As has been widely reported in the world press, since May 2, 2019, Title III of the Helms-Burton Act, enacted in 1996, has been in effect. As more fully described below, this statute allows certain persons who have done business with Cuba to be sued in US courts by plaintiffs who had an interest in Cuban property which was confiscated by the Castro regime and from which the defendant later benefitted.
As of this writing, there are four cases known to have been filed under this statute, all of them before the federal District Court for the Southern District of Florida, which sits in Miami. The first such case, filed on May 2, the very first day of eligibility for the filing of such cases, was brought against Carnival Cruise Lines, which in its Cuban cruises had allegedly used a dock and port which had been privately-owned before the Castro regime confiscated them. The second case was filed not long after as an attempted class action against Cuban state-owned entities that allegedly operate a hotel in Cienfuegos, Cuba. Shortly after there followed another case against the Swiss company Trivago, based on its having allegedly benefitted from helping to lease residential properties in Cuba. The fourth and final case thus far – though there will certainly be others filed in time – involves Société Générale as defendant, alleging that it has benefitted from working with a bank in Cuba that used to be privately-owned.
These four cases illustrate the potential breadth and scope of cases that may be brought under Title III of Helms-Burton. For those of you who have done business with Cuba or who are thinking of doing so, or who advise others who do so, what follows is a brief description of that statute to allow you to assess the potential risks involved.
I – Background
Not long after Cuba shot down two unarmed small airplanes in 1996 over international waters, killing four Cuban-Americans in the process, the U.S. Congress reacted strongly by enacting the Cuban Liberty and Democratic Solidarity Act, also known as the “Helms-Burton Act,” 22 U.S.C. Sections 6021-6091.
As briefly summarized below, Title III of that statute (22 U.S.C. 6081 et seq.) permits “United States nationals” to bring claims in federal district court relating to properties confiscated from them by the Cuban government, against those persons who have “trafficked” in those properties after their confiscation. In addition, Title IV of the statute, which is briefly mentioned below, allows the Secretary of State to deny visas to, and to expel from the country, any person (other than a United States citizen) who the Secretary determines “traffics” in “confiscated property,” including any corporate officer, principal or controlling shareholder of an entity which has so “trafficked.”
It should be noted that the statute applies to any “trafficking” in “confiscated property” that not only may have occurred in the past or be occurring currently, but also to that which may occur in the future. Consequently, companies that do business in or with the United States and are planning to do Cuba-related business in the future should keep Title III in mind.
Title III of the statute had been in suspense since the Helms-Burton Act was enacted in 1996 because the statute allows Presidents to suspend it, six months at a time, and every President until recently had done so. However, earlier this year President Trump allowed Title III to go into effect, first against Cuban government-owned companies, and now against all persons who have “trafficked” in property confiscated by the Cuban government.
II – Scope of Title III
Of course, given the very early stage of the four cases referred to above, and since there has not previously been any relevant litigation, at this time we cannot know how the courts may interpret some of Title III’s less-clear provisions. Therefore, what follows is based on the statutory language alone.
While Title III applies to any natural or legal person, including agencies or instrumentalities of foreign governments, among the most often-rumored targets for these claims are cruise lines, banks, shipping firms, liquor companies, hotel companies, automotive companies, tire companies, travel agencies/tourism companies, international commodities traders, and mining companies.
When the Helms-Burton law was passed, because of the comprehensive US trade embargo virtually no US company was doing business in Cuba. Consequently, it was generally assumed that the targets of Title III lawsuits would be non-US companies that were not similarly restricted from doing business in Cuba. However, over the years, some of the US sanctions against Cuba were loosened, and a significant number of US companies were permitted to engage in certain types of business in or with Cuba (for example, transportation, tourism, hospitality, agriculture and health care). Title III on its face allows claimants to bring actions against anyone who traffics in confiscated property. While it may seem inappropriate to allow such lawsuits against US companies for activities that were authorized by the US Government, limiting lawsuits only against non-US companies could also contravene US commitments under some bilateral and multilateral trade treaties.
For now, there is no indication that the Trump Administration intends to address this issue, so one is left only with the language of the statute. Nothing in that statute expressly excludes persons in the United States doing business in Cuba from being sued, and as already noted, the second Helms-Burton action brought was, in fact, brought against a US corporation, Carnival Cruise Lines. Nevertheless, given restrictions that have existed under US law on business with Cuba since 1996, some US persons who have done business with Cuba may be protected under one of two exemptions included in Helms-Burton: one for delivery of international telecommunications signals to Cuba, and another for transactions and uses of property incident to lawful travel to Cuba, to the extent necessary to the conduct of such travel. However, the terms used in those exemptions are somewhat vague and antiquated, so their scope remains to be decided by the courts.
Helms-Burton suits will most likely be brought by one of two different categories of “United States nationals.” The first category are persons (including entities organized under the laws of and with their principal place of business in the United States) who were US citizens when the confiscation occurred, and whose claims have been certified by the United States Foreign Claims Settlement Commission (FCSC). The second comprises persons who became US citizens after their properties were confiscated in Cuba – most likely, Cuban-American claimants – and whose claims have not been certified by the FCSC. However, to prevent the shopping of claims, the statute does contain limitations on actions where the attempted claimants are assignees who have acquired the claims involved after March 12, 1996.
“Property” means any type of personal or real property, including intellectual property such as trademarks, patents or copyrights. To be sued, a company must have “trafficked” in the “confiscated property.” “Trafficking” is described extremely broadly to include among other things selling, purchasing, leasing, managing, using, improving, investing in or otherwise acquiring an interest in “confiscated property,” engaging in a commercial activity using or otherwise benefitting from such property, or causing, participating in or profiting from “trafficking” by or through another person, without the authorization of any “United States national” who holds a claim to the property. As can be seen, the definition of “trafficking” allows claims against those who indirectly benefit from “confiscated property” through their commercial activities, and not just those who have a direct connection to the property. However, for "trafficking” to exist a person must have acted “knowingly and intentionally.” It is important to note that “knowingly” is defined to include not just actual knowledge, but also constructive knowledge – i.e., “having reason to know.”
No claim may be brought for less than U.S. $50,000, exclusive of interest, legal fees and costs. Residential property is also excluded from Title III, unless the claim was certified by the FCSC or is occupied by an official of the Cuban government or the Communist party.
For claims which have not been certified by the FCSC, before a “trafficker” can be sued the “United States national” intending to bring the action must provide at least 30 days’ prior written notice to the “trafficker” that it will be held liable for damages. If the “trafficking” is then discontinued before the expiration of the 30-day period, no claim may be brought. This 30-day grace period does not apply to suits brought on claims which have been certified by the FCSC. Nevertheless, since the "knowing" and "intentional" components of "trafficking" apply to all claims under Title III, even those certified by the FCSC, it may be advisable, even in the case of some certified claims, to provide some form of reasonable advance written notice to a defendant before filing suit.
There is also a unique and important statute of limitations for Title III claims: these claims may only be brought against persons who “trafficked” in the “confiscated property” within two years of the filing of the claim. Consequently, persons who “traffic” in "confiscated property" cannot be sued successfully more than two years after the time their “trafficking” ceases. Of course, any subsequent “trafficking” with the property would start the clock running again.
For many years, United States courts have sought to avoid becoming embroiled in disputes relating to foreign expropriations by employing the “act-of-state” doctrine. This doctrine in essence states that courts will not interfere in foreign policy matters by hearing claims (even if brought against non-sovereign defendants) which require judging actions taken by foreign governments within their own territory. This doctrine, which is judicially created common law, purports to be grounded on deference by the Judiciary to Congress and the President in international matters. However, Title III expressly eliminates the doctrine as an obstacle to rulings on the merits in actions brought under this statute.
Some of the defendants against whom claims could be brought will be foreign governments or their agencies and instrumentalities. In US courts, those defendants enjoy important “sovereign immunity” procedural rights and defenses under the federal Foreign Sovereign Immunities Act of 1978. Nothing in Title III addresses whether those rights and defenses will also apply to claims against these types of defendants brought under Title III.
