U.S. Authorizes U.S. Litigation Against Entities on Cuba Restricted List

On January 16, 2019, U.S. Secretary of State Mike Pompeo extended for 45 days the right to bring certain lawsuits in U.S. federal courts  by Americans who owned property in Cuba that was confiscated by its government. The stated reasons for this 45-day extension, instead of the long-standing practice of granting six-month extensions was to “permit us to conduct a careful review of the right to bring action under Title III [of the Helms-Burton or LIBERTAD Act] in light of the national interests of the United States and efforts to expedite a transition to democracy in Cuba and include factors such as the Cuban regime’s brutal oppression of human rights and fundamental freedoms and its indefensible support for increasingly authoritarian and corrupt regimes in Venezuela and Nicaragua.”  [1]

Secretary Pompeo’s New Statement [2]

On March 3, Secretary Pompeo issued another statement on this subject with two parts.

The first part granted “an additional suspension for 30 days through April 17, 2019, of the right to bring an action under Title III [of this federal statute as] necessary to the national interests of the United States and will expedite a transition to democracy in Cuba.” with the below exception. Beginning March 19, suspension shall not apply to:

The second part of this statement, however, contained an exception to this further suspension. Beginning March 19, this suspension will not apply to the “right to bring an action against a Cuban entity or sub-entity identified by name on the State Department’s List of Restricted Entities and Sub-entities Associated with Cuba (known as the Cuba Restricted List), as may be updated from time to time.” This exception protects, for now any foreign firm from such U.S. litigation.

The Cuba Restricted List [3]

This statement explained that the “Cuba Restricted List identifies entities and sub-entities under the control of Cuban military, intelligence, or security services. These security services are directly responsible for the repression of the Cuban people. We encourage any person doing business in Cuba to reconsider whether they are trafficking in confiscated property and abetting the Cuban dictatorship.”

The first such Restricted List was promulgated by the State Department in November 2017,, with a list of 180 entities and subentities that the Department had determined were owned or controlled by “the large military-run corporations that dominate the Cuban economy. These include GAESA and CIMEX, the holding companies that control most retail business on the island; Gaviota, the largest tourism company; and Habaguanex, the firm that runs Old Havana.

This list was amplified on November 14,  2018, with the addition of 26 subentities. According to the State Department, “direct financial transactions [by U.S. nationals] with these entities are generally prohibited because they would disproportionately benefit those entities or personnel at the expense of the Cuban people or private enterprise in Cuba.”

Cuba’s Reaction  [4]

Also on March 4 the Cuba’s foreign Ministry issued the following lengthy rejection of this U.S. move:

