By: Nicolas J. Gutierrez, Jr. *
I. Introduction. The Trump Administration’s recent unprecedented hyper-shortened suspension of the Title III right-of-action provision of the Cuban Liberty & Democratic Solidarity (LIBERTAD) Act of 1996 (more commonly referred to as the Helms-Burton law) has sent shock waves of both elation and concern among those that typically follow these issues. Secretary of State Mike Pompeo’s certification bluntly warning traffickers about dealing in stolen U.S. properties, and citing this nefarious practice for the economic lifeline that it provides to the Cuban regime, foreshadow a fundamental shift in U.S. policy toward Havana.
A. Europe’s Position. First, a bit of historical background … If one were to even partially believe the ubiquitous howls of protest from among the community of international legal experts upon its initial passage, the Helms-Burton law, and particularly its most controversial Title III, this legislation would have mostly up-ended the established world order as we have come to know it. Accompanied by sanctimonious cries of “extraterritoriality”, the European Union threatened to sue the United States at the World Trade Organization over this particular act of Congress, which resulted in the unratified 1998 “E.U. – U.S. Accords”, whereby the U.S. specifically committed not to enforce Helms-Burton’s Title III’s private right-of-action and Title IV’s visa revocation provisions against European nationals, although these traffickers constitute the vast majority of the Cuban regime’s current business partners in properties stolen from American citizens. In exchange, the EU was to somewhat vaguely: (i) “seek to deter” their companies’ investment only in Cuban properties “nationalized in violation of international law”; and (ii) assist in the creation of a non-binding “internet-based registry” of allegedly confiscated property claims, neither of which was ever actually implemented.
B. A Change in Policy. The poignant proclamation last week by the Trump Administration eschewing the usual routine six-month suspension of this federal private right-of-action for the first time ever since the law’s 1996 passage, in favor of a mere 45-day suspension commencing this upcoming February 1st, has caused quite a stir among the community of confiscated Cuban property claimants. This development, however, should not constitute a total surprise. In response to press inquiries at a reception held in Miami’s historic Freedom Tower immediately preceding last November’s highly anticipated mid-term Congressional elections, National Security Adviser John Bolton stated that the Trump Administration was going to “seriously study” and “view with fresh eyes” whether to permit Title III actions to be brought this year, as opposed to simply allowing “bureaucratic inertia” to result in the rote re-suspension of this key provision of the law for the 46th consecutive semi-annual occurrence since its initial enactment on March 12th, 1996. Significantly, this Administration is also considering permanently relocating the institutional implementation mechanism of Presidential suspension authority under Title III from the State Department (where President Obama had previously moved it) to the White House’s National Security Council. Notwithstanding Secretary Pompeo’s powerful message this time around, such a restructuring going forward is more likely to calibrate the relative weight of protecting the property rights of U.S. citizens to a higher degree, vis-à-vis the continued maintenance of good diplomatic relations with America’s allies, which is of course generally a lesser priority for this Administration as compared to all of its modern historical predecessors.
C. Presidential Waiver Authority. Back in the late winter of 1996, the Clinton Administration, which was then pushing towards a normalization of relations with the Castro regime, and was thus thoroughly unamused by Senator Jesse Helms’ and Congressman Dan Burton’s proposed comprehensive legislation to block these efforts, was suddenly backed into a corner by Fidel Castro’s unconscionably deliberate order to obliterate the Brothers to the Rescue planes over international waters. With little choice but to sign this partially punitive legislation, President Clinton did successfully negotiate an eleventh hour concession from Congress to the Executive Branch’s historical Constitutional predominance over foreign policy, by retaining the ability to suspend every six months claimants’ ability to file federal lawsuits against foreign traffickers in U.S. courts under Title III.
