Nearly a quarter century after its passage, the Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996 – commonly known as Helms-Burton, after its sponsors – was expected to revive a significant number of old disputes and unleash a flood of fresh litigation against corporate giants around the world, after the Trump Administration refused to continue to waive a controversial provision of the law this spring. It’s been nearly four months since the provision took effect, however, and the expected wave of new lawsuits has been little more than a trickle, with less than a dozen lawsuits filed (five of them involving the same defendants) rehashing asset confiscation claims that stretch back more than half a century, although a number of other lawsuits have been threatened. In a new twist, these fresh cases may breathe new life into various anti-U.S. sanctions “blocking statutes” enacted (and largely shelved) decades ago.
Helms-Burton – Quick History
Congress passed the Helms-Burton Act in 1996 after Cuba shot down two American “Brothers to the Rescue” planes (killing four people) that had repeatedly encroached on Cuban airspace, dropping anti-Castro leaflets. Helms-Burton expanded the already robust U.S. sanctions on Cuba by prohibiting the indirect financing of transactions involving property confiscated from U.S. nationals by the Cuban government. Concerned that the Cuban government was offering foreign investors the opportunity to profit from confiscated property, Congress referred to such investment as “trafficking,” which it defined as knowingly holding, transferring, using, or profiting from the property of U.S. nationals confiscated by the Cuban government.
To protect the claims of U.S. nationals seeking to recoup their confiscated property, Helms-Burton Title III created a civil cause of action for U.S. nationals to sue any person who knowingly or intentionally “traffics” in property confiscated by the Cuban government on or after January 1, 1959. Defendants to a trafficking lawsuit may include anyone currently trafficking (i.e., currently holding title to or otherwise using confiscated property) and anyone who has trafficked in the previous two years. A successful trafficking lawsuit entitles U.S. national claimants to treble damages plus interest, court costs, and reasonable attorneys’ fees.
After an EU challenge to the U.S. law before the World Trade Organization, and a subsequent settlement between the two jurisdictions in the late 1990s, the United States agreed to waive the application of Helms-Burton Title III – a position that Presidents of both parties continued for more than two decades, until earlier this year, when Secretary of State Pompeo signaled that the Trump Administration would no longer waive Title III. The law’s provisions took effect on May 1, 2019, and the first lawsuits have been filed.
Given that most jurisdictions around the world – including, most notably, Canada and the EU – do not maintain sanctions against Cuba, many global companies have engaged in business with Cuba that may now be subject to U.S. litigation under Helms-Burton. The interesting legal twist – apparently never before litigated, since the relevant portion of Helms-Burton has been consistently waived – involves the impact of so-called blocking statutes enacted by Canada and the EU to counter U.S. sanctions against Cuba. These statutes allow companies sued under Helms-Burton to file counterclaims, plus reasonable attorneys’ fees and court costs. This contest between Helms-Burton and the blocking statutes likely means that any lawsuits filed against companies located in blocking statute jurisdictions will, if not settled quickly, stretch well into the future, perhaps to a time when a future President will once again decide whether to waive Title III.
Claims Under Helms-Burton
So far, at least 11 lawsuits have been filed under Helms-Burton Title III:
Havana Docks Corp. sued Carnival Cruise Lines (“Carnival”) for trafficking in the Havana Cruise Port Terminal. Havana Docks purchased the land under the Terminal in 1917 and built docks there in 1920. After the Cuban Revolution, the Castro government confiscated the docks. During the Obama Administration’s easing of travel restrictions on Cuba, Carnival began to offer cruises to Havana using the Terminal as a port of call. Carnival’s use of the Terminal constitutes the basis for Havana Docks’ claim.
The Havana Docks case demonstrates how wide the scope of trafficking liability may be. Havana Docks does not assert that Carnival stole or purchased its property. Rather, the claim is based on the use that Carnival made of the confiscated property and the benefit it received. With such a broad scope, businesses need to think long and hard about whether they may be using property confiscated by the Cuban government, even if they do not own such property.
