Tag Archives: Helms-Burton Bill

FOREIGN INVESTMENT IN CUBA MIGHT BE AT RISK IF U.S. ALLOWS LAWSUITS OVER CONFISCATED PROPERTY

Posted on February 25, 2019 by Arch Ritter

BY MIMI WHITEFIELD

Miami Herald, FEBRUARY 20, 2019 12:00 AM

Original Article: Confiscated Property

Cuba’s efforts to attract foreign investment to boost its ailing economy were limping along even before the Trump administration raised the possibility that it might allow lawsuits in U.S. courts against foreign companies that do business on the island using properties confiscated from Americans or Cubans who later became U.S. nationals.

Now with the clock ticking on a U.S. decision on whether to allow U.S. nationals to sue for monetary damages, Cuba’s investment climate might be about to take another hit.

“I think this would be another layer of concern for potential foreign investors and could chill investment in Cuba considerably,” said Jason Poblete, a Washington area attorney who specializes in federal regulatory matters. “It would be an added complication.”

Every U.S. president since 1996 has routinely suspended Title III — the lawsuit provision — of the Helms-Burton Act fearing fallout from important U.S. allies such as the EU countries, Canada and Mexico whose investors in Cuba could be targeted. Like clockwork, presidents have waived the lawsuit provision every six months for more than two decades. The Trump administration has suspended it three times already.

But in January Secretary of State Mike Pompeo informed Congress that this time, beginning on Feb. 1, there would be only a 45-day suspension of Title III. “This extension will permit us to conduct a careful review of the right to bring action under Title III in light of the national interests of the United States and efforts to expedite a transition to democracy in Cuba,” the State Department said.
The review is being conducted at a time when U.S.-Cuba relations are increasingly frayed and will take into consideration “factors such as the Cuban regime’s brutal oppression of human rights and fundamental freedoms and its indefensible support for increasingly authoritarian and corrupt regimes in Venezuela and Nicaragua,” the State Department said.

Analysts say that indicates that the administration wants to make the case that this goes beyond property rights and foreign investment in Cuba and also has a national security dimension.

The decision could come soon, on or around March 2, because the secretary of state must give Congress at least 15 days notice before a suspension of Title III is to begin.

In a process that ended decades ago, the United States certified 5,913 claims for Cuban properties that belonged to U.S. citizens and were expropriated shortly after the 1959 revolution. Those claims plus interest are valued at about $8 billion in today’s dollars.

But under Helms-Burton, also known as the Cuban Liberty and Democratic Solidarity Act, Cubans who were not U.S. citizens at the time their properties were seized also would be able to file suit if a foreign investor in Cuba is “trafficking” in their former properties.

That would include investors who have joint ventures or partnerships with Cuban entities and companies that use or benefit from disputed properties. It also could target foreign companies that have management contracts for properties with underlying claims.

Excluded from the Title III definition of trafficking are any transactions and uses of confiscated property “incident to lawful travel to Cuba” as well as any property that is used for the delivery of international telecommunications to Cuba.

Those who lost their homes and smaller property owners also would be precluded from filing lawsuits if the value of their confiscated property didn’t exceed $50,000 at the time it was taken.

“It would not be easy to make a Title III claim. It requires time, money and emotional capital,” said Poblete. “This is complex litigation.”

Helms-Burton, which was signed into law in 1996 in the heat of Cuba’s shoot-down of two civilian planes piloted by Cuban Americans, notes that the Cuban government “is offering foreign investors the opportunity to purchase an equity interest in, manage or enter into joint ventures using property and assets, some of which were confiscated from United States nationals” in an effort to gain “badly needed financial benefit.”
Cuba, once wary of foreign investors, has said it needs to attract $2.5 billion annually in foreign investment to meet its development targets, but so far it has fallen short of that goal. From October 2017 to October 2018, for example, Cuba approved 40 new projects, representing a potential investment of $1.5 billion.

For 2018-2019, Cuba has announced it is opening up 525 projects, everything from opportunities in the tourism sector to building pharmaceutical, LED lighting and food processing plants, to potential foreign investors. This $11.6 billion portfolio of investment opportunities is the largest Cuba has ever released, beating the previous wish list for $10.7 billion worth of investment in 465 projects.

After the Cuban economy grew by just over 1 percent in 2018, Cuban leader Miguel Díaz-Canel said that “Cuba’s fundamental battle” is economic and that one of Cuba’s urgent needs is attracting more foreign direct investment.

But not everyone is convinced that Cuba is doing enough if it truly wants to attract foreign investors.

“The Cubans might say that foreign investment is a central part of their economic strategy but they haven’t created a climate that is attractive for foreign investment,” said Richard Feinberg, a professor at the University of California San Diego’s School of Global Policy and Strategy and a Brookings Institution fellow.