D. Certification Standard. Then National Security Adviser Sandy Berger, however, carefully stated that although the President was opting to suspend this provision at his first opportunity, the corresponding liability would in fact commence and continue to accrue against any and all foreign traffickers from then on. Unfortunately, the only conditions for effectively periodically gutting this law’s most powerful deterrent to Fidel Castro’s ability to partner with foreign investors on properties stolen from American citizens, was that the President semi-annually “certify to the appropriate Congressional committees” that such suspension would: (a) “be in the national interest of the United States”; and (b) “promote a transition to democracy in Cuba.” Over the ensuing 22 years, Presidents Clinton, Bush, Obama and even Trump have routinely executed these suspensions every January and July, occasionally loosely proclaiming that this enforcement lapse of U.S. law may somehow incentivize our European allies to “work towards pressuring Cuba to improve its human rights situation”. Arguably, the facts are that Cuba’s human rights scenario has continued to inexorably worsen overall throughout the past two-and-a-half decades, even as the European Union has more recently since retreated from even its minimalist “Common Position” on Cuba.
E. Rescission of Suspension. Interestingly, the President can rescind any such suspension of Title III at absolutely any time whatsoever, simply by making a similar certification as outlined above but in reverse. Additionally, any lawsuits commenced during a prior implementation of this section shall continue to proceed to their full course without impediment, after any subsequent suspension thereof. This is of particular importance, since if default or otherwise adverse judgments can be obtained against certain foreign traffickers, these may be more effectively monetized than other claims, as the overall claims settlement process is eventually played out. Title III’s overall scheme shall generally remain in effect, until the President certifies in the future that a “democratic transition government” has been established on the island.
F. Certified Claimants vs. Cuban-Americans. During the legislative debates over Helms-Burton, the U.S. certified claims community, which was then very well organized through its Joint Corporate Claims Committee, sought to exclude the far more numerous category of Cuban-American claimants from being able to avail themselves of Title III, claiming that any such inclusion would somehow dilute the certified claimants’ relatively preferential position. This position was assumed by that sector, even though empirically there is absolutely zero connection between the certified claimants’ eventual remedy source (generally contemplated as a future lump-sum payment by a future Cuban government to be distributed pro rata among this community), and the damages potentially available to Title III litigants from the pockets of foreign traffickers in Cuba, which also possess assets under the U.S.’s jurisdiction. In the end, a compromise was reached, in which only certified claimants would qualify to utilize Title III for the initial two years after the law’s enactment, and thereafter Cuban-American claimants could also bring such private actions. Needless to say, Title III’s continuous six-month suspensions every mid-January and July since 1996 have long rendered this compromise completely moot.
G. Regulatory Concept. The inspiration for the private right-of-action modality of Title III derives from similar schemes employed by both federal and state governments to entice “private attorneys general”, with the promise of treble damages and the ability to recover reasonable attorneys’ fees, to go to court to bring about perceived public policy benefits in such diverse fields as antitrust enforcement, the rights of disabled persons, food and drug regulation, etc. Of course, foreign defendants in any such actions are afforded the full due process protections of U.S. law, including inter alia the right to competent counsel, all manner of evidentiary protections, burden of proof requirements, and appellate rights. Ironically, none of these rights (nor their civil law equivalents) were ever even remotely offered to the victims of Cuba’s illegal takings, nor even in the cases of today’s internationally condemned slave labor and tourist apartheid practices on the island.
H. Act of State Doctrine. Perhaps the most significant aspect of Title III is that, if ever allowed to fully go into effect, it legislatively purports to circumvent or override the Act of State Doctrine, which has long served as a formidable litigation barrier to claimants seeking redress in court against foreign traffickers. This series of common law judicial precedents stands for the proposition that federal judges in the United States lack the requisite competence to examine the acts of foreign sovereigns against their own citizens, as most comprehensively articulated by the U.S. Supreme Court in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401, 84 S.Ct. 923, 926, 11 L.Ed.2d 804 (1964).
