”