WTO World Trade Organisation
Spain has asked European Union to file a complaint with the World Trade Organization against Argentina for seizing control of energy company YPF, which is majorly owned by Madrid-based Repsol.
Madrid has threatened economic and diplomatic "consequences" for Argentine President's decision to nationalize 51% of YPF owned by Spanish oil major Repsol.
However, Madrid might find it hard to put pressure on a nation that has been shut out of world debt markets and has ignored international fines in its earlier disputes.
European officials warned that the nationalization of YPF, majority-owned by Repsol, would damage the business climate in Argentina and disturb the legal underpinnings of other European companies' operations there. But, did not take any serious action against them.
The European Commission, European Union's executive arm, has ruled out a World Trade Organization complaint and said Spain will break European as well as international law by unilaterally imposing trade curbs on Argentina.
Further, they said that the investment-protection pledges were not a part of Argentina's commitments to the global trade body.
However, they are counting on the international uproar to force Argentina to back down.
Moreover, in a symbolic protest, the EU has canceled an April 19-20 policy dialogue with Argentina on economic and trade issues. The meeting, the 10th in two decades, was to be chaired by Christian Leffler, head of the Americas section in the EU foreign service.
But, the EU is unlikely to speed the phase-out of trade preferences that Argentina is scheduled to lose in 2014 as it is no longer classified as a developing country.
Under the rules of the World Trade Organisation and the European Union, Spain is not able to take any unilateral trade action against Argentina.
Now, its main recourse would be to take the Repsol-YPF case to the World Bank's International Centre for Settlement of Investment Disputes, known as the ICSID, to demand fair compensation for Repsol over the expropriation.
Yacimientos Petrolíferos Fiscales (YPF) is an Argentine oil company. Founded in 1922 under President Hipólito Yrigoyen's administration, it became the first oil company in the world to become vertically integrated.
Repsol: official website.
International Centre for Settlement of Investment Disputes (ICSID) is an institution of the World Bank Group based in Washington, D.C., United States which was established in 1966.