I. Judicial Precedent. Most recently, in De la Vega Glen v. Club Méditerranée S.A., 365 F.Supp.2d 1263 (S.D.Fla.2005), the Eleventh Circuit Court of Appeals affirmed the earlier ruling by the U.S. Southern District Court of Florida that, against the backdrop of a Presidentially suspended Title III, the Act of State Doctrine still barred recovery by a 95-year old Cuban exile matriarch against Club Med, despite this latter entity’s open and prolonged use of her family’s confiscated beachfront Varadero property as a business partner of the Cuban regime’s tourism entity, Gaviota, S.A. The rationale here is that, although the Cuban Revolution expropriated Elvira de la Vega Glen’s family’s property without any compensation whatsoever, thereby directly violating Cuba’s 1940 Constitution, its subsequent Ley Fundamental, and even the specific revolutionary decree that carried out this taking, the fact that Mrs. De la Vega Glen was “merely” a Cuban citizen (as opposed to an American or other foreign national) at that time results in the anomalous situation that the State’s usurpation of her property does not rise to the level of violating international law, only Cuban law. Therefore, this legally tolerated impunity permits the Cuban regime to subsequently partner with foreign companies to more effectively manage and thus more fully exploit this stolen beachfront property, obtaining badly needed hard currency under a scheme that also features a system of official confiscatory slave wage retention from Cuban laborers and strictly enforced tourist apartheid.
J. Lack of Other Options. Since Cuba lacks an independent judiciary, private property protections, or any other vestige of the rule of law, the De la Vega Glen family, or any other American or Cuban-American claimant, obviously cannot seek redress in Cuba. U.S. courts are also now off-limits due to the above-referenced Act of State doctrine, and there simply are no other international tribunals that offer standing to such victims of Cuba’s systematic confiscations to state their claims. Faced with this stark scenario, one can begin to understand the importance and necessity of fully implementing Title III. International law is by its very nature an evolving body of jurisprudence, which develops consensually as individual states in the international community implement certain measures to provide remedies previously lacking to its own citizens. Hence, in this regard, the Helms-Burton law can be viewed as contributing positively to the development of international law in an area of property rights where it was previously seriously lacking.
K. Conditions for Filing Claims. During the Helms-Burton law’s legislative process, various organizations orchestrated an uproar over “U.S. courts being potentially swamped by many thousands of Cuban-American lawsuits”, despite very exacting requirements having been established for such actions. To wit, Title III plaintiffs must first: (i) prove lawful ownership of the property at issue; (ii) have acquired such ownership of the claim as a U.S. national prior to the law’s enactment on March 12th, 1996, in order to have thereby avoided “a speculative market” in such claims; (iii) show that such property has a fair market value of at least $50,000.00, is non-residential in nature, and is not being utilized by ordinary Cubans or an accredited diplomatic delegation; (iv) identify a foreign entity trafficking in such property, which is quite broadly defined therein; (v) demonstrate that such foreign trafficker has significant assets in the U.S.’s jurisdiction; and (vi) finally (and more practically) have the financial wherewithal to be able to fund such a lawsuit, be it either on an hourly or contingency basis, or some combination thereof. During the protracted legislative process, claimants were even successful in obtaining a temporary waiver of the otherwise required specific license for transfers to their wholly owned limited liability entities, by the Department of Treasury’s Office of Foreign Assets Control (OFAC), in preparation for use as plaintiffs’ vehicles in the contemplated litigation then seemingly looming over the horizon. Political pressure during this legislation’s drafting, however, led to a special filing fee being established “to deter all but the most serious claims”. This aggressive separate fee, which is set under the federal courts’ administrative authority and duly indexed for cost of living increases, today for example stands at $6,548.00, or 16.37 times higher than the standard federal court filing fee of $400.00 in the U.S. Southern District of Florida. Can one just imagine the justifiable uproar over discrimination if a similar fee was established in another sensitive area of the law such as civil rights, in order “to deter frivolous cases”?
