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It will take years and millions of dollars in legal fees before the U.S. Supreme Court can provide guidance for litigation related to the waiver of Title III, the authors point out. (Photo: U.S. Supreme Court)
Holland & Knight attorneys Ronald A. Oleynik, Aymee D. Valdivia and Jonathan M. Epstein.
Wednesday, May 1, 2019
Perspectives

Cuba Policy: Seven Unanswered Questions


Unresolved issues remain regarding Trump Administration's Cuba policy changes.

BY RONALD A. OLEYNIK, AYMEE D. VALDIVIA,  JONATHAN M. EPSTEIN

U.S. Secretary of State Mike Pompeo has announced that, effective on May 2, 2019, the Trump Administration will not continue the waiver against lawsuits under Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 (the Act), also known as the Helms-Burton Act. Title III provides a cause of action in which U.S. nationals may sue any person who "traffics in confiscated property." That is, U.S. nationals, including individual citizens and corporations, with title to a claim on Cuban confiscated property may bring claims in U.S. federal court against persons (individuals or entities) that traffic – derive any economic benefit from – property that has been expropriated by the Cuban government since 1959.

Regarding the Trump Administration's decision, Pompeo stated on April 17, 2019, that "the right to bring an action under Title III of the Act will be implemented in full." A State Department official clarified that "the Secretary has made very clear that this is a decision not to waive, that has no exceptions." On the same day, National Security Advisor John Bolton spoke in Miami at a gathering of the Bay of Pigs veterans. Bolton stated that "we have decided to end the Helms-Burton Title III Waivers, once and for all" and "we are enforcing all sanctions transparently, aggressively, and effectively." These statements leave a number of questions unanswered as to how such lawsuits might work. A few of the most pressing questions include the following:

1.    Will Lawsuits Be Allowed Against U.S. Companies Doing Authorized Business in Cuba?

The end of the Title III waiver will allow claimants to bring claims against anyone trafficking in confiscated property. The U.S. government has not yet provided any clarifications as to whether this includes U.S. companies currently doing business in Cuba authorized by the U.S. government under general licenses under the Cuban Asset Control Regulations, 31 C.F.R. Part 515, or under specific licenses issued by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC). Both as a matter of legislative interpretation and foreign policy, it is counterintuitive that the U.S. government would allow suits against U.S. companies for activities in Cuba that were authorized by the U.S. government to undertake. On the other hand, allowing Title III lawsuits only against non-U.S. companies may amount to unfair treatment toward foreign investors and could violate bilateral or multilateral treaties to which the United States is signatory.

2.    What Are the Parameters of the Travel and Telecommunications Exceptions Enumerated in the Law?

The LIBERTAD Act excludes certain activities related to travel and telecommunications from the definition of "trafficking." Thus, providing international telecommunication signals to Cuba and the use of confiscated property that is incident and necessary to lawful travel to Cuba are exceptions under the Act and cannot be raised in a Title III claim. Even going back to the 1990s when the Act was enacted, certain travel, trade, carrier services and telecommunications were authorized. Leaving to the courts the job of defining the bounds of these exceptions, without at least providing the executive branch's interpretation, may create unnecessary litigation and chill activities that are in U.S. foreign policy interests.

3.    Will There Be an Exception for U.S. Companies Providing Agricultural Goods to Cuba Under the Humanitarian Policies Set Out in the Cuba Sanctions Regulations?

The U.S. government has had a policy of permitting U.S. companies to export agricultural goods and equipment to Cuba. Whether the courts will construe an exception for these companies to continue providing agricultural goods to Cuba remains to be determined. Unlike the travel and telecommunications exceptions listed in the Act, there is no such exception for agricultural goods or humanitarian projects. Even if a U.S. agriculture exporter isn't sued directly for having its agricultural produce pass through or be unloaded on or by Cuban confiscated property, the possibility that wire transfers made through the U.S. financial system may be subject to a garnishment proceeding may be enough to stifle these humanitarian-based transactions.