  • “The Ministry of Foreign Affairs rejects in the strongest terms the new escalation in the US aggressive behavior against Cuba.”
  • “Since its entry into force in 1996, the Helms-Burton Act has sought to universalize the economic blockade through brutal and illegal pressures exerted by the United States against third countries, their governments and companies.  It is intended to suffocate the Cuban economy and generate or increase shortages among the population with the purpose of imposing in Cuba a government that serves the interests of the US.”
  • “Given the illegitimate character of the goals they pursue, which are contrary to International Law, the Helms-Burton Act and the blockade arouse universal rejection, which has been reiterated for almost three decades at the most important regional and international fora.  The most recent example of that was the United Nations General Assembly meeting held on November 1, [2018] when said policy was rejected through 10 consecutive votes, thus leaving the US in complete isolation.”
  • “Title II of the Helms-Burton Act states that the overthrowing of the revolutionary government, the subsequent tutelage by a US intervenor and the ultimate establishment of a counterrevolutionary government subordinated to Washington would unequivocally pursue the return or compensation to former owners for all the properties they or their descendants might claim, regardless of whether or not they were US citizens at the moment when nationalizations took place or the fact that they abandoned them. During all that period, the economic blockade would continue to be fully implemented.”
  • “Consequently, Cubans would be forced to return, reimburse or pay to US claimants for the house where they live, the area on which their communities are built, the arable land  where they farm  their products, the school where their children are educated, the hospital or polyclinic where  they receive medical assistance, the place where their workplace is located or where they have a private business, and also for subsidized services such as electricity, water, and communications enjoyed by the population.”
  • “This is an aspiration that can only be conceived by the minds of those who identify Cuba s a colonial possession.  According to the Helms-Burton Act, the economic blockade would be lifted only when that ambition is fulfilled.”
  • “This law relies on two fundamental lies: the notion that nationalizations carried out soon after the triumph of the Revolutionary were illegitimate or inappropriate and that Cuba is a threat to the US national security.”
  • “Cuban nationalizations were carried out in accordance with the law, strictly abiding by the Constitution and in conformity with International Law. All nationalizations included processes of fair and appropriate compensation, something that the US government refused to consider.  Cuba reached and honored global compensation agreements with other nations which are today investing in Cuba, such as Spain, Switzerland, Canada, United Kingdom, Germany and France.”
  • The real threat against regional peace and security are the irresponsible declarations and actions of the US government as well as the destabilizing plans against Latin America and the Caribbean aimed at pursuing the stated purpose of imposing the Monroe Doctrine.”
  • [Cuba’s] Reaffirmation of   Cuban Dignity and Sovereignty Act of December 24, 1996, states that the Helms-Burton Act is illegal, inapplicable and has no legal value or effect whatsoever. It considers null and void any claim under that law by any natural or juridical person.”
  • “According to that [Cuban] law, claims for compensation for nationalized properties could be part of a process of negotiation on the based on equality, mutual respect between the governments of Cuba and the United States, and be “reviewed together with the indemnifications the Cuban State and people are entitled to as a result of the damages caused by the blockade and   aggressions of every sort, of which the US government is responsible”. It also makes it clear that those who resort to procedures or mechanisms under the Helms-Burton Act to the detriment of others shall be excluded from possible future negotiations.”
  • “The Cuban Government reiterates to all economic partners and foreign companies operating in Cuba that full guarantees will be granted to foreign investments and joint projects. Article 28 of the Cuban Constitution, which was ratified by an overwhelming majority on February 24, 2019, also recognizes those guarantees, which are also included in [Cuban] Law No. 118 on Foreign Investments of March 29, 2014.”
  • “Today’s [U.S.] decision imposes additional obstacles to our economic development and progress goals, but the United States will keep on failing to achieve its main purpose of submitting by force the sovereign will of Cubans and our determination to build socialism. The majority feelings of the peoples of Cuba and the United States in favor of improving relations and establishing a civilized and respectful coexistence shall prevail.”

Other Reactions

John Bolton, U.S. National Security Advisor commented the same day in the following tweet: “Cuba’s role in usurping democracy and fomenting repression in Venezuela is clear. That’s why the U.S. will continue to tighten financial restrictions on Cuba’s military and intel services. The region’s democracies should condemn the Cuba regime.”

Senator Marco Rubio (Rep., FL) had a similar tweet: “Today expect the United States to take the first in a series of steps to hold the regime in #Cuba accountable for its 60 years of crimes & illegality which includes its support for the murderous #MaduroCrimeFamily. Justice is coming. And more to come.”

Rubio also joined with U.S. Senator Rick Scott (Rep., FL) and U.S. Representative Mario Diaz-Balart (Rep., FL) in issuing the following lengthier statement supporting this Trump Administration move. [5]

Senator Rubio made the initial comments of the Press Release,“‘President Trump is sending a strong message that the United States will not sit idly by while the Cuban regime continues to support the Maduro crime family at the expense of the Venezuelan people,’ Rubio said. ‘For 60 years, the Cuban regime has forced millions into exile, destabilized neighboring countries, given safe harbor to fugitives from justice and to international terrorists, and made millions trafficking in stolen property. By beginning the process of implementing Title III of the Helms-Burton Libertad Act, the United States is holding the Cuban regime accountable for its crimes, including its support for the murderous Maduro crime family. Justice is coming — and it is just getting started.’”

Senator Scott added, “The Administration’s plan to fully and immediately implement Title III and IV of the Libertad Act signals to the international community that the United States is serious about its commitment to freedom and democracy in Cuba. Allowing American citizens to sue for stolen property in Cuba and denying foreign nationals involved in trafficking stolen property entry into the United States is a huge step toward cutting off the money supply to the Castro Regime. It is clear that where we see instability, chaos and violence in Latin America, we also see the fingerprints of the Castro regime and their money – and this action by the administration is an important step in stabilizing the entire region. President Trump’s strong action on the Libertad Act will further hold the Cuban regime accountable. I urge him to continue with the planned implementation this month so we can help begin a new day of freedom and democracy for Cuba and its people.”

