Trump Administration Reverses Course on Lawsuits Over Expropriated Cuban Property
In an effort to strengthen sanctions against Cuba, on May 1, 2019, the Trump administration allowed a long-dormant law to awaken: Title III of the Helms-Burton Act (“Title III”).1 The effect was far-reaching and immediate, as businesses are already being hauled into U.S. courts to defend against allegations that they are involved in “trafficking” in property expropriated by the Cuban government.
What Is Title III?
Title III creates a private cause of action for “trafficking” in property expropriated by the Cuban government on or after January 1, 1959.2 Under the law, trafficking is the transfer of confiscated property without the property owner’s consent.3 “Property” means any interest in intellectual, personal or real property, excluding residential real estate.4 Exemptions are narrowly drawn, encompassing only the delivery of telecommunication signals, the trading of public securities, the payment of certain travel expenses, and the activities of resident Cuban citizens.5
Liability under Title III carries a hefty price tag, including attorneys’ fees and the greater of:
- The present-day fair market value of the property;
- The value of the property when confiscated, plus interest;
- The amount certified by the Foreign Claims Settlement Commission,6 plus interest; or
- The amount certified by a court-appointed special master, plus interest.7 A plaintiff may even recover three times their damages if they first certify their claim under the International Claims Settlement Act.8
Since its enactment in March 1996, Title III has lain dormant.9 Every six months for the past 23 years, the U.S. executive branch has suspended the enforcement of Title III—more than 40 times in total.10 In an unprecedented announcement in April 2019, the Trump administration declared that it would let the last suspension expire on May 1, 2019.11 Foreign and domestic businesses alike now have reason to assess what an unencumbered Title III means for them.
The Long Reach of Title III
The end of executive suspension has spawned immediate litigation. On May 2, 2019, Havana Docks Corporation and its majority shareholder sued Carnival Cruise Corporation.12 The plaintiffs claim that Carnival Cruise has for years docked at the plaintiffs’ seaport terminal, which the Cuban government expropriated in 1960. On the same day, Exxon Mobil Corporation sued two state-owned Cuban companies for their use of capital and land confiscated from Exxon’s predecessors in 1960.13
To be liable under Title III, however, a business need not deal so directly with expropriated property. The law broadly prohibits causing, directing, participating in and profiting from the trafficking activities of a third party.14 In short, every business—both foreign and domestic—that authorized or benefitted from the transfer of confiscated property within the past two years15 could find itself a named defendant in U.S. federal court litigation.
Where the potential consequences are as steep as treble damages, the long reach of Title III should give pause. This is especially true for businesses in Canada and the European Union, which consider Title III “contrary to international law” and are “determined to work together to protect the interests of [their] companies” before the World Trade Organization.16 In these regions, blocking statutes prevent the enforcement of Title III judgments in domestic courts.17 The same courts also permit “clawback” countersuits to recover damages ordered by U.S. courts.18
Assessment of legal exposure under Title III is paramount. First, businesses should scrutinize the ownership histories of their assets. Second, any business engaged in direct or indirect commercial activities in Cuba should evaluate the potential legal exposure of those activities and of the third parties involved. Even during these early stages, consulting with legal counsel may be prudent and lead to strategies that minimize both reputational and legal risks associated with Title III. As case law develops, skilled counsel will be needed to monitor the legal landscape and to chart defenses to the complex questions of jurisdiction and judicial enforcement.
For questions regarding Title III of the Helms-Burton Act, or any other U.S. economic sanctions or trade compliance matters, please contact Jon P. Yormick, Special Counsel, at firstname.lastname@example.org, (216) 928-3474 or (716) 847-7006. Should you have any questions regarding international litigation or arbitration matters, please contact Jeffrey D. Coren, Senior Associate, at email@example.com or (716) 847-7024.
Dean A. Elwell and Jason Kim, Phillips Lytle Summer Associates, assisted in the preparation of this client alert.
- 22 U.S.C. §§ 6021–6091. The Helms-Burton Act is also known as the Cuban Liberty and Democratic Solidarity Act and the LIBERTAD Act.
- 22 U.S.C. § 6082(a)(1)(A).
- Id. § 6023(13)(A)(i)–(ii).
- Id. § 6023(12).
- Id. § 6023(13)(B).
- See 50 U.S.C. § 4101.
- 22 U.S.C. § 6082(a)(1)(A)(i), (ii).
- Id. § 6082(a)(3); 22 U.S.C. §§ 1621–1645o.
- See Glen v. Club Méditerranée, S.A., 450 F.3d 1251, 1256 (11th Cir. 2006) (noting the “prolonged dormancy” of Title III).
- 22 U.S.C. § 6085(c)(1)(B).
- Press Release, U.S. Dep’t State, Secretary Pompeo Extends For Two Weeks Title III Suspension with an Exception (LIBERTAD Act) (Apr. 3, 2019).
- Havana Docks Corp. v. Carnival Corp., No. 1:19-cv-21724 (S.D. Fla. filed May 2, 2019); Garcia-Bengochea v. Carnival Corp., No. 1:19-cv-21725 (S.D. Fla. filed May 2, 2019).
- Exxon Mobil Corp. v. Corporación Cimex S.A., No. 1:19-cv-01277 (D.D.C. filed May 2, 2019).
- 22 U.S.C. § 6023(13)(A)(iii).
- Id. § 6084.
- Press Release, EEAS Press Team, Joint Statement by Federica Mogherini and Cecilia Malmström on the decision of the United States to further activate Title III of the Helms Burton (LIBERTAD) Act (Apr. 17, 2019).
- Foreign Extraterritorial Measures Act, R.S.C. 1985, c F-29 s. 7.1 (Can.); Council Regulation 2271/96, art. 4, 1996 O.J. (L 309) (EC).
- R.S.C. 1985, c F-29 s. 9 (Can.); Council Regulation 2271/92, 1992 O.J. (L 220) (EC).