L. Title I. In terms of establishing some context, a brief summary of Helms-Burton’s other Titles is in order. Title I essentially sets forth the law’s objectives, codifies and even expands the existing U.S. embargo against the Cuban regime [more formally the Cuban Asset Control Regulations (the “CACR”), found at 31 Code of Federal Regulations, Part 515], which until then only consisted of a series of Executive Orders later converted into regulations promulgated by the OFAC. From then on, other than some relatively minor discretionary decisions (such as those involving the regulation of certain categories of travel and remittances), any changes to the CACR require a majority vote of both the Senate and the House of Representatives, rather than merely a Presidential decision. This check and balance proved to be critical in thwarting the second-term Cuba-specific normalization initiatives of both President Clinton between 1996-2000 and President Obama from 2012 to 2016.
M. Section 103. For example, one particularly potentially impactful provision in Title I that expands the CACR, but has yet to be fully tested potentially through a declaratory action, is Section 103’s strict prohibition of any direct or indirect financing transactions involving confiscated U.S. property. This non-suspendable proscription, which also does not include any possible categories of exceptions and applies to the properties of both certified U.S. claimants and Cuban-Americans, could conceivably be applied to keep automatic teller machines (or ATM’s), with any connection whatsoever to the comprehensive worldwide U.S. banking system, out of the lobbies of foreign-managed hotels on properties taken from American citizens.
N. Title II. Title II establishes a series of diplomatic and economic incentives that the United States would make available first to a future transition, and then to a democratic, government in Cuba. Recognition, assistance and commerce are conditioned and calibrated based upon the achievement of such identifiable milestones as: (i) freedom for all political prisoners; (ii) calling for democratic elections within 18 months; (iii) establishment of multiple political parties; (iv) legalization of labor representative activity; and (v) significant progress in restoring property rights to confiscated owners, specifically restituting or compensating progressively the properties of certified U.S. claimants and Cuban-Americans on the island.
O. Title IV. Title IV is neither Presidentially suspendable nor a private right-of-action. It does, however, create a government obligation to deny/revoke the visas of, and exclude from the national territory, the principals, controlling shareholders, and corporate officers of foreign traffickers in Cuba (on the properties of either U.S. certified claimants or Cuban-Americans), together with those of their spouses, minor dependent children and agents. This measure is particularly distasteful to European businessmen, who could end up being stopped by U.S. customs and immigration officials at any points of entry into America, appearing on the same exclusionary look-out lists as terrorists, narco-traffickers, neo-Nazis and persons with communicable diseases. The mere threat of implementation of this relatively obscure provision has induced certain foreign traffickers to pay for the consent of the legitimate owners of the properties on which they have been doing business. Very limited information is publicly available about these curious phenomena, which still must be specifically licensed by the OFAC, due to these deals typically being shrouded behind non-disclosure clauses. The most notable of these potential traffickers has been STET, the Italian state-owned telecommunications company that reportedly paid $25 million to International Telephone & Telegraph (IT&T), the U.S. certified claimant that owned the expropriated Havana telephone circuits and has now come to own Sheraton Hotels, for the right to use this property for ten years commencing in 1997, and then renewed it for a similar period and price in 2007. Unfortunately, there have not been many more such deals struck, due to the State Department’s (DOS) typically weak, haphazard and inconsistent enforcement of this otherwise potentially powerful provision. The lack of judicial review of the DOS’s actions in this regard, absent the emergence of a possible writ of mandamus class action some day, has led the DOS to often quite literally have its Office of the Legal Advisor review these cases perpetually in order to avoid ever actually taking any decisive action thereon.
P. Abortive Fifth Title. There was to also have been a fifth Title involved in the Helms-Burton law that would have established a streamlined and favorably discounted procedure, regarding how the Internal Revenue Service (IRS) would treat the relative tax liability of claimants who obtained compensation under Title III (and possibly even Title IV) decades after taking advantage of their limited tax loss carry-forwards, legislatively sponsored in the 1960’s by then Florida Senator George Smathers and Congressmen Claude Pepper and Dante Fascell. Unfortunately, this putative fifth Title ran into some initial opposition, then stalled and was finally dropped, after taking a back seat to the law’s more substantive (and less technical) provisions. Therefore, the resolution of this issue, which will only be relevant if claimants ever obtain significant compensation, remains subject to future negotiation with the IRS and possibly even further Congressional action.
