Reactivation of Title III of the US Helms-Burton Act: what are the implications for international companies operating in Cuba?
DS Avocats, Paris
The provisions of Title III of the United States Helms-Burton Act 1996, the enforcement of which was suspended for a long period, were reactivated by US President Donald Trump on 2 May 2019. It is now possible to bring an action before US courts against any person that is doing business with products confiscated during the Cuban Revolution. This triggers an increase in the risk of lawsuits in the US against international companies that conduct business activities in Cuba.
A right to bring legal action against persons trading with property confiscated by the Cuban government
Title III of the Helms-Burton Act provides Cuban exiles who are also US nationals with a private right of action before US federal courts, against any person who has traded with property confiscated by the Cuban government since 1959.
The claims specified in Title III are nevertheless subject to the following restrictions: (1) a statute of limitations of two years after the end of the trade concerned; and (2) a materiality threshold set at US$50,000.
The legislation targets natural and legal persons who knowingly and intentionally engage in commercial activity using confiscated property.
Financial consequences for liable persons
Persons who have been declared liable under Title III may face significant financial consequences.
The legislative regime allows claimants to choose between various methods of calculation of the damages incurred, including calculating the current value of products confiscated or the value at the time of the confiscation, plus interest.
Claimants may also recover triple damages for claims certified by the US Foreign Claims Settlement Commission or if the defendants continue to exploit the confiscated property beyond 30 days from formal notice to cease its use.
The Helms-Burton Act having an extraterritorial reach, lawsuits may be filed against both US and international companies. A number of American, Cuban and European companies have already been sued before US courts as a result of this reactivation.
Measures to be taken by companies potentially concerned
International companies are advised to do an inventory of their various direct and indirect business activities involving Cuba and to conduct background checks of any property that could be potentially concerned in order to determine whether it has been previously confiscated by the Cuban government.
Companies should also examine the origin of their products in order to determine whether they come from confiscated property or trafficking of these goods.
Such self-assessment may help mitigate reputational risks. Companies that are being sued in accordance with Title III may risk losing their relationship with financial institutions, customers and other business partners who do not want to benefit indirectly from the proceeds of the confiscated property in question.
Towards a new legal battle between the US and the rest of the world?
Business partners of the US are very reluctant about the reactivation of these provisions.
Canada and the European Union have already made a joint declaration in which they assert that the extraterritorial reach of the unilateral implementation of Title III by the US is contrary to international law.
They have expressed their intention to use blocking statutes in order to preclude the submission of legal requests arising from Title III brought against Canadian and European nationals and to block the enforcement and recognition of US judgments. These regulations may further allow counterclaims by Canadian and European nationals.
Another possible option for business partners of the US would be to challenge the extraterritorial reach of Title III through a complaint before the World Trade Organization (WTO). The WTO has a Dispute Settlement Body that could resolve the issue through international arbitration.
Cuban authorities consider that the reactivation of Title III reinforcing the US embargo is purely and simply illegal, inapplicable and without legal value or effect.
The text of the Helms-Burton Act is available at https://www.treasury.gov/resource-center/sanctions/documents/libertad.pdf.