Alicia Nicholls
Last week (April 17, 2019), United States (US) Secretary of State, Mike Pompeo, announced that the US will for the first time enforce the provisions of Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996. Title III gives US citizens, who were owners of private properties in Cuba confiscated by the Cuba Government following the 1959 revolution, the right to bring claims against foreign individuals and entities utilizing or deriving economic benefits from those confiscated properties.
Because of the threat of legal challenges being brought by third States before the World Trade Organisation (WTO), President Bill Clinton, as well as his successors President George W. Bush and President Barack Obama never enforced Title III. However, the Trump Administration has indicated that it will start enforcing these provisions with effect from May 2, 2019.
Given the extraterritorial nature of this development, this article briefly explores what possible implications this development may have for CARICOM firms which currently trade or invest in Cuba or are seeking to do so.
Background
The LIBERTAD Act, more commonly known as the Helms-Burton Act, gives legislative force to the commercial, financial and economic embargo which the US has imposed on Cuba since the 1960s to force regime change in that Caribbean country. It is an embargo which the international community has condemned as illegal, immoral and ineffective.
Title III (Protection of Property Rights of United States Nationals) of the Helms Burton Act gives US nationals, whose property was confiscated (that is, nationalised or expropriated) by the Government of then Cuban leader Fidel Castro following the Cuban Revolution of 1959, the right to bring an action in US federal courts against any person who “traffics” in confiscated property.
Three main things should be noted here. Firstly, the definition of “traffics”, as used in Title III, is broad. It includes for example not just selling, transferring, etc confiscated property, but engaging in a commercial activity using or otherwise benefiting from confiscated property, inter alia. This means, for example, that the US owner of a piece of property, such as a hotel plant, confiscated by the Castro Regime, can bring an action in the US courts against any foreign firm which uses that hotel plant or even more nebulously, “engages in a commercial activity using or otherwise benefiting from” that hotel plant.
Secondly, claims can also be brought by persons who were not US nationals at the time their property was confiscated, which would include Cuban-Americans who are now naturalized US citizens. This, therefore, potentially increases the number of claims that could be brought. According to the US Department of Justice’s data, the US Foreign Claims Settlement Commission adjudicated a total of 8,821 claims in the Cuba program, of which it found 5,913 to be compensable.
Thirdly, the Act is extraterritorial in reach. It empowers US citizens who are owners of confiscated property to bring claims in US courts against any “person” who traffics in said confiscated property. The term “person” is defined in the Act as “any person or entity, including any agency or instrumentality of a foreign state.” Moreover, under Part IV (Exclusion of Certain Aliens) foreign nationals and their spouses and minor children may be barred from entry into the US if found to have converted confiscated property for personal gain or traffic in confiscated property.
These draconian provisions are meant to act as a deterrent to businesses from third States seeking to invest or do business in Cuba, in an effort to undermine the Cuban economy. They are also a fetter on the sovereignty of third States wishing to trade with Cuba, which raises questions about their compatibility with international law, and more specifically, international trade law.
Indeed, back in the mid-1990s, the EU had sought to challenge the compatibility of the Helms-Burton with WTO rules. This challenge was withdrawn after President Clinton agreed to suspend the right to private action under Title III. The Act allows the President to suspend Title III for up to six months at a time if deemed to be in US national security interests. Presidents Bush II and Obama also suspended this right of private action. In fact, the Obama administration saw an attempt at the normalization of US-Cuba relations, including the resumption of diplomatic ties. The Trump Administration, however, has taken a hard lined stance on Cuba. In January 2019, the US Department of State released a statement indicating they would only give a 45 day extension of the Title III suspension while undertaking a “careful review”. This ultimately led to the decision of April 17, 2019 to no longer suspend Title III.
Possible Implications of Helms-Burton Right of Action on CARICOM-Cuba Trade
What does this development mean for CARICOM-Cuba trade potentially? CARICOM countries and Cuba have a long history of cooperation and friendship, most notably in the areas of education, health and culture. Turning to trade, CARICOM has a bilateral partial scope trade agreement with Cuba known as the Trade and Economic Cooperation Agreement (TECA) which was signed in 2000. It is a partial scope agreement in that it liberalizes trade between a limited number of goods between the parties, with the contemplation that a free trade agreement would eventually be negotiated. It also includes limited provisions on cooperation in other trade-related areas. Although a second protocol to the Agreement was signed in 2017, including an expansion of the list of goods, no free trade agreement exists as yet.
Regrettably, detailed statistics on the level of CARICOM-Cuba trade or CARICOM firms’ level of foreign direct investment (FDI) into Cuba have been difficult to obtain. According to an ECLAC study entitled “An Assessment of the Performance of CARICOM Extraregional Trade Agreements” published in 2015, Cuba was the destination for 0.11% of CARICOM exports in 2013. According to a June 2018 press release from the Trinidad & Tobago Ministry of Trade and Industry, “Trinidad and Tobago is currently Cuba’s largest CARICOM trading partner, recording 80% of trade in the region”. Reporting from the Guardian Newspaper of Trinidad reveals that Trinidad & Tobago “exported an estimated $456 million in goods to Cuba in 2016 and imported $37 million worth of products” and Trinidad is one of Cuba’s biggest trading partner in the LAC region.
Although CARICOM-Cuba merchandise trade remains small, the Obama-era roll-backs saw increased interest on the part of CARICOM firms in exploring Cuba as a potential market. Caribbean countries have established or sought to establish trade liaisons in their Cuba-based diplomatic missions. The establishment of a direct air link via the Trinidad & Tobago-based Caribbean Airlines also made it easier for tourism and scoping out business opportunities.
Regrettably, the current US administration’s hardened stance potentially creates a cloud of uncertainty for CARICOM firms currently doing business or seeking to do business in Cuba. Once Title III goes into effect, Caribbean firms found to be dealing in confiscated property could be exposed to costly litigation before US courts and persons found liable face possible barred entry of themselves and their immediate families to the US. Extra-regionally, some countries, such as Canada’s Foreign Extraterritorial Measures Act (FEMA) and the EU’s Blocking Statute, bar the enforcement and recognition of US judgments under Title III of the Helms-Burton Act. I am uncertain whether any Caribbean country has a similar Act, and this is something on which CARICOM firms should seek counsel from their attorneys-at-law.
It should be noted that those firms which would be most likely impacted would be US firms which invested in Cuba during the Obama-era détente, as well as European firms which have substantial business interests in Cuba, notably in the tourism sector. For this reason, it is no surprise that the EU, Canada, UK and Mexico have strongly condemned this latest action by the Trump Administration. The EU has stated that it would “consider all options at its disposal to protect its legitimate interests, including in relation to its WTO rights”.
As I noted earlier, the extraterritorial application of the US Helms-Burton Act is of questionable legality under international law and meant to scare businesses from investing in Cuba in an effort to cripple the Cuban economy. Therefore, I am by no means advocating that CARICOM firms should stop investing in Cuba. What they should do, however, is to pay careful attention to this development and seek legal advice from their attorneys to ascertain and mitigate any current or potential areas of legal exposure. For example, they should ascertain whether any property from which they are seeking to benefit commercially, is currently subject to a US claim. That said, however, the prospects of legal challenges before the WTO, as well as the upcoming US presidential election due in 2020, means that the durability of this policy reversal is not guaranteed.
Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.
Caribbean Trade Law and Development 