Enforcing U.S. Judgments Against “Foreign” Assets of Foreign Sovereigns: a Rejoinder

On June 30, 2025, in Petersen Energia Inversora, S.A.U. v. Argentine Republic, a federal district court in New York ordered the Republic of Argentina to “(i) transfer its Class D shares of YPF to a global custody account at BNYM in New York within 14 days from the date of this order; and (ii) instruct BNYM to initiate a transfer of the Republic’s ownership interests in its Class D shares of YPF to Plaintiffs or their designees within one business day of the date on which the Shares are deposited into the account.” As authority for the Order, the court cited Federal Rule of Civil Procedure 69(a)(1) and New York CPLR § 5201 and CPLR § 5225. A substantially similar order was issued in Bainbridge Fund Ltd. v. Republic of Argentina, an unrelated case. Argentina appealed both orders. Some of the legal issues underlying these orders were previously discussed at TLB (here and here).

We argue that, as a matter of international law, the Order in Petersen fails on two separate, yet complementary grounds. First, the measures ordered constitute execution activity in furtherance of a judgment and are therefore incompatible with the rules of international law limiting the right of domestic courts to enforce their decisions (“enforcement jurisdiction”) in the territory of another state. Second, even assuming that it is not an exercise of enforcement jurisdiction and that the judgment on the substance condemning Argentina to pay in excess of US$16 billion (which is on appeal) is ultimately upheld, the order purports to dictate upon Argentina which assets within its territory must be allocated to satisfying that judgment. We argue, by contrast, that the determination of budgetary allocations (including those required to satisfy judgments) and identification of the resources required to meet them constitute quintessentially sovereign (jure imperii) acts. As a result, we submit that the Order violates Argentina’s sovereign immunity.

The Enforcement Jurisdiction Question

Under international law, it is broadly accepted that domestic courts lack the right to enforce judgments against assets located in the territory of foreign states. In the seminal Lotus case, the Permanent Court of International Justice reasoned that “the first and foremost restriction imposed by international law upon a State is that – failing the existence of a permissive rule to the contrary – it may not exercise its power in any form in the territory of another State. In this sense jurisdiction is certainly territorial.” The canonical interpretation of this dictum is that the extraterritorial exercise of enforcement jurisdiction without the territorial state’s consent is impermissible under international law.  U.S. courts generally agree. In its decision in Republic of Argentina v. NML Capital, LTD (2014), the Supreme Court of the United States confirmed that U.S. “courts generally lack authority in the first place to execute against property in other countries.” A similar conclusion was reached by another federal district court of New York in Levin v. Bank of N.Y., concluding that the FSIA “does not permit executing against extraterritorial assets.” We submit that the Order in Petersen is at odds with this settled prohibition.

Admittedly, whether an order to turn over assets located extraterritorially constitutes a measure of enforcement may be questioned. Arguments have been made, for instance, that a turnover order involving assets of a defendant over which the court has personal jurisdiction constitutes a form of extraterritorial adjudicative jurisdiction, permissible under international law. Adjudicative jurisdiction, it is generally accepted, concerns the legal power of the state to modify or determine the rights and duties of parties to a legal controversy.  Nevertheless, we suggest that endorsing an understanding of turnover procedures that entirely carves them out of enforcement jurisdiction undermines the Lotus prohibition to a point that makes it virtually irrelevant. Paraphrasing Lord Bingham of Cornhill writing for the British House of Lords in Jones v. Saudi Arabia (2006), the prohibition of extraterritorial enforcement jurisdiction cannot be circumvented simply by considering “turnover” a mere exercise of adjudication. Accepting the court’s approach in Petersen would mean that the prohibition of extraterritorial enforcement jurisdiction reaffirmed in Lotus has been washed away.

The Sovereign Immunity Question

Even if we accept that turnover orders are akin to adjudicatory measures – hence not limited by the prohibition of extraterritorial enforcement jurisdiction – we submit that the district court in Petersen missed a critical issue: the entitlement to “sovereign immunity” under international law creates a legal obstacle that the court cannot simply “bypass” by relying on the New York state turnover rules. Let us explain. The court’s analysis in Petersen turned solely on whether Argentina’s YPF shares located outside the United States are “immune” under the Foreign Sovereign Immunities Act (FSIA) (emphasis added). It further noted that the FSIA is silent on the matter, because it explicitly addresses only the immunities of foreign sovereign assets “in the United States.” Against this background, the court concluded – in a controversial (here, here, here and here) move – that extraterritorial assets of foreign sovereigns are thus effectively fair game for U.S. courts so long as they have personal jurisdiction over the sovereign judgment debtor.

We submit that the critical question is not whether the shares themselves are protected by sovereign immunity, or whether they would be so entitled if brought within the United States. Rather, what is at issue is whether a New York court can order a foreign sovereign to bring specific assets into the court’s jurisdiction to pay for a judgment. Indeed, the determination of which assets within the sovereign judgment debtor’s territory should be allocated to the payment of any judgment debt constitutes an exercise of sovereign authority (an act jure imperii). Sovereign immunities are predicated on the equality of states (par in parem non habet imperium). It thereby follows that no state (or the courts of that state) can dictate to a foreign sovereign measures that legally constrain the determination of which of its assets located in that sovereign’s own territory will have to be dedicated to satisfying judgments against that sovereign.

In other words, whether certain specific assets are themselves protected by a state’s sovereign immunity is an entirely separate question from whether a municipal court can compel a foreign sovereign to transfer specific assets from the sovereign’s territory to the forum territory. Under current international law, sovereigns may be exposed to a foreign municipal court ordering them to pay (namely by issuing a judgment against such sovereign after having established adjudicatory jurisdiction), and even to such court seizing non-immune assets of the sovereign judgment debtor present in the forum country’s territory. However, it is still true today that the decision of which of its assets it will bring into the jurisdiction of the foreign court, with its direct budgetary – including fiscal policy – implications, constitutes an exercise of sovereign authority. No domestic court has authority to choose which assets outside the forum of a sovereign judgment debtor should be dedicated to fulfilling the judgment.

The FSIA has hardly overridden this basic principle. Under FSIA § 1604 the rule remains that “a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States.” The Court of Appeals of the Second Circuit further indicated that “when drafting the FSIA Congress took into ­account the interna­tional community’s view of sovereign immunity,” adding that this consideration “makes a world of difference in the Act’s interpretation.” With reference to this decision, the Restatement (Fourth) of the U.S. Foreign Relations Law notes that under the FSIA “there will be circumstances in which Congress created a right without a remedy.”

Systemic Implications of the Order

If the order in Petersen is upheld, we submit that it would constitute a breach of fundamental rules on sovereign immunity and would carelessly undermine important limits that international law places upon the extraterritorial exercise of enforcement jurisdiction. But perhaps more importantly, this outcome would fatally weaken the system in place which seeks to protect the authority of every state against potentially reckless decisions of foreign courts, undermining the cardinal principle of sovereign equality of states. In effect, it would establish a precedent that can pose a dramatic change in the manner in which commercial dealings by foreign sovereigns will be administered.