“The domestic market is stagnant if not shrinking. For companies interested in repatriating profits? There are already delays in Cuba repatriating profits,” he said.

Potential investors also have complained of a lengthy, cumbersome process for evaluating investment proposals, although Cuba said it is streamlining the approval process. It also has opened a Special Economic Development Zone in Mariel that offers special tax and customs breaks and allows up to 100 percent foreign ownership.

 

“The biggest disappointment with Díaz-Canel so far is that the economy is in serious straits. The Cuban people would like to see light at the end of the tunnel,” Feinberg said.

But in the event that Title III lawsuits are allowed to go forward, he said, “the business climate in Cuba would go from a temperature of 0 to minus 5 degrees. That may be a bit dramatic but already there’s just a trickle of foreign investment coming in.”

Cuban Foreign Minister Bruno Rodríguez said earlier this week that Cuba is ready if the United States applies Title III: “We have a program, with a predictable plan for the economy until 2030. The Cuban economy has a strong international anchor.”

Even if the U.S. government decides after its review to continue the suspension of Title III, “the threat itself has a chilling effect,” Feinberg said. “For companies contemplating a new investment in Cuba, they must do their due diligence and make sure there is not an underlying claim.”
“This isn’t really about property,” said Phil Peters, president of the Cuban Research Center. “It’s an attempt to squeeze the Cuban economy to hopefully push Cuba over the brink” and bring political change.

If Title III is activated, a person or entity trafficking in confiscated property would get a three-month warning and then would be liable for monetary damages up to three times the value of the property plus interest as well as court costs and reasonable attorneys’ fees.

European hoteliers and Canadian mining operations are expected to be among the biggest targets if Title III goes forward. Investors from as many as 20 countries could be the targets of Title III lawsuits, said John Kavulich, president of the U.S.-Cuba Trade and Economic Council.

But U.S. trading partners are expected to push back against the extraterritorial nature of Title III.  “The EU, Canada, the UK, and Mexico have what are called blocking regulations on their books to countermand an action under Title III,” said Pedro Freyre, a Miami lawyer who represents cruise lines and other U.S. companies doing business in Cuba.

Such blocking regulations, he said, wouldn’t allow defendants to participate in discovery, would block compliance with any U.S. court orders and wouldn’t allow for the enforcement of a judgment. “They generally allow for claw-back as well, which means the defendant would be allowed to sue the claimant for damages and attorney’s fees,” Freyre said.
The EU also could revive a World Trade Organization complaint it filed when Helms-Burton first became law but which it later withdrew.

“The foreign companies will argue that the United States doesn’t have jurisdiction,” said Robert Muse, a Washington attorney who specializes in U.S.-Cuba relations. “This would be a hard-fought issue.”

Sherritt International

 Nickel Mine and Concentrator, Moa, Cuba; Jointly Owned by Sherritt International and Cuba. A “Helm’s-Burton” Property

 

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CUBA MUST CONTEND WITH A NEW COLD WAR IN THE WESTERN HEMISPHERE

Posted on January 24, 2019 by Arch Ritter

WORLD POLITICS REVIEW, Thursday, Jan. 24, 2019

Cuba faces a much tougher international environment today than it did just a few years ago. Relations with Latin America have cooled as relations with Washington have regressed to a level of animosity reminiscent of the Cold War. In response, Havana is looking to old ideological comrades in Moscow and Beijing to compensate for the deterioration of ties in its own backyard.

These setbacks abroad come at a time when the Cuban economy is vulnerable. Export earnings have been falling, foreign reserves are low, and the debt service burden is heavy, as Cuba tries to retire old debts that it renegotiated. Despite the economic reforms begun in 2011, domestic productivity is still weak, making Cuba dependent on foreign investment for capital to fuel growth.

A decade ago, progressive governments dominated Latin America. Cuba had friendly presidents in every major Latin American country except Mexico and Colombia, and even those two were not actively hostile. In Venezuela, Hugo Chavez saw himself as a protégé of Fidel Castro, promoting “21st-century socialism” in the hemisphere financed by his country’s vast oil wealth. At its peak, Venezuela provided about two-thirds of Cuba’s oil consumption at highly subsidized prices, with the cost offset by some 40,000 Cuban doctors and teachers serving Venezuela’s poor.

Under Presidents Luiz Inacio Lula da Silva and Dilma Rousseff, Brazil’s state development bank provided $832 million in loans to modernize Cuba’s aging port at Mariel. Pressure from Latin American heads of state at the Sixth Summit of the Americas in Colombia in 2012 contributed to President Barack Obama’s landmark decision to normalize U.S.-Cuban relations.

