Jones Day Talks: Trump Administration Allows Private Parties to Sue Under Helms-Burton Act for Assets Seized in Cuba
Breaking more than two decades of precedent, the Trump Administration has allowed the suspension of Title III of the Helms-Burton Act to lapse, thereby enabling eligible individuals and companies to file lawsuits in U.S. courts seeking compensation for assets expropriated by the Cuban government since 1959.
Jones Day’s Chris Pace and Rick Puente discuss the circumstances leading to Title III, how companies can evaluate claims they may have under Title III or exposure they may face under Title III, and potential defenses to Title III lawsuits.
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Dave Dalton:
The United States and Cuba are back in the news, but not for reasons you might assume. We're talking about Title III of the Helms-Burton Act. And because, after many years, its suspension was allowed to lapse, companies around the world could be targeted for legal action in US court by those whose property was confiscated by the Castro regime between 1959 and 1996. Sounds complicated? Well, fortunately, we have Jones Day's Rick Puente and Chris Pace here to explain. I'm Dave Dalton. You're listening to JONES DAY TALKS®.
Dave Dalton:
Jones Day partner Chris Pace represents clients in commercial disputes, trade secrets, and unfair competition cases, money laundering, and other criminal investigations of prosecutions and federal antitrust and RICO actions. Based in Miami, Chris was previously assistant US attorney for the Southern District of Florida and was a law clerk to Supreme Court Justice Anthony M. Kennedy. Rick Puente has argued cases on behalf of major financial institutions and global corporate entities in federal and state court and before international arbitration tribunals. Rick has served as a guest lecturer and moderator on international arbitration and litigation topics at universities and in conferences in the United States, Europe, and Latin America. Chris, Rick, thanks for being here today.
Chris Pace:
Great-
Rick Puente:
Our pleasure.
Dave Dalton:
All right, I'll take you back to 1996. Congress engages the Cuban Liberty and Democratic Solidarity Act, more commonly known as the Helms-Burton Act, after the Cuban Air Force shot down a pair of civilian planes flown by a nonprofit group called Brothers to the Rescue. I remember when that happened, by the way. The law has now been in place for more than 20 years. Rick, let's start with you. Talk about Helms-Burton. What was it supposed to accomplish, and why was it enacted in the first place?
Rick Puente:
Helms-Burton, by background, comes into play at a time where the Cuban economy and the Cuban-US political situation was undergoing some tension. Cuba had lost the support of $6 billion in revenues from the Soviet Union. They were suffering economic hardship. They amended their constitution to look for investments. The Torricelli bill in the United States passes with a focus of trying to strengthen the embargo and end the communist regime in Cuba and make it a more democratic process. The Brothers to the Rescue planes are shot down. The United States basically reacts with anger because they were unarmed Cessnas, and Bill Clinton signs into law, in March of 1996, the Helms-Burton Act, which consists of four separate provisions. One of them is Title III, which permits private causes of action filed by US nationals against third parties that traffic in property that was confiscated by the Cuban Government after 1959.
Dave Dalton:
Okay, let's get into Title III a little bit. Chris, why don't you take it from here? Talk about Title III, what it does, and why we're talking about it now, 23 years later.
Chris Pace:
So Title III, and I think Rick gave a nice little summary there, Title III allows US citizens who have ownership claims to property that was confiscated in Cuba to bring claims against people who are... The phrase in the statute is trafficking in that property. That doesn't just mean ownership. It really means you're profiting from it, you're somehow operating that property. These are things such as ports, hotels, restaurants. They're really large sections of property in Cuba.
Chris Pace:
The way the statute worked, the president had the authority to suspend allowing anyone to bring a lawsuit under this statute. So the statute says, "We're going to allow these lawsuits, but the president, for six-month intervals, can suspend it." Every president since President Clinton has entered these six-month stays and not allowed lawsuits to be filed. The Trump administration, just in April, finally said, "You know what, we're done staying this. We're going to allow claims to be brought under this statute." In effect of May 2nd, litigation could be brought pursuant to Helms-Burton Act for the first time.