2. Garcia-Bengochea v. Carnival Cruise Lines
Garcia-Bengochea claims to be the rightful owner of 82.5 percent of the La Maritima and Terminal Naviera docks in Santiago de Cuba that were confiscated by the Castro regime in 1960. As in the Havana Docks case above, the basis for Garcia-Bengochea’s claim is that Carnival trafficked in his property by using the docks as part of its Cuba cruise offerings. At a hearing on July 31, Carnival argued that an Office of Foreign Assets Control (OFAC) license should preclude any liability it faces under Helms-Burton because of an exception to the definition of trafficking for transactions necessary for lawful travel to Cuba.
The Garcia-Bengochea case is interesting for two reasons. First, Garcia-Bengochea’s claim is only partially certified. Under Helms-Burton, claims that are certified by the Foreign Claims Settlement Commission (FCSC) enjoy a presumption in favor of the amount of the claim. However, Helms-Burton does not appear to have contemplated claims that are only partially certified, so it’s unclear how the court will handle it. Second, Carnival’s argument that an OFAC license should protect it from liability could have major implications for other tourism-related trafficking claims because, during the Obama Administration, OFAC issued general licenses allowing multiple types of travel to Cuba. If Carnival’s argument wins the day here, many other trafficking claims could also be defeated.
Under the name Standard Oil, Exxon had significant operations in Cuba before the Cuban Revolution. These operations included refineries, ocean terminals, packaging plants, and service stations. In 1960, the Cuban government nationalized Exxon’s assets and eventually transferred them to the Cuban state-owned enterprises Corporación Cimex S.A. (“Cimex”) and Unión Cuba-Petróleo (“Union”). The basis for Exxon’s trafficking claim is that Cimex is currently operating Exxon’s service stations and Union is using Exxon’s refinery.
An interesting feature of the Exxon lawsuit is that Exxon is targeting Cuban companies. If Exxon prevails and receives a judgment in the United States for its trafficking claim, it remains unclear how Exxon intends to collect. Would Exxon seek to enforce that judgment in foreign jurisdictions? Or would Exxon attempt to collect from blocked Cuban assets in the United States? It’s too soon to tell.
4. U.S. v. $717,200,000
In November 2018, the French banking giant Société Générale (“SocGen”) agreed to a global settlement with the U.S. Treasury Department’s Office of Foreign Assets Control, the Federal Reserve, the U.S. Department of Justice, the New York County District Attorney’s Office, the U.S. Attorney for the Southern District of New York, and the New York State Department of Financial Services for violating U.S. sanctions, including those against Cuba. SocGen apparently violated U.S. sanctions by processing payments involving Cuba through the United States. $717 million of that settlement was to be remitted to the U.S. Attorney for the Southern District of New York. To execute the settlement, the U.S. Attorney filed a complaint for forfeiture to seize the $717 million penalty.
In an interesting twist, after the relevant provision of Helms-Burton went into effect in May, Banco Nuñez – a Florida corporation incorporated in 1996 to hold the confiscated equity of a Cuban bank of the same name whose assets were confiscated by the Cuban government – joined the U.S. Attorney’s forfeiture lawsuit seeking a portion of the funds to satisfy a trafficking claim. Banco Nuñez had been the second-largest bank in Cuba before the Cuban Revolution, when the Castro Regime nationalized all the Cuban-owned banks on the island and consolidated them into Banco Nacional de Cuba (BNC). The basis of Banco Nuñez’s claim is that, by processing payments through the Cuban financial system, SocGen must have processed transactions through BNC and therefore trafficked in Banco Nuñez’s property.
It remains to be seen how the court will react to Banco Nuñez’s argument. There is some precedent for using settlement proceeds to compensate victims of the Castro Regime. In 2015, the French banking giant BNP Paribas entered into a similar global settlement. Afterward, the Department of Justice invited victims to provide information describing how they suffered at the hands of the Cuban government so they could be compensated from the fine assessed against BNP Paribas. Banco Nuñez argues that this precedent should be followed to satisfy its trafficking claim. We’ll be watching to see if Banco Nuñez prevails.
