CUBA STANDARD — In a major policy shift after 23 years, the Trump administration announced it will activate a clause of the Helms-Burton law of 1996 that allows claims holders to sue foreign companies that do business in the island using properties confiscated more than five decades ago.,
Highlighting Cuba’s support for what he described as “the former Maduro regime” and arguing that Cuba’s “main export is oppression”, which “directly threatens U.S. national security”, Secretary of State Mike Pompeo announced in a five-minute press briefing in Washington Wednesday morning that the Trump administration will implement Title III “in full”, effective May 2.
Pompeo did not take any questions.
Later that day, during a speech to Bay of Pigs veterans at the Biltmore Hotel in Miami, National Security Advisor John Bolton announced that Treasury Department measures are pending to further restrict non-family travel to Cuba he described as “veiled tourism”. He did not elaborate. He also said that remittances to Cuba will be capped at $1,000 per person every quarter. Bolton did not mention any plans to return Cuba to the State Department’s list of “state sponsors of terrorism”, as some observers fear.
Quoting an official who spoke on condition of anonymity, the Miami Herald reported that U.S. travel to Cuba will be limited to family visits. At closing of the New York Stock Exchange the same day, shares of cruise giants Royal Caribbean Cruises Ltd., Carnival Corp. and Norwegian Cruise Line Holdings Ltd. were all down.
Referring to a U.S. policy dating back to 1832 that is commonly rejected in Latin America, Bolton ended his speech declaring that “the Monroe Doctrine is alive and well”, suggesting that the United States will take measures against any outside power trying to influence nations in this hemisphere.
“He totally confesses the intent of complete domination, recolonization and hegemony over Latin America”, said Foreign Minister Bruno Rodríguez in Havana, referring to Bolton. “They are announcing measures — of course we have to study the regulations — that for sure will damage the Cuban economy. But more than anything they will damage people.”
Rodríguez highlighted Cuban families, private businesses in Cuba, and U.S. citizens whose freedom to travel is further restricted.
In a tweet, the foreign minister called the measure “an attack on international law, and on the sovereignty of Cuba and other states”.
The Trump administration will also begin enforcement of Title IV of the 1996 law, a senior official who spoke on condition of anonymity said on Tuesday. That provision blocks U.S. travel by executives of companies accused of “trafficking” in Cuban properties.
Activating Title III is part of President Trump’s rollback of Obama-era detente with Cuba, that official said.
Concerned about backlash from close allies, as well as from certified claimants worried about messing up the legal process, all presidents since Bill Clinton have routinely suspended Title III of the Helms-Burton law. But the Trump administration is forging ahead even though European Union leaders and the foreign ministers of Canada and Spain have made clear their opposition in the run-up of the announcement.
In a letter to Mike Pompeo April 10, EU foreign policy chief Federica Mogherini and EU Trade Commissioner Cecilia Malmström said the bloc might file a complaint with the World Trade Organization (WTO) and predicts counterclaims against U.S. companies in European courts.
The two EU officials called on Washington to honor a 1998 agreement to grant a consistent waiver for EU companies and citizens while the bloc suspends a WTO challenge over the issue.
“Failing this, the EU will be obliged to use all means at its disposal, including in cooperation with other international partners, to protect its interests,” the letter said. “The EU is considering a possible launch of the WTO case.”
The letter also said that EU courts were empowered to allow EU companies to recover any losses caused by claims over Cuba, adding that an overwhelming majority of the 50 largest U.S. claimants, making up more than 70% of the value of claims, had assets in the European Union.
“This could trigger a self-defeating cycle of claims that will impair the business climate, without bringing justice to holders of claims, or impacting the situation in Cuba in any positive way,” the two EU officials wrote.
In a joint European Union-Canada statement on Wednesday, Mogherini and Foreign Minister Chrystia Freeland call the U.S. measure “regrettable” and that they are “determined to work together to protect the interests” of their companies, warning that EU and Canadian laws allow counter-claims against any U.S. lawsuits.
A day later, the Mexican government condemned the step and said it will protect Mexican companies in Cuba. The same day, the United Kingdom joined the chorus, saying it “will work alongside the EU to protect the interests of our companies.”
Property confiscations are generally considered part of the national legal realm of each country.
“We cannot accept that a country tries to impose its laws outside its own borders,” said Alberto Navarro, EU ambassador in Havana, in March, according to AFP. “That would be a return to the jungle.”
The Trump administration is aware of European opposition, the anonymous U.S. official said during the Tuesday briefing. The Europeans are entitled to sue or file a WTO complaint, but they “will fail”, he added.
The measure will only cause a “bump” in the business community, but have an economic impact on Cuba and show U.S. resolve, the official said.
The U.S. Chamber of Commerce disagrees.
“Six decades of trying to isolate Cuba has failed to bring change to the island,” the powerful business lobbying organization said in a statement about the Title III activation. “Today’s measure doubles down on this strategy.”
“We strongly support U.S. government efforts to protect the property rights of U.S. citizens abroad, but full implementation of Title III is unlikely to achieve those aims and is instead more likely to result in a protracted legal and diplomatic morass that ensnares U.S. courts, companies and partners,” the Chamber statement says. “The U.S. government established a legal mechanism for certifying and processing U.S. citizens’ claims to property in Cuba, and elsewhere, specifically to prevent such a scenario from unfolding. Furthermore, it is difficult to see how this action squares with the administration’s earlier commitment to hold harmless U.S. companies legally authorized and previously encouraged to do business in Cuba.”