Dave Dalton:
Okay, so just for clarity, let's say my family owned a hotel in Havana and the Castro regime comes in, whenever that was, 1961 or something. They seize the property, they take it, and now, based on Helms-Burton and the Title III component of Helms-Burton, I can sue?
Rick Puente:
That's right, you can sue, David. You can sue the third party, whatever party is trafficking, deriving any economic benefit from that property. If you were a US national, you probably have a certified claim that was issued by the foreign claim service commission that basically established that, A, you were the owner of that property, and B, what the value of that property was when it was confiscated. And Title III permits you to sue, let's say, a European or Mexican or Asian company that may be trafficking in that property, in US federal court.
Dave Dalton:
Is this going to be a huge tidal wave of litigation for all this? I mean, how many lawsuits can be filed, Chris?
Chris Pace:
There's two different ways of looking at it. Rick just mentioned something called certified claims that went before a commission and have been actually certified. There's 6,000 of those claims. There's also, even if you didn't get a claim certified, you can still have a claim today. Mainly, it deals with people who were not US citizens at the time of this claims commission, but since became US citizens, and as we all know, there's a large number of people who have left Cuba and subsequently become US citizens. The State Department has estimated that there could be almost 200,000 of those claims. From a valuation standpoint, just the 6,000 certified claims alone, a recent estimate is that the claims, including interests, are valued at around $8 billion.
Dave Dalton:
Minimum, we're probably looking at $8 billion, but it could be substantially more?
Rick Puente:
That's right. The statute provides, David, for travel damages after there is a 30-day notice of trafficking activity. If there's continued trafficking after that notice, there's a travel damage provisions, which is inclusive of interest, so those $8 billion could be $24 billion, in theory.
Dave Dalton:
How long does it take for something like this to play out? I'm getting a little ahead of us, the way we want to go, but I imagine we're looking at years of litigation, perhaps. Chris?
Chris Pace:
I suspect that's right. I mean, two things to keep in mind. There's a short statute of limitations of two years for bringing the claim. So I think you used the word wave, and that's a very accurate phrase because there's probably going to be a large number of the lawsuits filed, and then they'll drop off dramatically because somebody, for example, who's operating in a hotel, if they're operating it right now and they stop, you've got two years to bring your claim. There's a lot of unsettled issues as it relates to the lawsuit, and there's going to be a lot of challenges in terms of trying to identify the right defendants and get them before a federal court. So I would anticipate that this is going to take a while for the litigation to work its way through the federal courts.
Dave Dalton:
If a company might be vulnerable to this kind of action, let's talk about defenses. Are there legitimate defenses to a certified claim, or are these just got to be collection-type actions? Rick, what's your take?
Rick Puente:
Well, certainly, there are some companies, for instance, that are doing business with Cuba pursuant to an OFAC license, right? When President Obama started opening relations with Cuba, some US companies, for instance, the cruise lines, have an OFAC license that permits them to travel to Cuba, and take passengers to Cuba, and do limited business with Cuba, right? Well, they're probably going to raise as a defense, the OFAC license, saying, "We're legally doing business in Cuba. How are we going to be liable?" So that would be one defense.
Rick Puente:
Other defenses that we may see ore personal jurisdiction defenses. For instance, some of these companies do not have a significant presence in the United States. They're European companies that may have just simply a very minimal involvement in the United States, so personal jurisdiction will be one of the defenses if they are sued. And there's also the extraterritoriality of Helms-Burton because it is basically a statute that concerns and is focused with conduct that is occurring outside the US, and there are some arguments that will probably be made as to whether that is proper, whether Congress can solely legislate and whether the courts can adjudicate conduct that is occurring solely outside the United States.
Chris Pace:
And Dave, if I can, just because Rick and I were talking about this just the other day, there's a difference between what defenses will be raised and what defenses will be viable. For example, things like OFAC licenses, that's the Office of Foreign Assets Control, don't really speak to, it's okay for you to operate in another country. They really deal with whether you can have funds coming back and forth. But Rick's right. Given the size of the claims, I would expect that any defense that can be raised will be raised and will be litigated. Maybe after we've got some court decisions, one way or the other, we'll find out which are the really strong defenses and which are really without substance.
