United States: Trump Administration Allows Civil Actions Against Certain Cuban Entities

Jonathan M Epstein is a Partner in Holland & Knight's Washington D.C. office

Ronald A Oleynik is a Partner in Holland & Knight's Washington D.C. office

Andres Fernandez is a Partner in Holland & Knight's Miami office

Aymee D Valdivia Granda is a Partner in Holland & Knight's Miami office

Andrew K McAllister is an Associate in Holland & Knight's Washington D.C. office

HIGHLIGHTS:

  • The Trump Administration is allowing U.S. nationals to pursue civil actions against certain Cuban entities under Title III of the Helms-Burton Act (Libertad Act) for trafficking in property confiscated by the Cuban government.
  • Broader actions against non-Cuban entities under Title III of the Act remain suspended for another 30 days, until April 17, 2019.
  • U.S. and foreign clients doing business in Cuba should take heed of potential consequences of U.S. judgements against Cuban government entities.

For the first time since the Helms-Burton Act (Libertad Act) of 1996 went into effect, the U.S. President (through delegation to the Secretary of State) is allowing U.S. nationals to bring civil actions under Title III of the Libertad Act against certain parties for "trafficking" in "confiscated property" nationalized by the Cuban government without paying compensation to its owners.

While the general suspension of Title III remains in effect, beginning on March 19, 2019, a U.S. national may bring legal action against Cuban entities and sub-entities identified on the Cuba Restricted List. The State Department announced its actions on March 4, 2019.

Who May Bring an Action?

U.S. nationals, including individual citizens and corporations, may bring an action, subject to certain limitations with respect to whether or not they have a claim certified by the Foreign Claims Settlement Commission (FCSC). For example, a U.S. national who was eligible to file a claim with the FCSC but did not do so, or whose timely claim was denied by the FCSC, cannot file a claim under Title III. On the other hand, a person who became a U.S. citizen after the period for filing FCSC claims closed, or persons who acquired rights to certified claims from relatives or others, may be able to bring an action under Title III.

What Is Trafficking in Confiscated Property?

Confiscated property includes property nationalized, expropriated or otherwise taken by the Cuban government on or after Jan. 1, 1959, without the provision of adequate compensation, as well as certain unpaid debt by the Cuban government.

A person traffics in confiscated property if that person knowingly and intentionally transfers, manages, holds interest to or controls the property, engages in commercial activity while using or otherwise benefiting from the confiscated property, or obtains profits from the traffic in the confiscated property by or through another person. There are certain exclusions from the definition of traffics – such as transactions and uses of property incident to lawful travel to Cuba, to the extent that such transactions and uses of property are necessary to the conduct of such travel as well as transactions and uses of property by Cuban citizens who live in Cuba.

Against Whom May an Action Be Brought?

Beginning on March 19, 2019, an action may only be brought against Cuban entities and Cuban sub-entities identified on the Cuba Restricted List (which may be updated by the State Department at any time). The State Department stated that these entities "are directly responsible for the repression of the Cuban people." (Holland & Knight believes this is an "inclusive" list and likely excludes claims against entities determined to be owned or controlled by entities on the Cuba Restricted List.)

In cases of foreign companies participating in joint ventures with entities identified on the Cuba Restricted List, the foreign partner in the venture is not subject to a Title III claim. For instance, a European or Chinese company participating in a joint venture with an entity on the Cuba Restricted List is not subject to direct legal action. Similarly, U.S. companies engaging in certain transactions with an entity on the Cuba Restricted List are not subject to direct legal action under Title III.

In What Venue May Action Be Brought?

Beginning March 19, 2019, an action may be brought in U.S. district courts.

What Are Some Possible Defenses to an Action?

The Cuban government's potential defense to an action might be lack of personal jurisdiction, executive branch's lack of authority to implement a partial waiver of Title III and other statutory defenses.

What Is the Impact of a Successful Title III Action?

Although direct legal action against non-Cuban entities remains suspended, non-Cuban entities could be indirectly impacted by a successful action brought against an entity on the Cuba Restricted List. The chief concern is the possibility of garnishment. If a non-Cuban entity is doing business with an entity on the Cuba Restricted List that has a judgement against it based on a successful lawsuit under Title III, the non-Cuban company may be exposed to a garnishment action wherein the judgement holder will try to intercept funds being transferred to or from the Cuban entity (that has a judgment against it). Such a garnishment action will be disruptive and drag the non-Cuban entity into court to defend the funds that it was trying to transfer to or receive from Cuba.

It is not yet clear what steps the Cuban government will take in response to the United States latest actions. But Cuba is likely to employ countermeasures against the United States, including diplomatic, judicial and administrative actions that may impact U.S. business interests.

When Are the Next Important Dates?

With the exception of an action against an entity on the Cuba Restricted List, Title III is suspended at least until April 17, 2019.1 The Secretary of State has stated that the government will monitor the impact of the suspension and assess whether a further suspension is necessary to the interests of the United States.

In order to continue the general suspension beyond April 17, 2019, the Secretary of State must report to Congress 15 days before April 17, 2019 (i.e., on or about April 2, 2019) that suspension is necessary to the U.S. national interests and will expedite a transition to democracy in Cuba.

The State Department's statement encourages "any person doing business in Cuba to reconsider whether they are trafficking in confiscated property and abetting the Cuban dictatorship." The government appears to be signaling that it may allow other Title III actions in the future.

Footnotes

1 The law allows for each suspension period to be up to six months.

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.

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