“Many American companies will now be subjected to countersuits in Europe, Canada, Latin America, and elsewhere. Today’s announcement threatens to disrupt our trade ties to these countries, which are among our closest allies and best customers. Instead, we should be working with them to make the case for democratic change in Cuba.”
“Allowing these lawsuits marks another own goal in President Trump’s Cuba policy,” said James Williams, president of Engage Cuba, a Washington-based pro-normalization advocacy group. “This doesn’t punish the Cuban government; it lets them off the hook. Instead of negotiating direct compensation from the Cuban government for property confiscation, American and European companies will now be the ones paying. This decision punishes the Cuban people and American companies — companies who were given permission by the U.S. government to do business and are now having the rug pulled from underneath them.”
“It is ironic that President Trump would make this fringe decision after the Trump Organization worked for years to open a Trump Hotel and golf course in Cuba,” Williams added.
The Russian government reacted by declaring the sanctions “illegal” and by stepping up help. Deputy Foreign Minister Serguei Riabkov assured Cuba that his government will “do everything possible to help Cuba and Venezuela,” Cuban Foreign Ministry General Director of Bilateral Affairs Emilio Lozada García said in a tweet.
To be sure, the actual impact is hard to predict. While it has added general uncertainty, a partial lifting of Title III in March that allows U.S. lawsuits against some 200 Cuban entities affiliated with the armed forces has not produced a single lawsuit in the four weeks since, says Robert Muse, a Washington-based lawyer.
John Bolton added to fears among investors.
“I can’t wait for those lawsuits,” he said in a PBS NewsHour interview. “For major American companies, for major European companies, there may well lawsuits be filed, and settled out of court. That’s often the nature of complex corporate litigation.”
No matter whether they are filed at all, or whether they produce billions of dollars in judgments against foreign companies, the mere threat of lawsuits is expected to slow down Cuba’s efforts to attract foreign investment. Even though Title III shields companies that use confiscated assets in connection with legal travel, it could also affect U.S. airlines, cruise companies and one hotel operator that flocked to Cuba during the Obama administration.
It is hard to predict how Title III will play out in U.S. courts. There are close to 6,000 registered claims in the U.S. register, for an estimated total of $8 billion; however, Title III would also allow non-certified claims holders, who were Cuban nationals at the time of confiscation, to sue. In a Q&A after Pompeo’s remarks, Assistant Secretary of State Kimberly Breier said that holders of up to 200,000 uncertified claims, “valued easily in the tens of billions of dollars”, could file suit. She also said these claims could eventually be certified.
Also, the administration has yet to reveal what kind of entities could be sued.
Adding uncertainty to the impact, in the 1990s, Canada and the European Union introduced measures in response to Helms-Burton that block enforcement of U.S. judgments in Europe and Canada.
Finally, Cuba — which has settled claims with all nations except the United States — has a law on its books dating back to 1996 that eliminates from future compensation any claims holders who sue in U.S. courts.
“Anyone who uses the processes and mechanisms of the Helms-Burton Law damaging others will be excluded from possible future negotiations,” the foreign ministry said in a statement in March.
“Cuba’s nationalizations were made in accordance with the law, with strict adherence to the constitution and in conformity with international law,” the foreign ministry statement added. “All nationalizations included just and adequate compensation processes, which the U.S. government rejected to consider. Cuba reached and honored global compensation agreements with other nations that today invest in Cuba, such as Spain, Switzerland, Canada, UK, Germany and France.”
Toronto-based Sherritt International, probably the foreign company most heavily invested in Cuba, said its business will “not be materially impacted”, Reuters reported. The company will “continue to operate as usual” and “focus on meeting its nickel/cobalt production targets”.
Spain’s Meliá Hotels International — the biggest hotel management company in Cuba — said that the Title III activation will not change anything in how it does business in the island. “Cuba is an exceptional destination and must remain open for international tourism,” the company added.
U.S. cruise companies and airlines will likely be affected by Bolton’s planned measures against “veiled tourism”, but most companies said they were still waiting for specific regulations before commenting.
“We are closely monitoring recent developments with respect to U.S.-Cuba travel,” a spokesperson for Miami-based Norwegian Cruise Line Holdings said. “At this time no new regulations have been issued and accordingly, the company’s itineraries which include Cuba as a destination will continue as scheduled.”
Meanwhile, a European businessman in Cuba suggested, on condition of anonymity, that foreign companies already established in Cuba are prepared.
“For a long time, investors have taken great care to avoid risks related to investing in a property that might have been seized. Investing in Cuba has been so controlled anyway; the risk is always considered even before planning for a business begins. Today, any new business involving foreign investors will be located in a special development zone or in a new place exempt from any pending claim. There is plenty of space available.”
“In terms of impact on our company itself, there is no additional exposure deriving from Title III or IV.”
He said, however, that he expects his import business to be affected through rising unpredictability and insecurity in its relationships with suppliers and banks.
“Let’s take an example: We sell a product of German origin to Cuban customers,” he said. “Will our provider ask us for final users now, restrict final users, misinterpret compliance limits? A problem that we’ve been dealing with for quite some time is banks and their compliance policy.”
What is hard to gauge is how companies considering to invest in Cuba are reacting to the U.S. measure.