5. Banco Nuñez v. Société Générale S.A.
Banco Nuñez followed its attempt to join DOJ’s forfeiture action with a direct trafficking lawsuit against SocGen. In this suit, Banco Nuñez relies on evidence from the forfeiture action to allege that SocGen developed a system of credit facilities to circumvent U.S. sanctions against Cuba. SocGen’s credit facilities allowed it to process BNC transactions with foreign companies and thereby gain a profit of over $1 billion. Banco Nuñez’s trafficking argument is that, because it owned 10.5 percent of BNC at the time it was confiscated, any profits realized from commercial activity with BNC constitute trafficking in its property.
What’s interesting about Banco Nuñez’s case against SocGen is how, if taken to its logical conclusion, Nuñez’s argument implies secondary and perhaps tertiary trafficking liability. This is because its argument implies that anyone who does business with a trafficker is themselves a trafficker. This type of downstream liability is exactly what non-U.S. businesses were concerned about when Helms-Burton was passed. For our part, we’ll be watching to see how far courts are willing to let this derivative liability go.
6. Mata et al. v. Grupo Hotelero Gran Caribe et al.
In 1925, Antonio Mata, a Cuban national, built the Hotel San Carlos in Cienfuegos, Cuba. In 1962, the Cuban government confiscated Hotel San Carlos from Antonio’s son. The Cuban government eventually abandoned the hotel and it fell into disrepair. Around 2005, Cimex began renovating Hotel San Carlos and, through a joint venture with the Spanish hotel chain Meliá Hotels International, S.A. (“Meliá”), reopened the hotel in early 2018.
The Hotelero case is interesting in two respects. First, it is the first fully “uncertified” claim filed under Helms-Burton. This means that, unlike in the five cases above, there is no presumption in favor of the plaintiffs. In this respect, the case should evolve in a manner similar to typical litigation for determining damages and liability. Second, it is the first filed case to invoke Helms-Burton’s notice provision, which requires plaintiffs filing uncertified claims to notify alleged traffickers that they are trafficking in confiscated property 30 days prior to joining those persons as defendants. Fulfilling this notice provision entitles these plaintiffs to three times the value of the property plus interest, court costs, and reasonable attorneys’ fees.
In this case, Mata’s heirs notified Meliá of their intent to add Meliá as a defendant after the end of its notice period. Once this happens, this may be a dispute where we get a taste of how EU persons intend to use the EU Blocking Statute to defend against Helms-Burton liability.
7‑11. Mata et al. v. Trivago GmbH
The same plaintiffs suing Grupo Hotelero also sued the German travel services company Trivago GmbH for trafficking in the Hotel San Carlos by booking rooms for travelers. Interestingly, the plaintiffs in the Trivago case assert that their trafficking claim extends beyond the booking of hotel rooms to also include use of the San Carlos’ “trade name, goodwill, legacy, and storied history[.]”
The plaintiffs in the Grupo Hotelero and Trivago cases requested that the court grant a class certification for their claim, which would allow the suit to become a class action. The class would include all U.S. nationals who own uncertified property confiscated by the Cuban government that has been trafficked in by Trivago and other entities. At least four other claims have been filed against Grupo Hotelero and Trivago since the Mata suits, each requesting that their claim be treated as part of a class action. Like the Mata claims, these claims involve other confiscated properties in Cuba that have since been converted into hotels and resorts. If the court grants these class certifications, travel services companies like Trivago may be stuck in litigation for years fighting trafficking claims.
Spanish Civil Claim
In addition to the 11 Helms-Burton claims mentioned above, the Cuban-American Sánchez Hill family filed an unjust enrichment claim against Meliá in Spain arising out of land confiscated by the Castro Regime. Before the Revolution, the Sánchez Hill family owned a 100,000-acre property in Cuba’s Holguín province that included the Santa Lucia sugar mill. Shortly after the Cuban Revolution in 1960, the Cuban government confiscated this property and later the Cuban armed forces built several hotels on the land, two of which are run by Meliá.