Rick Puente:
To clarify Chris' point, and he's absolutely correct, my earlier point, the cruise lines in particular, the airlines, et cetera, they're also going to focus on the statute itself, which basically, they're using or trafficking in confiscated property. They're going to say that it's probably necessary to travel, which is one of the exemptions under Helms-Burton. Whether that is going to hold up or not, that's another question, right? And that'll be litigated.
Dave Dalton:
Let's talk about the types of claims. Chris, you mentioned a second ago, I think you said there are about 6,000 certified claims and over a hundred thousand uncertified. Are there other issues or additional issues presented by lawsuits over those claims?
Chris Pace:
There will be additional issues when it comes to uncertified claims because a certified claim is conclusive proof of ownership of property and it's a presumption in favor of the value of the property. So for an uncertified claim, you have to go through the proof of ownership and you have to go through more to just establish the valuation of the property, and that's challenging in light of the difficulty of getting information out of Cuba. So we may think of ourselves, like if I had established my ownership of my house here in Miami, that's very easy, but it's going to be very hard for somebody who's a Cuban national, who now is a US citizen, to be able to establish that back in 1959, they owned a certain building in Havana.
Rick Puente:
That's right, and just expanding on that point a bit, even when you had the certified claims process that was filed by US nationals in the 1960s, there were about 2000 or so that were denied because the proof was not sufficient, or the evidence was not to the foreign service commission's satisfaction on ownership. Now, that's complicated by the lapse of time. You have 50 years, right, more than 50 years that have lapsed, so ownership is going to be challenging.
Dave Dalton:
Yeah, a tough sell, I imagine. One thing I've learned talking to you guys the last couple of years, doing these programs, you guys are always stressing, anticipating things, and mitigating risk, and being prepared and so forth. And maybe I'm getting ahead of the discussion because maybe it's just too early to tell, but how can a company evaluate its potential exposure in something like this? I mean, is it going to take some time to even just untangle this? How would I know? How would I know?
Chris Pace:
Well, there's two parts to that. Certainly, the first part is that companies can now look at whatever connections they have with property in Cuba, what interactions do we have with folks there, what involvement, when did it start, and make their own risk assessment as well as taking steps, for example, to preserve documents and make sure that they're keeping whatever evidence they have available.
Chris Pace:
Another part to it though, which is a real question mark, is the definition of "trafficking" in confiscated property is very broad. So Rick gave maybe an easier example, or Dave, maybe you did, like the hotel. Okay, I owned a hotel and now somebody else is running the hotel. That's pretty easy. But what about the lender? So you owned a hotel, somebody else is operating it. Now, a bank comes in and makes a loan to that hotel to make renovations and improvements. Are the interest payments that were made to that bank trafficking in confiscated property because they're profiting from the property?
Chris Pace:
Companies can make their best assessment right now, but the challenge they're going to have is, until some court comes in and gives a better definition to when do you get to the point of trafficking, they're going to have a hard time. I will say one other thing with international companies. There are a number of nations that have entered blocking statutes. I think a number of these international companies are talking to their respective governments and viewing this as an issue that might be best resolved at the government-to-government level.
Dave Dalton:
I see. Well, you mentioned, obviously, there's no... Well, at least I think you said there's no case law yet, but are there other situations somewhere in the world where something sort of like this happened, that we could draw some inferences from, or is there sort of a precedent somewhere, that you know of?
Chris Pace:
There are some comparable situations, such as happened with claims relating to Iran and claims relating to Libya, but none of them that I think really gives us the kind of insights to have confidence in the way that the federal courts are ultimately going to be resolving issues under Helms-Burton.
Dave Dalton:
Okay, okay. Let's think big picture for a second. This is all very unusual and this could have a huge impact on non-US companies that have been doing business in Cuba for a long time. What's been the international response so far? I know this is fresh. This just happened, really, last week or two. But what are you guys hearing?
