INSIGHT: Bracing for Helms-Burton Impact—What to Keep in Mind if Doing Business in Cuba

In 1996, just weeks after Cuba shot down two unarmed airplanes over international waters killing four Cuban-Americans, a meeting took place between numerous Cuban-American leaders from Miami, House and Senate leaders, and OFAC officials at the Treasury Department in Washington, D.C., to address how the U.S. government should respond.

Among the ideas discussed was creating a statutory cause of action in favor of U.S. citizens whose property in Cuba had been confiscated, against not only the Castro regime, but also others who benefited from that confiscated property. Both those individuals who were U.S. citizens at the time of the confiscation, and those who became so after it, would be given a cause of action.

An Unprecedented Statute

A nation extending the power of its courts to individuals who were citizens of a foreign country at the time a wrong occurred was unprecedented. So was being authorized to sue those who subsequently benefited from confiscated property, even if the benefit was derived indirectly. Nevertheless, no one could think of any legal reason why the U.S. could not alter its domestic laws in this manner if it so chose.

Thus was born Title III of the Cuban Liberty and Democratic Solidarity Act (commonly known as Helms-Burton).

Due to the controversial nature of Title III and pressure from allied nations, a legislative compromise was reached to allow this portion of the statute to be suspended by the president for six months at a time. Since Helms-Burton’s passing, each U.S. president exercised this right to suspend until May 2, when President Donald Trump allowed Title III to go into effect.

There are now at least nine known cases filed under this statute, most of them in the Southern District of Florida in Miami.

Some of the actions have been brought against companies owned by the Cuban government; others, against non-Cuban companies alleged to have benefited from confiscated Cuban property. Those companies include a U.S. cruise line, a French bank, and a German hospitality company.

Maybe the most notorious of these lawsuits has been filed in the District of Columbia by oil-giant Exxon Mobil. Exxon seeks $280 million in damages from two Cuban state-owned companies for a refinery expropriated in 1960. Breaking with historical precedent, the two Cuban-state companies named as defendants in the lawsuit have indicated they will appear in U.S. federal court to defend themselves.

Guidance for Potentially Impacted Companies

Given the very early stage of these cases, and because there has not previously been any relevant litigation, we cannot yet know how the courts may interpret some of Title III’s less-clear provisions. However, the great bulk of Title III’s provisions are clear enough to provide guidance regarding the scope of the statute and who the at-risk individuals or entities may be.

Under Title III, U.S. citizens may bring claims in federal district courts against persons who have “trafficked” in confiscated properties. More specifically, there are two types of citizens that may sue. The first is a person or U.S. entity who was a citizen (or, if an entity, in existence) 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 U.S. citizens after the confiscation, and whose claims were therefore never certified by the FCSC. This latter group of potential plaintiffs includes many Cuban-Americans.

Importantly, Title III applies to any “trafficking” in “confiscated property” that not only may have occurred in the past or be presently occurring, but also to that which may occur in the future. Consequently, companies that are planning to do business with Cuba and have ties to the U.S. should consider Helms-Burton.

While Title III applies to any natural or legal person, including agencies or instrumentalities of foreign governments, for obvious reasons among the most-expected targets for these claims are cruise lines, shipping companies, banks, liquor companies, tobacco companies, hotels, and tourism agencies.

For purposes of Title III, “property” means any type of personal or real property, including intellectual property, such as trademarks.

A defendant must have “trafficked” in the “confiscated property.” Notably, residential property is excluded from Title III unless the claim was certified by the FCSC or the property is occupied by an official of the Cuban government or the Communist party. “Trafficking” is described extremely broadly to include even profiting from trafficking by or through another person without the authorization of any United States national who holds a claim to the property. In other words, claims are allowed against those who indirectly benefit from confiscated property, and not just those who have a direct connection to it.

However, for trafficking to exist, a person must have acted “knowingly and intentionally,” though constructive knowledge (i.e., “having reason to know”) is sufficient.

Title III is subject to a two-year statute of limitations, meaning that persons who “traffic” in “confiscated property” cannot be sued successfully more than two years after their “trafficking” ceases.

There is also the very critical issue of damages. To summarize, damages can be as high as three times the greater of (1) the value of the property when confiscated, plus interest at the weekly average one-year Treasury bill; and (2) the current value of the property; plus, in either case (1) or (2), legal fees and costs.

In the case of (1), interest compounds annually and accrues from the date the property was confiscated until the date the lawsuit is filed. Most of the property at issue was confiscated in the 1960s, so cumulative interest could be high.

Persons who have done or plan on doing business with Cuba and have ties to the U.S. would be well advised to assess the risks posed by Title III. This should include reviewing contemplated Cuba-related transactions to determine the level of risk; revisiting applicable contracts to assure maximum protection; and obtaining guidance from counsel regarding other available safeguards.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Mark Raymond is the managing partner in Nelson Mullins Broad and Cassel’s Miami office. He represents clients in high-stakes complex commercial litigation, including class actions, and advises the boards of directors and general counsel of many prominent companies.

Carlos Loumiet is a partner in Nelson Mullins Broad and Cassel’s Miami office. He represents business and financial services clients in the U.S., Europe, the Middle East, Asia, Africa, Latin America and the Caribbean. His work includes both regulatory issues and transactions, often across borders.

Franco Furmanski is an associate in Nelson Mullins Broad and Cassel’s Miami office. He represents companies, both domestic and international, in connection with mergers, acquisitions, and joint ventures, and also provides general outside counsel services on a wide range of subjects.