Canada: Bracing For Impact: US Helms-Burton Right Of Action Comes Into Full Effect On May 2

On April 17, 2019, US Secretary of State Mike Pompeo announced that the Trump administration will no longer suspend the private right of action under Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996  (the "Helms-Burton Act"), thus exposing Canadian and other non-US firms to civil claims in US courts for damages arising from "trafficking" in "confiscated" property in Cuba. The decision, which takes effect on May 2, will have a significant impact on companies doing business in or with Cuba.

This brief note is intended to provide some context for these developments and highlight the potential impact on Canadian companies and Canada's response to date.

What is Helms-Burton?

In early 1996, shortly after the downing by the Cuban Air Force of two planes flown by "Brothers to the Rescue" (a Cuban-American organization),  US President Clinton signed into law the Helms-Burton Act.  The Helms-Burton Act is extraterritorial in nature – it applies to activities outside the territory of the United States. Further, unlike other US sanctions measures in place against Cuba, it applies regardless of any US ownership or control over the foreign entity and irrespective of whether US goods, services or technology may be involved in the transaction. 

In other words, a Canadian company with no US ownership, employing no US citizens or residents and handling no US-origin goods or technology, can be subject to measures under the Helms-Burton Act for its business activity occurring entirely outside of the United States.

The most controversial elements of the legislation are contained in Title III ("Protection of Property Rights of US Nationals") and Title IV ("Exclusion of Certain Aliens").

Title III - Private Right of Action

Title III of the Helms-Burton Act, which has been in effect since August 1, 1996, accords a private right of action to US nationals (including those who were not US citizens at the time of expropriation) who have a claim to property expropriated during the Castro revolution in Cuba to bring suit against those considered to be "trafficking" in such confiscated property.   The Helms-Burton Act grants authority to the US President to suspend the coming into force of Title III as well as to suspend the right to bring an action under Title III, both of which are renewable every six months.  On July 16, 1996, US President Clinton announced that he would not exercise his right to suspend the coming into force of Title III, but that he was suspending the right of US nationals to bring actions under Title III on a six-month basis.  Since then, the right to bring action has been suspended every six months under the administrations of President Clinton, President Bush, President Obama and, until now, President Trump.

Persons are considered to be trafficking in confiscated property where they knowingly and intentionally, and without the authorization of any US national owning a claim to the property, engage in any one of a broad range of specified commercial activities or profit or benefit from such activities.   Notably, the definition of trafficking is broad enough to include not only direct dealings in confiscated property, but also the conduct of business with the owners of such property -- for example, indirect activities, such as purchasing from or selling to traffickers, could be considered to be either "engaging in a commercial activity . . . otherwise benefitting from confiscated property" or "profiting from trafficking". 

Also of significant concern is the availability of treble damage awards to claimants under Title III.  Any person found to have been trafficking after November 1, 1996 in confiscated property, a claim to which has been certified by the US Foreign Claims Settlement Commission, will be subject to treble damages.  In respect of non-certified claims, traffickers will be liable for treble damages if they continue to traffic in confiscated property after receiving written notice of a Title III action against them at least thirty days before its initiation.

            Title IV - Bar on Entry into the United States

Title IV of the Helms-Burton Act came into force on March 12, 1996 and provides for the exclusion from entry into the United States of any foreign national, and their spouses and minor children, who has converted confiscated property for personal gain or who traffics in confiscated property in Cuba, a claim to which is owned by a US national.  Although the definition of trafficking for the purposes of Title IV differs somewhat from that applied for the purposes of Title III, trafficking again is defined in broad and vague terms. 

The US State Department's first notification under Title IV was made to Sherritt Inc. of Canada, the largest private investor in Cuba, and a company well known for its public intentions to continue expanding its business activities in Cuba despite the existence of the US trade embargo.  Since August 24, 1996, certain officers and directors of Sherritt, along with their spouses and minor children, have been barred from entry into the United States.   Although the US State Department since then has also from time to time banned from the United States executives, and their family members, from other companies, including those of Mexico and Israel, at the present time Sherritt is the only listed company.