Q. U.S. Trafficking on U.S. Property. This situation is now even further exacerbated, however, by the additional unseemly phenomena of the presence of U.S. traffickers exploiting American-owned properties in Cuba. This bizarre spectacle comes as a result of the Obama Administration’s recent deliberate attempts to erode the embargo by issuing certain OFAC licenses to various American cruise ship and hotel companies to do business with the Cuban military’s powerful Grupo de Administracion Empresarial (GAESA) in Havana, Santiago and Cienfuegos inter alia. Not surprisingly, as typically is the case, most of the properties involved in these businesses were expropriated without any compensation whatsoever from people who either were American citizens at the time or were subsequently naturalized as such. At some point, there may well also exist common law jurisdiction in lawsuits between Americans on both sides in federal courts to adjudicate these curious disputes, independent of Title III, which only contemplated foreign (rather than American) trafficking in the Cuban properties of other Americans back then.
R. Consequences of Implementation. What now seems far more probable after Secretary Pompeo’s recent pronouncement, an eventual Presidential certification to actually not suspend Title III (either after this first 45-day suspension or shortly thereafter), thereby allowing its full implementation typically for at least a six-month period (as defined in Section D of this article above), would result in the following likely consequences. First, amidst the inevitable flurry of news coverage and editorials, an unmistakable message would be sent that U.S. policy has effectively been changed, in order to stand solidly on the side of protecting the victims of property takings in Cuba from the ongoing exploitation of foreign traffickers doing business with the usurper Cuban regime. Second, due to the limitations set forth in Section K of this article above, there would potentially likely be only dozens, rather than thousands, of these suits filed, a relative volume easily accommodated administratively by our judicial system. Third, in their predictably furious reaction, after possibly even establishing a procedure against the United States at the World Trade Organization (WTO), our European and Canadian allies may attempt to dust off their previously promulgated, but never implemented, “blocking” or “claw-back” laws. These statutes may be used by these governments to saber-rattle, threaten and posture politically, but in the end their effectiveness is limited to: (i) their authority to sanction their own nationals for “complying” with Helms-Burton’s “extra-territorial provisions”; (ii) seek to “shield” their nationals from U.S. judgments; and (iii) even provide countervailing causes of action in their own domestic courts. Fourth, while the individual litigation results of the filed actions may vary, the most likely outcome is that these actions may well act as leverage resulting in an elevated number of settlements, through which traffickers would pay a negotiated amount to the claimants for their consent to use these properties, while the Castro regime is still in power and the ultimate resolution of these expropriations has yet to be finally adjudicated.
II. Conclusion. This time around, foreign traffickers and their host governments have been abruptly denied the “safe harbor” comfort that previous lengthier and unjustified suspensions had routinely afforded them. Regardless of how the Trump Administration specifically proceeds after this first highly truncated suspension period of Title III, the stars are clearly aligning for it to be in the best position yet over the past two and a half decades to send a powerful message to the world that finally America will stand up for its citizens who had their properties stolen in Cuba, even if that means that European and other nationals will be held accountable by the U.S. judiciary for trafficking with knowledge in such properties. If this historic opportunity is squandered, however, which many unfortunately still expect and will push hard for, the same muddled theme will prevail that, as far as the most powerful government in the world is concerned, it will remain “business as usual”, with regard to an open season for trafficking in the stolen properties of American citizens in Cuba.
* Mr. Gutierrez is a Senior Research Fellow at the Cuban Studies Institute, and currently serves as President of the National Association of Sugar Mill Owners of Cuba. In this latter representative capacity, he was and continues to be actively involved in the initial passage and subsequent enforcement of the Cuban Liberty & Democratic Solidarity (LIBERTAD) Act of 1996, more commonly known as the Helms-Burton law.
