Trump allows lawsuits over Cuba confiscated property: What you need to know

April 18, 2019 - 9:31 AM
A man cuts grass with a machete outside the Habana Libre hotel, formerly the Habana Hilton, in Havana, Cuba April 17, 2019. (Reuters/Fernando Medina)

HAVANA — The Trump administration announced on Wednesday it was allowing U.S. citizens to file lawsuits against both Cuban entities and foreign companies over property seized and used following Fidel Castro’s 1959 revolution.

The provision that allowed these lawsuits, Title III of the Helms-Burton Act, had been fully waived by every president since the law was passed 23 years ago due to opposition from the international community and fears it could create chaos in U.S. courts.

Here’s what the implementation of this legislation means, according to lawyers and experts familiar with the issue:

How many lawsuits could arise from this move? 

The U.S. State Department has said Title III could produce up to 200,000 claims reaching a value in the tens of billions of dollars given the scale of expropriation after the Cuban revolution and of exile to the United States.

“The people who left in the ’60s virtually owned the island,” said Washington-based attorney Robert Muse, who specializes in Cuba issues.

“There was some U.S. investment but it was principally Cubans that owned most of the factories, retail premises and farmland,” he added.

Still, some experts say the U.S. government figures could be inflated given the cost of and obstacles to filing suits, as well as doubts over whether claimants could ever get their hands on reparations if they won a judgment.

The legislation does not allow claims for residential property still used for residential purposes, for example. Claimants must be able to prove their ownership of property six decades ago in another country as well as its confiscation.

“The real impact of this is going to be more limited than what is being bandied about publicly,” said Pedro Freyre, a Cuban-born attorney who heads the international practice at law firm Akerman.

“It is a very technical law and other countries have already enacted legislation to protect themselves,” he continued.

Who are the big investors in Cuba this could affect? 

Any plaintiffs are more likely to sue foreign companies than Cuban entities given a greater likelihood of getting any money back, experts say.

Yet, given that Cuba’s economy remains heavily dominated by the state, there is only limited foreign investment, restricting the number of companies that could be affected.

European and Canadian companies are the top foreign investors in Cuba, with investments focused on tourism, mining, real estate, rum and cigars. Chinese firms have also made some investments.

U.S. companies have increased business on the island since former President Barack Obama eased slightly the decades-old travel embargo on Cuba, although they do not have any major investments there.

How likely is it claimants will get any money back? 

U.S. citizens suing Cuban state entities are unlikely to get any money back in the near-to-medium term even if they win their case as Cuba’s current government does not recognize U.S. courts.

Cubans wait to talk to officials of the National Immigration Institute (INM) to register and get a turn to apply for U.S. asylum, at the premises of the state migrant assistance office in Ciudad Juarez, Mexico April 17, 2019. (Reuters/Jose Luis Gonzalez)

Moreover, Cuba no longer has any assets in the United States that could be seized for compensation, experts say.

People suing foreign companies for using confiscated property could force them to pay by threatening to attach any assets they may have in the United States. It would be harder for them to convince a foreign court to allow them to attach an asset abroad.

Meanwhile, several countries including Canada and the members of the European Union passed so-called blocking legislation in the 1990s requiring their companies not to comply with Title III claims and allowing them to make counterclaims if they are affected.

Whether or not this will prove an effective deterrent to claims remains to be seen.

Will Title III impact US companies doing business in Cuba? 

The U.S. companies doing business with Cuba could emerge unscathed as most are in the travel or telecommunications industries and Title III includes exemptions for both sectors, lawyers say.

The extent of those exemptions – and whether they also apply to foreign companies – will likely be determined in U.S. courts, experts say.

U.S. companies that have entered the Cuban market in recent years are airlines like Jetblue and American as well as cruise companies like Carnival and Norwegian.

Alphabet Inc’s Google signed a deal with Cuba’s telecoms monopoly last month to work toward improving connectivity on the island.

Will this help US companies with certified claims to confiscated property? 

The 1959 revolution resulted in the largest expropriation of U.S. assets ever, according to Muse.

However, this legislation is unlikely to help reach a settlement for the 5,913 claims held by U.S. companies and individuals that have been certified by the U.S. Justice Department and are estimated to be worth roughly $8 billion, according to experts familiar with the matter.

On the contrary, it could make the path toward a resolution more arduous by putting off any normalization of relations that could lead to a settlement, they say.

It will also muddy the focus by potentially throwing up thousands of more claims by Cuban Americans, which the Cuban government deems violate international law.

So what’s certain? 

The only certainties appear to be that the measure will create more tension with the United States’ top allies, further hurt the Cuban economy and play well with the anti-Castro Cuban American electorate in the swing state of Florida ahead of the 2020 presidential elections.

Cuba has been banking on foreign investment — alongside an update of its state-run companies and an expansion of the private sector — to boost its stagnant economy.

However, this move will likely dampen investment in the island. The Trump administration’s harsher rhetoric toward Cuba has already translated into financial institutions being warier of any transactions related to the country, according to business and diplomatic sources.

Companies with existing investments will have to carefully analyze their legal exposure.

That said, they are long used to dealing with the tricky U.S. trade embargo and have weathered many crises in U.S.-Cuban relations, analysts say, betting the eventual reward of the forbidden fruit is worth the risk.

Reporting by Sarah Marsh; Editing by Daniel Flynn and Leslie Adler