What is Canada's response?

Canada's Foreign Extraterritorial Measures Act (FEMA) is best known for its Blocking Order that (i) makes it a criminal offence to comply with certain measures comprising the US trade embargo of Cuba and (ii) requires Canadian companies to immediately notify the Attorney general of Canada of certain communications they receive in respect of such US measures. For over 25 years, Canadian companies have attempted to navigate their way through potentially conflicting obligations between US sanctions against Cuba and the FEMA Blocking Order.

However, in the specific context of Title III of the Helms-Burton Act, the Canadian government made some potentially helpful amendments to FEMA in 1997 to respond to the threat of lawsuits against Canadian companies. These remain in effect today and provide for the following:

  • Helms-Burton Title III judgments shall not be recognized or enforced in Canadian courts;
  • the Attorney General may prohibit or restrict the production of records in Canada for purposes of Title III actions in the United States,,
  • Canadian companies who have had damages awarded against them in the United States may claim an equivalent amount of damages from the US Title III plaintiff in Canada (i.e., a "clawback"), and
  • Canadian Title III defendants may recover their costs from US plaintiffs before a judgment has been issued in the United States.

Of course, if a US plaintiff under Title III has no presence or assets in Canada, some of these mechanisms may be of limited value.

Could this be challenged under international trade and investment agreements?

To date, Canada has not challenged the Helms-Burton Act under its trade agreements in place with the United States. This is in contrast to the approach taken by the European Union.

In October of 1996, the EU initiated a challenge of key elements of the US trade embargo of Cuba by requesting the establishment of a World Trade Organization ("WTO") panel to consider the consistency of the US measures with WTO agreements, including the General Agreement on Tariffs and Trade 1994 ("GATT 1994") and the General Agreement on Trade in Services ("GATS").  The EU challenge was made in respect of the Helms-Burton Act (including the Title III right of private action, the Title IV  ban on entry into the United States, and restrictions on US persons financing transactions involving confiscated property), the US Cuban Assets Control Regulations, and certain other sanctions measures.

In April of 1997 the EU agreed to suspend its challenge at the WTO, pending attempts by the US Administration to have Congress amend the Helms-Burton Act enabling EU individuals and companies to be exempt from the application of Title IV of the Helms-Burton Act, and to obtain a Title III waiver for the EU without a specific time limit.  The EU agreed not to challenge the Helms-Burton Act as long as the waiver of Title III remained in effect and no action was taken against EU companies.

This EU-US "truce" has no doubt come to an abrupt end with the Trump administration's decision to cease suspending the Title III right to bring action.

Indeed, an April 17, 2019 joint statement issued by EU High Representative/Vice President Federica Mogherini, Minister of Foreign Affairs of Canada Chrystia Freeland and EU Commissioner for Trade Cecilia Malmström declared that Canada and the EU are "determined to work together to protect the interests of our companies in the context of the WTO".    

In addition to likely challenges at the WTO, Canadian companies subject to Title III claims in US courts may also consider pursuing damages against the US government under the NAFTA Chapter 11 investor-state dispute mechanism. This, however, may not be available for long as  NAFTA's proposed replacement, the US-Mexico-Canada Agreement, eliminates the application of investor-state dispute settlement as between Canada and the United States.

What now?

Canadian companies across all sectors should be carefully reviewing their activities that relate to Cuba and their potential exposure to claims that those activities are connected to "confiscated" property. These include not only companies operating in Cuba or on Cuban property, but also those who supply goods or services to the island. Such review would include due diligence regarding affected properties and claims filed with the US Foreign Claims Settlement Commission,

As with any steps that may be taken in reaction to US measures regarding trade with Cuba, Canadian companies must also be fully mindful of the potential application of the "non-compliance" and notification obligations under the FEMA Blocking Order.

To view the original article click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions