The Trump Administration Considers Allowing American Citizens to Sue Companies Trafficking in Confiscated Properties in Cuba
By Arthur M. Freyre*
Secretary of State Mike Pompeo announced on January 16, 2019, that he is evaluating if Title III of the Helms-Burton Cuba sanctions law would be waived in 45 days or whether he would recommend to President Trump that Americans be allowed to defend property rights in U.S. federal court. Secretary Pompeo’s decision is expected to come by March 2nd. If Title III is not waived, American citizens and others may sue in U.S. federal court for trafficking in confiscated properties in Cuba. Foreign companies doing business in Cuba, or any person subject to U.S. law who may be considering Cuba-related transactions, should familiarize themselves with this matter.
American taxpayers have been barred from bringing forth anti-trafficking property lawsuits because every president has waived Title III since the law was enacted in 1996. One of the main reasons Title III has been waived until now is the concern that a foreign company or country would prevail against the U.S. in the court of the World Trade Organization.
To understand the impact of Title III, some historical perspective will help highlight why it is such an important tool in defending American property rights. After the 1959 communist takeover of Cuba, the Cuban government targeted American citizens and others opposed to the socialist revolution. The Cuban government’s confiscation of property resulted in thousands of American citizens and countless Cuban nationals losing their residences, businesses, and other forms of personal and real property.
Internationally it is well recognized that all nations, including Cuba, may confiscate property for different reasons, but under international law, nations have an obligation to compensate foreign nationals for property confiscations or expropriations. Cuba’s confiscations were driven by both economic and ideological reasons in a process that violated both international property law and international human rights law.
The only remedy that an American citizen had at the time was to file their claims for certification by the Foreign Claims Settlement Commission. The International Claims Settlement Act of 1949 (22 U.S.C. 1643, et. seq.) governs the certified claims process. The Cuba Claims Program was completed and closed in 1972, when the Commission certified 5,911 claims. The program was briefly reopened in 2005, during which two additional claims were certified.
Updating U.S./Cuba Policy & Laws in Response to New Circumstances
In the early 1990s, for the first time since the Cold War, the U.S. Congress looked closely at how best to protect U.S. national interests, including property rights of American nationals. In 1996, the Congress passed the Cuban Liberty and Democratic Solidarity Act or “Helms-Burton”. This law was also enacted, in part, as a response to the murder of three citizens and one U.S. national whose civilian airplanes were shot down by the Cuban Air Force over international waters.
The new law created an updated legal and policy framework for U.S.-Cuba relations that included tougher sanctions, but also a mechanism to defend U.S. property rights such as Title III that would authorize lawsuits against foreign companies and others doing business in Cuba on property that is the subject of a certified claim or otherwise confiscated property. Every president since Clinton has waived this section for national security reasons, barring all lawsuits. However, the Trump Administration is taking a second look at this option to help claim holders defend their property rights.
While the ultimate goal of Title III is settling the claims, not litigation, such lawsuits may afford claimants the right to sue for trafficking in properties that are the subject of a certified claim or otherwise confiscated. According to the law, certain lawsuits may not be allowed such as those pertaining to transactions on confiscated properties used today for lawful travel and telecommunications as defined in the statute and the Cuban Assets Control Regulations. This restriction on Title III, and other legal questions, will undoubtedly receive a great deal of scrutiny by administration officials and those considering filing a lawsuit.
Take Steps to Ensure Lawful Transactions in Cuba Do Not Include Confiscated Properties
U.S. and foreign companies doing business in Cuba may need to reassess their risk exposure if the Trump Administration implements Title III. Companies doing business in Cuba should always screen potential transactions for confiscated property scenarios. Foreign companies with an office in the United States should have an additional layer of vigilance for two reasons. First, foreign companies with U.S. offices are subject to embargo regulations, even if the U.S. subsidiary has no contact with Cuba. There are also extra-territorial legal considerations.
The second reason is that executives of foreign companies that do business in Cuba could lose their U.S. visa for engaging in trafficking in property subject to a certified claim or other claims. There are other potential penalties including the loss of U.S. visas for company officials whose businesses engage in unlawful trafficking under U.S. law, reputational risk, among others. Several Members of Congress are also considering anti-trafficking legislation to bolster and update existing laws and regulations.
In closing, companies doing business in Cuba should reassess their risk exposure, regardless of whether Title III will be implemented or waived.
*Arthur M. Freyre of Poblete Tamargo LLP advises clients on public policy and legal matters having many years of experience as both a consultant and expert in public policy matters . Mr. Freyre is a regular contributor to online publications focused on foreign policy and technology, including DC Dispatches and the International Law Quarterly.