Lastly under Title III, there is the very critical issue of damages. To summarize, damages awarded can be as high as three times the higher of (1) the value of the property when confiscated, plus interest from the date the property was confiscated (and not from when the claimed “trafficking” began) and until the claim is brought, compounded annually, based on the weekly average 1-year Treasury bill over the entire timeframe; or (2) the current value of the property; plus in either case (1) or (2), legal fees and costs. In cases involving certified claims, the value set by the FCSC will be presumed to be the value of the property to measure damages, unless there is clear and convincing evidence to the contrary as determined by the court.
It should be noted that since most of the property at issue was confiscated in the 1960s, cumulative interest could represent a very significant amount. Similarly, that the amount of any benefit that the defendant “trafficker” may have derived from the “confiscated property” is irrelevant to the damages calculation, so that even a small and financially unproductive amount of “trafficking” in such property could lead to very significant exposure.
III – Visa Denials under Title IV?
As noted earlier, Title IV of Helms-Burton mandates the denial of visas and the exclusion from the United States of foreign persons who, as determined by the State Department, traffic in confiscated property, including officers and controlling shareholders (and their families) of entities that traffic in confiscated property. Over the years this statute has rarely been applied by the US Government, and then only to a few companies that have been particularly active and visible developing or exploiting properties in Cuba that were known to have once been privately-owned. While claims under Title III may be a major headache, and will draw the bulk of the public attention at the outset, potentially equally important for many foreign companies is the possible denial of visas under Title IV for their corporate officers to reside in or visit the United States.
The application of Title IV is entirely discretionary with the State Department, so it does not necessarily follow that being the object of a Title III law suit will also lead to visa problems under Title IV. However, given the Trump Administration’s embrace of Title III after three prior Presidents had declined to let it enter into effect, the Cuban Government’s continued strong support for the Maduro regime in Venezuela, the recent repeated public references by the Trump Administration to a “troika of evil” consisting of Cuba, Venezuela and Nicaragua, and the importance of Florida with its large Cuban-American voting population in the upcoming 2020 Presidential election, the possibility cannot be discarded that claims brought under Title III could also lead to difficulties under Title IV.
IV – Reaction Overseas
Title III was suspended by successive US Presidents, both Democrat and Republican, for 23 years in large part because the European Union, Canada and other major US allies threatened retaliatory actions, including bringing an action before the World Trade Organization (WTO) to declare Title III invalid under the WTO Agreement.
Not surprisingly, overseas reaction to the recent activation of Title II has been virtually uniformly negative. Among other things, both the European Union and Canada have signaled their intention to initiate a WTO action to defend their nations’ companies against Title III lawsuits. Moreover, a number of countries have “blocking” statutes which, in addition to prohibiting their companies from complying with US sanctions, also ban the enforcement of US judgments against their nationals, and in some cases allow counterclaims for damages to be filed in their courts against US Title III claimants.
Cuba itself has publicly promised to indemnify persons who are found liable in Helms-Burton Title III actions, though thus far there have been few details made known on how this indemnity would work.
For now, we would simply note that under US law, none of the foregoing will be a defense to, or suspend or subsequently invalidate, any claims that may have been brought in United States courts. Further, Title III specifically provides that any future suspension of the statute itself will not affect any pending actions. As a result, it is not clear how Title III defendants with assets (including accounts receivable) in the United States will be able to use any of the foregoing legal measures to avoid execution of a Title III judgement against those assets.
V – Conclusion
In conclusion, it is time for persons who have done business with Cuba in the recent past, or who plan to do so in the future, to assess the risks and opportunities posed by Title III of the Helms-Burton Act. For those who are potential defendants, this includes reviewing recent Cuba-related transactions, as well as those planned for the future, to determine the level of exposure involved; revisiting applicable contractual documentation to assure maximum protection; and considering what securities law disclosures may be in order.
