U.S. Government Now Permitting Private Right of Action Against Companies Doing Business in Cuba

The Trump administration’s decision to lift such suspension subjects companies doing business in Cuba to the risk of large claims. While all companies are theoretically subject to such lawsuits, non-U.S. companies, to the extent they are not otherwise prohibited by their own governments from conducting business with Cuba, will face the greatest risks from this action.

Key Takeaways

1. Companies Doing Business Related to Cuba Should Examine Their Vulnerability to Title III Claims.

Title III of the Helms-Burton Act authorizes U.S. nationals to bring claims not only against persons who directly exploit confiscated Cuban properties that were previously owned by U.S. nationals but also against persons who indirectly benefit from such confiscated properties or profit from “trafficking” by third parties. The term “traffics” is broadly defined, in Section 4(13) of the Helms-Burton Act, to cover, inter alia, direct sales, transfer and management of confiscated property as well as engagement in “commercial activity using or otherwise benefiting from confiscated property” and participation in such trafficking. Thus, companies doing business in Cuba, or dealing with third parties as regards Cuba-related business, now risk exposure to Title III claims.  

According to the U.S. Department of State, the Foreign Claims Settlement Commission — an independent entity within the U.S. Department of Justice —  has certified approximately 6,000 claims with an estimated total value of $2 billion ($8 billion with interest).²  In addition to those certified claims, the State Department estimates that up to 200,000 uncertified claims could be brought, implicating “tens of billions” of dollars in property interests.³  

2. Blocking Statutes in Certain Jurisdictions May Allow for Recovery of Losses Caused by Title III Claims.  

Several jurisdictions, including the European Union (EU) and Canada, have enacted “blocking statutes” as a form of countermeasure against certain unilateral sanctions adopted by other countries. In general, these statutes block judicial recognition or enforcement of judgments or administrative decisions issued by U.S. courts or other authorities based on Title III⁴ and entitle companies to recover damages (including legal costs) suffered as a result of Title III claims against the original claimant or any person acting on its behalf or as an intermediary.⁵

Under the EU Blocking Statute, for example, EU nationals or companies whose interests are affected by Title III claims are entitled to initiate such litigation before EU member states’ courts where the original claimant, or any person acting on its behalf or as an intermediary, holds assets.⁶ Possible recovery may take the form of seizure and sale of those assets, including shares held by the original claimant or any person acting on its behalf or as an intermediary in EU companies.

Accordingly, those companies vulnerable to Title III claims may consider the possibility of initiating litigation in jurisdictions that have adopted “blocking statutes” to recover any losses they may suffer. Companies should consider this possibility together with their overall evaluation of the risks caused by Title III.

3. U.S. Government’s Suspension of Title III May Be Subject to WTO Challenge.

The EU has announced that it is considering whether to challenge Title III as a violation of the United States’ obligations under the World Trade Organization (WTO).⁷  Back in 1996, the EU challenged the Helms-Burton Act at the WTO. That case was withdrawn only after the United States reiterated its willingness to continue its suspension of Title III, as part of a larger agreement with the EU. 

The European Union and other WTO members could raise arguments that Title III results in de facto discrimination against goods and services from countries with significant business presence in Cuba. To avoid the risks of potential Title III lawsuits, companies doing business in Cuba may be motivated to limit trade with the U.S. so as to reduce the chance of being subject to personal jurisdiction in U.S. courts. Title III could, in this way, potentially violate several WTO obligations, including the most favored nation and national treatment provisions of the General Agreement on Tariffs and Trade 1994 (GATT) and General Agreement on Trade in Services (GATS).

The United States may intend to defend any such challenge to Helms-Burton through recourse to the national security exceptions of the GATT and GATS (as the United States initially suggested in 1996), which permit a WTO member to deviate from its WTO obligations when taking action, inter alia, “which it considers necessary for the protection of its essential security interests … taken in time of war or other emergency in international relations.” A recent WTO panel decision, in Russia – Traffic in Transit, has clarified that the GATT national security exception is not self-judging but rather subject to objective determination by WTO adjudicators; it further explained that WTO members’ discretion to define their essential security interests is limited by their obligation to interpret and apply GATT Article XXI in good faith.⁸    

Conclusion

Non-U.S. companies doing business in, or otherwise involving, Cuba should evaluate their potential exposure to claims under Title III of the Helms-Burton Act and the potential to counter any risk through recourse to blocking statutes. Further, such companies should consider, together with their home governments, whether initiation of a WTO dispute would be fruitful.  

Sidley attorneys, across our multiple practice groups and offices, are well equipped to advise on these multidimensional and complex questions, including potential U.S. civil actions, the EU blocking statute and WTO dispute settlement.                                                                                                                                      

¹ Pub. L. No. 104-114, 110 Stat. 785 (1996), codified at 22 U.S.C. §§ 6021-6091.

² U.S. Department of State, Briefing With Assistant Secretary for Western Hemisphere Affairs Kimberly Breier (April 17, 2019), available at https://www.state.gov/r/pa/prs/ps/2019/04/291176.htm.

³ Id.

⁴ See, e.g., Article 4 of Council Regulation (EC) No 2271/96 of November 22, 1996, protecting against the effects of the extraterritorial application of legislation adopted by a third country and actions based thereon or resulting therefrom, OJ L 309, 29.11.1996, p. 1 (as amended) (EU Blocking Statute).

⁵ See, e.g., Article 6 (paras. 1 and 2) of the EU Blocking Statute.

⁶ See Article 6 (para. 3) of the EU Blocking Statute.

⁷ Joint Statement by High Representative/Vice President Federica Mogherini and Commissioner for Trade Cecilia Malmström on the decision of the United States to further activate Title III of the Helms-Burton (Libertad) Act, European Commission Statement (April 17, 2019), at http://europa.eu/rapid/press-release_STATEMENT-19-2171_en.htm.

⁸ SeePanel Report, Russia – Measures Concerning Traffic in Transit, WT/DS512/R and Add.1, adopted April 26, 2019.