Watershed moment - US/Cuba relations

Cuba and the US have announced an end to five decades of hostility, which could draw to a close one of the longest-standing trade embargoes in the world. However, questions remain over the precise impact talks will have.

Ruth Green

After years of negotiations behind closed doors, the US and Cuba finally brokered a deal last December, which saw the release of US government contractor Alan Gross and three Cuban agents convicted of spying on anti-Castro groups in Miami.

The significance of the move cannot be underestimated. Fernando Peláez-Pier is a former IBA President and a partner at Hoet Peláez Castillo & Duque in Caracas. He says:
‘It has been an enormous step to take the decision to re-establish diplomatic relations between the US and Cuba and to lift the embargo in the short term, although it is not yet envisioned that it will lead to a reopening of embassies in each country.

It’s the beginning of a new era in the relations between both countries, marking a before and an after

Fernando Peláez-Pier
Hoet Peláez Castillo & Duque Caracas;
Former IBA President

‘This is the most important decision since Carter and Castro decided to establish representation of each country’s interests in Havana and Washington. It’s the beginning of a new era in the relations between both countries, marking a before and an after.’

However, the process is far from over. ‘Whoever thinks this process will be fast would be mistaken and would fail to understand the complexity of the case and what it implies for the re-establishment of relations between two countries after more than 50 years,’
says Peláez-Pier.

The road to reconciliation was always likely to be long. Edmund Sim, Chair of the IBA International Trade and Customs Law Committee and a partner at Appleton & Luff in Singapore, says: ‘Complete normalisation of trade relations will require legislative changes, but with the US Congress controlled by the opposition, such changes will not come so soon.

‘However, the US had similar experiences in re-engaging with China, Vietnam and Myanmar,’ he says. ‘In that case normalisation of trade relations was a relatively drawn out process. Looking to those precedents, I think we will see some initial euphoria in the business community, followed by the inevitable let-down when economic reform is not as fast as anticipated.’

Carl Micarelli, international counsel at Debevoise &  Plimpton in New York, says: ‘The US embargo on Cuba does remain largely in place. There’s some legislation enacted by the US Congress – including the Helms–Burton Act [which effectively formalised the US trade embargo on Cuba] – that remains in effect, so there’s still a long way to go until there’s completely liberalised trade with Cuba. Whether and how fast we move in that direction is going to depend a lot on the situation here in the United States.’

We will see some initial euphoria in the business community, followed by the inevitable let-down when economic reform is not as fast as anticipated

Edmund Sim
Appleton & Luff, Singapore; Chair, IBA International
Trade and Customs Law Committee

Although talks held so far in Havana in January and Washington, DC in February revealed several sticking points ­– such as Cuba’s ongoing inclusion on the US list of state sponsors of terrorism – ultimately the US wants to see economic, legal and political reform in Cuba.

Stephen Propst is a partner at Hogan Lovells in Washington DC. He says: ‘The US government is looking for democratisation, loosening of Cuban state control over essentially all parts of the economy and social life, greater access to free speech, communications – essentially human rights – and the ability for individual Cubans to own property and engage in private business.’

Although it is still early days, the changes could have a big impact on business between the two countries. ‘One thing that is very significant for US companies doing business in third countries is the relaxation of the more draconian aspects of the prohibition on dealing with Cuban nationals,’ Micarelli says. He recognises that such prohibition was never easy to enforce, but says that it has proved problematic for certain companies in the past; for example, when European and Latin American hotels owned by US companies hosted Cuban delegations. A change to this restriction would, he says, ‘ameliorate those types of headaches’.

As well as opening up trade generally, it is already apparent that certain industries are set to benefit from the changes. ‘There are some specific industries, like telecommunications, where the opportunities have been expanded pretty significantly,’ Propst says. ‘This includes consumer communications devices, which means for instance that Apple can now legally sell iPhones to Cuba. Whether there’s a real market there in terms of people who can afford to buy them is another issue, but at least the opportunity is there.’

In the insurance sector, US companies will now be able to offer global travel insurance policies that include Cuba – something which had previously been unthinkable. Less clear, however, is what the wider impact will be for the rest of Latin America.

‘Normalisation with Cuba eliminates a stumbling block to increased US–Latin American trade integration,’ says Sim. ‘However, anti-US sentiment in Venezuela and other countries continues. Yet if those countries also come around, we could see the resurrection of the Free Trade Agreement of the Americas one day.’

Improved relations between Cuba and the US could place other countries in a better position to openly engage with Cuba. ‘The bottom line,’ says Propst, ‘is it makes it easier for some Latin American countries to engage with Cuba without fear of a negative impact on their relations with the US.’

It is difficult to predict the effect that the talks will have on the provision of legal services in Cuba, which comprise the National Organization of Collective Law Offices and the National Union of Jurists of Cuba.

It makes it easier for some Latin American countries to engage with Cuba without fear of a negative impact on their relations with the US

Stephen Propst
Hogan Lovells, Washington, DC

‘Legal services have been regulated and controlled by the state since 1965 and so the profession cannot be exercised freely and foreign law firms are not authorized to establish a presence or practice law,’ says Pelaez-Pier.

In Cuba there are currently around 22 collective law offices, which can advise Cuban citizens on family law, criminal issues, litigation, commercial law and real estate, but they have no experience of cross-border transactions. There are also three firms that have traditionally been authorised to represent the interests of foreign entities.

Normalising trade relations could change the legal profession in Cuba beyond recognition. ‘Extensive changes to the regulatory framework governing the profession and the provision of legal services will be necessary in order to help Cuban lawyers cope with the likely influx of capital and foreign investment and inevitable flurry of commercial and financial transactions,’ says Peláez-Pier. ‘Not because they are lacking in competence, but simply because they lack experience of these types of transactions
and negotiations.

‘What I can say categorically is that organisations and institutions such as the IBA and other multilateral organisations can play an important role in providing technical assistance and the necessary support to Cuba’s legal profession, to help educate them in areas of the law in which they haven’t had the opportunity to practise over the past 50 years, and to help them draft the new regulatory framework.’

Ruth Green is a freelance journalist and can be contacted on ruthsineadgreen@gmail.com