In the late 1990s, the Sánchez Hill family relied on visa restrictions in Helms-Burton Title IV (which, unlike the trafficking claims in Title III, were not waived) to bring Meliá to the bargaining table. However, after years of negotiations, the parties were unable to settle. Now the family is trying a different approach. Rather than rely on Helms-Burton to sue Meliá in the United States for trafficking, they are suing under Article 455 of the Spanish civil code, which allows claims for damages against “possessors in bad faith” for an amount equal to “any fruits received and those which the legitimate possessor could have received” plus maintenance expenses.
The Sánchez Hill family is currently seeking €10 million (approximately $11.2 million) to satisfy its unjust enrichment claim. However, even if its claim fails, the family could potentially still bring a trafficking suit against Meliá in the United States.
Canadian and European Response
As noted above, Canada and the EU were at the forefront of jurisdictions enacting or updating blocking measures after the passage of Helms-Burton. For example, the Canadian Foreign Extraterritorial Measures Act (FEMA) authorizes the Canadian Attorney General to issue orders prohibiting Canadian persons from complying with specified extra-territorial measures. Helms-Burton is currently the only law so specified. FEMA authorizes Canadian persons to respond to Helms-Burton claimants by filing counterclaims in Canada. Fines for violating FEMA are severe, ranging up to C$1.5 million (approximately $1.15 million) per violation for corporations and in the case of individuals C$150,000 and five years in prison.
For its part, the EU included Helms-Burton Title III in the Annex to the EU Blocking Statute when it was enacted in November 1996. Since no Title III lawsuits were filed until this year, no EU companies were impacted by such suits. Now, with Helms-Burton in effect and a number of claims already filed against EU-based companies, and more expected, the EU Blocking Statute is likely to have an increased impact. As in 1996 after Helms-Burton was passed, the European Commission immediately criticized the reactivation of Title III. In a joint statement by High Representative and Vice President Federica Mogherini and Commissioner for Trade Cecilia Malmström on April 17, 2019, the EU reiterated its “strong opposition to the extra-territorial application of unilateral Cuba-related measures that are contrary to international law.” According to the statement, the decision not to renew the waiver is also a breach of commitments made by the United States in the EU-U.S. agreements entered into in 1997 and 1998.
As we previously noted, it remains unclear to what extent the EU Member States will enforce the blocking statute. Yet this long-dormant piece of EU legislation may have a veritable impact when it comes to defending EU persons against Helms-Burton trafficking claims – and here is why:
Of course, to date there is no case law dealing with the compensation for losses related to the application of Helms-Burton. The exact scope and application of the EU Blocking Statute in this context thus remains open. It is subject to interpretation by the competent courts, which in the first instance will be local EU Member State courts. One of the initial determinations to be made by EU claimants is which EU Member State court would have jurisdiction to hear a counter Helms-Burton claim. As the EU Commission states in its Guidance Note, the answer depends on the specifics of the case, on the applicable rules on jurisdiction, the national civil procedure, and other factors. In particular, the EU rules determining jurisdiction as governed by Regulation (EU) No 1215/2012 apply. According to these rules, if the defendant (i.e., the Helms-Burton claimant) is not domiciled in an EU Member State, the question of jurisdiction is to be determined based on the applicable national laws of the EU Member State where the court is located. For example, under German civil procedure, a local court could be competent in such a scenario if the defendant has assets that are located in the court’s district.
In any event, the cases discussed above involving SocGen and Trivago show that Helms-Burton claims are a new reality for EU businesses. Reports indicate that additional claims relating to the hotel and rum industries are currently being prepared. Given the broad wording of the EU Blocking Statute’s provisions allowing for compensation of losses, reverse litigation in the EU is likely to occur shortly after any Helms-Burton claims against EU persons proceed.
Helms-Burton’s vast liability was understood at the time it was passed, which is why presidents of both parties regularly invoked six-month waivers of its civil liability provisions. With the waivers ended and lawsuits trickling in, the specter of trafficking liability is rising in the United States and abroad. Similarly, claimants seeking compensation from Canadian or EU persons need to consider that those defendants may, in turn, countersue. Before the smoke clears, companies with historical Cuba dealings should review their Helms-Burton exposure and act accordingly. As always, we here at MoFo’s National Security Practice are here to help.