Rick Puente:
Well, the European Union, Canada, Mexico, have been vocal, particularly the politicians, the press articles that you read, in making clear that Helms-Burton violates international law. That's the statement that you hear often, and that they will utilize laws that they have, these blocking statutes that Chris referred to, to protect companies from their countries. So for instance, Canadian companies, they're going to be looking at Canadian laws to protect them from potential discovery, potential judgments that could be entered against them. In general, the international community has been vocal against Helms-Burton because a lot of companies, particularly from Spain, from Canada, from Mexico, have significant investments in Cuba, so they've been protective of their company's interest in Cuba.
Chris Pace:
Well, and it gets even more complicated. Rick gave a good example with, I believe Canada... Doesn't the Canadian statute also even prohibit a company from complying with Helms-Burton? So there are clashes between nations here, and caught in the middle, are going to be some corporations.
Dave Dalton:
See, this could be huge. This was a quiet, little... well, maybe not so quiet, not so little, but this was a story I was barely aware of, Chris, until you guys contacted me a couple of weeks ago, and here we are. This sounds like this could escalate into something huge. So let's wrap it up with this. We don't like to talk about predictions exactly, but as you're watching this unfold, what should people look for in the next medium, long-term, next few months, years? You talked about the international response a little bit, but what should we look for as this news story moves along? Why don't we go to Rick first?
Rick Puente:
Well, I think on the international front, you're going to see potential claims before the World Trade Organization, under the principle of most-favored-nation, under GATT for the member country saying, "Hey, you're not treating us properly under the most-favored-nation treaty standard." There are defenses that will be raised to that, including the United States could raise a national security defense by viewing Cuba as a national security threat, particularly with its close association to Venezuela. I expect to see more lawsuits. ExxonMobil, for instant, recently filed a lawsuit against Cuban companies, claiming an exemption under the Foreign Sovereign Immunities Act, claiming commercial exemption. I believe you're going to see more filings. And of course, some of these companies are going to be presenting the defenses that we spoke about, and we're going to see how courts are treating and handling these defenses.
Dave Dalton:
Real good. Chris, anything you'd add?
Chris Pace:
There's also a political angle that we should talk about going forward. This is not just limited to Cuba, the president's action. It was announced, and Rick was even at the announcement. When it was announced, Mr. Bolton spoke not only about Cuba, but about Venezuela and Nicaragua and the need for regime changes in those countries. The administration has also started to limit travel to Cuba. If the Cuban Government transitions to a democratic government, it's quite possible that the United States Government's response will be to try to provide some relief under Helms-Burton. So I think we're not only going to have litigation, I think people who are affected by this are going to have to pay close attention, not only to what occurs in the World Trade Organization, but what occurs between countries outside of that, and whether these governments change over.
Chris Pace:
Also, there's going to be bilateral treaty negotiations that the US has with the EU, with England, as in connection with Brexit, with Japan. Those are currently scheduled. There's other ones that will be established. And this will be a subject to those two, that they might be resolved by bilateral negotiations, then in a trade agreement, the US agrees to not allow these claims to go forward. So this will be fought not only in the courts, it will be fought in the legislatures, it will be fought among governments in the United Nations, and then probably fought in the court of public opinion.
Rick Puente:
That's right, and I think some view this as Trump being a strong negotiator, the Trump administration taking an offensive position to try to negotiate. We heard the other day, the secretary of state saying that they've been in conversations with Cuba. Are they negotiating, indirectly, the situation in Venezuela through the revival of Title III? That's also a possibility, right? And how that results and how that comes to a conclusion will be interesting to watch.
Dave Dalton:
Fascinating dynamic, fluid situation that we'll be watching very carefully, so thank you both for being here. Chris, thanks for coming back. Rick, thanks for being with us for the first time. I hope we do this again soon, and as this situation evolves, let's get together and talk again. This is a very, very interesting topic, to say the least.
Chris Pace:
It is, Dave, and we look forward to talking to you again.
Dave Dalton:
All right, take care.
Rick Puente:
Thanks a lot, Dave.
Dave Dalton:
Thanks, Rick. Thanks, Chris. You can find complete biographies for Chris Pace and Rick Puente at jonesday.com. Subscribe to JONES DAY TALKS® in Apple Podcasts, Android, Google Play, and Stitcher. Be sure to check out some of our previous podcasts at jonesday.com. Thanks for listening. I'm Dave Dalton. We'll talk to you next time.
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