4.    Will the Canadian and EU Blocking Statutes Have Any Real Bite?

The European Union (EU) and Canada have blocking statutes that they have stated they intend to invoke in response to the lifting of the Title III waiver. These blocking statutes prohibit Canadian and EU companies from complying with U.S. sanctions, ban the enforcement of U.S. judgments against Canadian and EU persons, and allow damages counterclaims to be filed in Canada or the EU courts against the U.S. Title III plaintiffs. Blocking statutes have historically served as rhetorical tools and have rarely been enforced, so their success is unclear.

Additionally, the EU and Canada have signaled they are willing to initiate a World Trade Organization (WTO) action to defend the interests of their nations' companies in Cuba. The EU had initiated WTO proceedings in 1996, following the enactment of the Act, but the case was withdrawn when the U.S. and the EU reached a series of agreements, including the waiver of Title III. Although a WTO action would undoubtedly put pressure on the U.S., it would be long and costly, and proving that Title III is in violation of specific provisions of the WTO Agreements might prove challenging.

5.    Will There Be an Executive Order, Interim Regulations or a Set of Frequently Asked Questions (FAQs) Issued by the State Department, the National Security Council or OFAC to Provide Guidance?

Without providing parameters or requirements, lifting the waiver of Title III would appear to open the floodgates of litigation in courts across the country. While the U.S. judicial system will eventually work out the inconsistencies in judicial approaches to this issue, it will take years and millions of dollars in legal fees before the U.S. Supreme Court can provide guidance. In the meantime, all parties to Title III lawsuits will be left with legal bills and substantial uncertainty as the executive branch cedes its foreign policy mandate to the judicial branch.

6. When and How Will Title IV of the Act Be Enforced?

Bolton also announced on April 17 that the U.S. government "will be taking actions to implement Title IV of Helms-Burton." Title IV mandates the denial of visas to and the exclusion from the United States of foreign individuals who (as determined by the Secretary of State) traffic in confiscated property, including officers or controlling shareholders of an entity that traffics in such confiscated property as well as spouses, minor children and agents of the foregoing persons. Although Title IV has never been suspended, it has been rarely applied. According to the Act, no final decision of a court on the "trafficking" activities seems to be required for Title IV to be enforced; therefore, the mere filing of a Title III claim could prompt the Secretary of State to determine that the defendant individual and his family or an officer of the defendant corporation should be excluded from the U.S. territory.

7. When Will Other Cuba Sanctions Changes Mentioned by Bolton Take Effect?

During his speech on April 17, Bolton announced that the Department of the Treasury will implement further regulatory changes – e.g., amendments to the Cuban Assets Control Regulations (CACR) – in order to a) restrict non-family travel to Cuba (e.g., 11 out of the 12 authorized travel categories may be impacted); b) limit money remittances to Cuba, which are currently unrestricted, to $1,000 per person per quarter; and c) end the use of "U-turn transactions." (The CACR's general license identified as "U-turn transactions" authorizes U.S. financial institutions to process, as intermediary banks, Cuba-related transactions – even if such transactions are not authorized under the CACR – provided that the transaction originates and ends outside of the U.S. and that neither the originator nor the beneficiary are U.S. persons.) Many in Washington, D.C., suggest that these changes may be months away, which would not be inconsistent with the implementation of the changes that President Donald Trump announced in June 2018 (i.e., the elimination of the individual people-to-people travel category), which did not get implemented until October of that year.

Bolton also announced that new entities would be added to the Cuba Restricted List published by the Department of State. This list identifies Cuban entities under the structure or control of the Cuban military, intelligence, and security services and personnel, with which direct financial transactions are prohibited. The updated Cuba Restricted List was published in the Federal Register on April 24, 2019.

Andres Fernandez and Barbara Efraim also contributed to this article. Along with Ronald A. Oleynik, Aymee D. Valdivia,  Jonathan M. Epstein, they are members of Holland & Knight’s Cuba Action Team and advise clients on a wide range of legal and practical matters involving Cuba.

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