But in recent years, the progressive “pink tide” of leftist governments has given way to a riptide of conservatism. Chavez is gone and his successor, Nicolas Maduro, presides over an ever-worsening political crisis and an economy in free fall, with 80,000 percent hyper-inflation last year. Venezuela’s oil production is down by two-thirds because of mismanagement and neglect. Oil shipments to Cuba have fallen by 50 percent, forcing the government to ration energy consumption by state entities, stunting economic growth.

In Brazil and Colombia, far-right governments have aligned themselves with Washington’s threatening stance toward Havana. New Brazilian President Jair Bolsonaro’s denunciations led Cuba to end its “More Doctors” program, under which some 8,000 Cuban physicians served Brazil’s poor, earning Havana $250 million annually. In Chile, Argentina, Ecuador, Guatemala, Paraguay and Peru, progressive presidents have been replaced by conservatives. In short, Latin America has become a much less hospitable diplomatic environment for Cuba. It is no coincidence that on his first major international tour, Cuban President Miguel Diaz-Canel’s destination was not Latin America, but Russia, followed by North Korea, China, Vietnam and Laos.

The reversal of Havana’s fortunes in Latin America has been serious, but the reversal of relations with Washington has been disastrous. In the two years after Obama and Castro announced their plans to normalize relations on Dec. 17, 2014, the two governments re-established diplomatic relations, expanded trade and travel, and signed 23 bilateral accords on issues of mutual interest. Some 60 U.S. companies signed commercial deals with Havana, and the number of U.S. visitors jumped 57 percent between 2014 and 2016. Castro’s strategy of opening Cuba to U.S. trade and investment as part of his plan to modernize the economy seemed to be paying off.

Donald Trump’s election changed all that. In June 2017, Trump declared he was “canceling” Obama’s policy of engagement and tightening the embargo. Then the mysterious medical problems that afflicted some two dozen U.S. diplomats in Havana became the excuse for downsizing the embassy, thereby crippling educational, cultural and commercial exchanges. Washington imposed a travel advisory warning Americans not to go to Cuba, and in the first half of 2018, the number of U.S. visitors plummeted nearly 24 percent. However, cruise ship arrivals increased over the next six months, so the total number of U.S. visitors ended the year flat.

Then John Bolton, who targeted Cuba during George W. Bush’s administration with false claims that Havana was developing biological weapons, became Trump’s national security adviser last April. Speaking in Miami on the eve of the U.S. midterm elections, he ratcheted up the threatening, insulting rhetoric, declaring Cuba a member of a “Troika of Tyranny”—along with Venezuela and Nicaragua—and promising more sanctions to come. The administration is reportedly weighing sanctions on individual Cuban officials, imposing more restrictions on travel to the island, and returning Cuba to the Department of State’s list of state sponsors of international terrorism.

But the most serious sanction under review is allowing Title III of the Cuban Liberty and Democratic Solidarity Act—known as the Helms-Burton Act, for its original sponsors—to go into effect. Suspended by every president since the law passed in 1996, Title III would allow U.S. nationals, including Cuban-Americans, who lost property after the 1959 revolution to sue both the U.S. and foreign companies in U.S. courts for “trafficking” in their property—that is, making a profit from it.

During its first two years, the Trump administration continued the suspension of Title III, which has to be renewed every six months. But with a new deadline looming this month, hard-liners in the National Security Council—led by Bolton and Mauricio Claver-Carone, a long-time lobbyist for regime change policies aimed at Cuba—argued against suspension. The result was a short 45-day suspension, giving the Trump administration more time to assess the consequences of letting Title III go into effect.

Activating Title III would open a floodgate of litigation and damage Cuba’s efforts to attract foreign investment since U.S. and foreign firms would be loath to risk getting caught up in costly court fights. It would also prompt counter-measures by European governments unwilling to countenance Washington’s assertion of extraterritorial jurisdiction over their firms.

Faced with this new standoff in the Caribbean, Cuba is rejuvenating relations with its old Cold War allies, Russia and China, both of which are expanding their presence in Latin America. Moscow was the first stop on Diaz-Canel’s first major foreign trip last November, and he came away with $260 million in new economic assistance and $50 million in military aid to refurbish Cuba’s aging Soviet-era arsenal. Diaz-Canel and Russian President Vladimir Putin reaffirmed that their “strategic partnership” extended beyond just economic cooperation. In Beijing, Diaz-Canel met with President Xi Jingping and signed several economic cooperation agreements. China pledged new investments in communications, energy and biotechnology—sectors where U.S. firms had hoped to gain a foothold before U.S.-Cuban relations soured.

A small island like Cuba has to be integrated into the global economy in order to prosper. Raul Castro clearly recognized that when he sought to repair diplomatic and commercial relations with Latin America and the United States. Historically, Cuba has suffered because of its economic dependence on a series of global patrons: Spain, the United States, the Soviet Union and Venezuela. Cuba’s leaders would prefer to diversify economic ties across a wide range of countries regardless of ideology. But the Trump administration’s renewed hostility, along with the collaboration of conservative Latin American governments, leaves Cuba no choice but to look for allies among Washington’s global rivals.

William M. LeoGrande is professor of government at American University in Washington, D.C., and co-author with Peter Kornbluh of “Back Channel to Cuba: The Hidden History of Negotiations between Washington and Havana.”

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WILL TRUMP OPEN A PANDORA’S BOX OF LITIGATION OVER CUBAN PROPERTY?

Posted on July 11, 2017 by Arch Ritter

If the president fails to continue the suspension of Title III, business relations will be disrupted far more severely and irreparably than they would be by any regulatory change.

William M. LeoGrande,  Professor of Government at American University

Huffington Post, 07/10/2017 02:34 pm ET |

Original Article: Pandora’s Box of Litigation?

Signing the “Helms-Burton Bill”

Long before the Departments of State, Treasury, and Commerce finish writing the new regulations that President Trump ordered to restrict trade and travel to Cuba, the president will face another decision on relations with Havana that could be far more consequential for U.S. businesses. By July 16, he will have to decide whether to continue suspending certain provisions of Title III of the Cuban Liberty and Democratic Solidarity Act of 1996 (also known as Helms-Burton, after its sponsors).

If he allows Title III to go fully into effect, he will open the door to as many as 200,0000 lawsuits by U.S. nationals whose property was taken by the Cuban government after 1959.

U.S. courts would be swamped, the ability of U.S. companies to do business on the island would be crippled, and allies abroad might retaliate for U.S. suits brought against their companies in Cuba. The tangle of resulting litigation would take years to unwind.

Title III allows U.S. nationals to file suit in U.S. courts against anyone “trafficking” in their confiscated property in Cuba—that is, anyone assuming an equity stake in it or profiting from it. The U.S. Foreign Claims Settlement Commission has certified 5,913 claims of U.S. nationals whose property was seized. These are the claims that Cuba and the United States had begun to discuss during the Obama administration.

But Title III takes the unusual position of allowing naturalized Cuban Americans who lost property to also file suit against alleged traffickers. Normally, international law recognizes the sovereign right of governments to dispose of the property of their own citizens. According to the Department of State, by including Cuban Americans who were not U.S. citizens when their property was taken, Title III creates the potential for an estimated 75,000-200,000 claims worth “tens of billions of dollars.”

Back in 1996, angry opposition from U.S. allies Canada, Mexico, and Western Europe, whose companies doing business in Cuba would be the targets of Title III law suits, led President Bill Clinton to insist on a presidential waiver provision in Title III when Congress was debating the law. As a result, the president has the authority to suspend for six months the right to file Title III law suits, and he can renew that suspension indefinitely. Every six months since the Cuban Liberty and Democratic Solidarity Act was passed, successive presidents, Democrat and Republican alike, have continued the suspension of Title III.

The Morning Email

Bottom of Form

If President Trump does not renew the suspension by July 16, however, claimants will be free to file Title III law suits by the tens of thousands. Once the suits have been filed, there will be no way to undo the resulting legal chaos.

When the Cuban Liberty and Democratic Solidarity Act was passed, U.S. allies in the Americas and Europe denounced its extraterritorial reach. Mexico, Canada, and the United Kingdom passed laws prohibiting compliance with it. The European Union filed a complaint with the World Trade Organization, which it dropped after President Clinton suspended Title III. In fact, the principal justification both President Clinton and President George W. Bush offered for continuing the suspension was the need to maintain cooperation with European allies.

If President Trump does not renew the suspension, all these old wounds with allies will be reopened as U.S. claimants try to haul foreign companies into U.S. courts for doing business in Cuba. We already have enough tough issues on our agenda with Mexico, Canada, and Europe without adding another one.

U.S. businesses would not be exempt from potential liability. A Cuban American family in Miami claims to have owned the land on which José Martí International Airport was built, so any U.S. carrier using the air field could be sued under Title III. Another family that owned the Port of Santiago could file suit against U.S. cruise ships docking there.

Moreover, it would be almost impossible for a U.S. company to know in advance whether a proposed business opportunity in Cuba might become the subject of Title III litigation. “This will effectively end for decades any attempt to restore trade between the U.S. and Cuba,” attorney Robert Muse told the Tampa Bay Times.

Explaining the new trade and travel regulations that President Trump announced on June 16, senior administration officials said they were designed “to not disrupt existing business” that U.S. companies were doing in Cuba. If the president fails to continue the suspension of Title III, business relations will be disrupted far more severely and irreparably than they would be by any regulatory change.

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