Representative Diaz-Balart stated, “Today, the Trump Administration took another important step toward righting some of the wrongs perpetrated by a dictatorship that brutally oppresses its people and opposes U.S. interests at every opportunity. Shamefully, for nearly twenty-two years since the LIBERTAD Act’s enactment, unscrupulous businesses have ignored this important provision in U.S. law and have chosen to partner with tyrants. This is just the first action of many regarding the Administration’s actions on Title III. Justice for the victims of the Castro regime’s confiscations is long overdue. Years of consecutive extensions may have lulled some into a false sense of impunity. Yet now companies which willingly entangle themselves in partnerships with the anti-American, illegitimate, and oppressive regime in Cuba are on notice that they will be held responsible for their part in callously benefiting from the extensive losses suffered by victims of the regime. I will continue to work with the Administration, Senator Rubio, and my congressional colleagues to ensure the United States continues to pressure the Castro regime and move forward with the full implementation of Title III.”

 Conclusion

This U.S. announcement may have only symbolic significance.

First, according to the Associated Press, “virtually none of the businesses [on the State Department’s Cuba Restricted List has] . . . any links to the U.S. legal or financial systems, meaning the ability to sue [in the U.S.] is unlikely to have any effect on the Cuban economy or foreign businesses that work with the socialist government.” In lawyer’s language, any lawsuit in a U.S. court against an entity on the Cuba Restricted List should be subject to a very strong objection for lack of personal jurisdiction over the Cuban entity, meaning any such case very likely would be dismissed at the commencement of the case. [6]

Second, another potential defense to a U.S. lawsuit might be sovereign immunity.

Third, it would be insane for any U.S. claimant to sue any of the Cuban entities in a Cuban court, which would throw out any such case and perhaps impose some penalty on the claimant for bringing such a case.

Fourth, if any of the Cuban entities are present in other countries of the world, a lawsuit there by a U.S. claimant presumably would not be subject to a lack of personal jurisdiction defense, but other defenses might be available plus other countries’ possible hostility to the overall purposes of the Helms-Burton Act and U.S. policies towards Cuba.

Finally Cuba correctly observes that it recognizes that it has an international legal obligation to compensate foreign owners of expropriated property and that it has settled many (all?) such claims by non-U.S. persons. Moreover, under the U.S.-Cuba rapprochement in 2015-16 the two counties had discussions about the U.S. claims although the details have not been publicly released. A major impediment to such a negotiated settlement is Cuba’s lack of financial resources for such payments. Therefore, this blogger has suggested in another post that the only realistic result is for the two countries to reach an overall settlement, including Cuba’s claims against the U..S., which would have the net effect of the U.S. government’s paying the U.S. claims for expropriated property,   =================================

[1] Update on Trump Administration’s Threat To Allow U.S. Litigation Over Cuba’s Expropriated Property, dwkcommentaries.com (Jan. 30, 2019).

[2] State Dep’t, Secretary Enacts 30-Day Suspension of Title III (LIBERTAD Act) With an Exception (Mar. 3, 2019); Reuters, Foreign Partners Excluded From U.S. Lawsuits Against Cuban Firms: Official, N.Y. times (Mar. 4, 2019). 

[3] New Restrictions on U.S. Travel to Cuba and Transactions with Certain Cuban Entities, dwkcommentaries.com (Nov. 8, 2017);More Cuban Businesses Forbidden to U.S. Visitors, dwkcommentaries.com (Nov. 16, 2018).

[4] Cuba Foreign Ministry, Declaration of the Ministry of Foreign Affairs: Cuba Strongly Rejects New Aggressive Escalation by the United States (Mar. 4, 2019).

[5] Press Release: Rubio, Scott, & Diaz-Balart Commend Trump Administration’s Decision to Hold the Communist Cuban Regime Accountable for Crimes (Mar. 4, 2019).

[6] Assoc. Press, Trump Symbolically Tightens Embargo on Cuba, N.Y. Times (Mar. 4, 2019). See The Personal Jurisdiction Requirement for Civil Lawsuits in U.S. Courts, dwkcommentaries.com (Aug. 8, 2011).

New Restrictions on U.S. Travel to Cuba and Transactions with Certain Cuban Entities                                     

On November 8, the U.S. Treasury, Commerce and State departments released regulations imposing new restrictions on U.S. citizens travel to Cuba. Taking effect on November 9, they “are aimed at preventing U.S. trade and travelers from benefiting its military, intelligences and security arms of the Communist-ruled country.” In addition, they require U.S. travelers on “person-to-person” trips “to use a U.S.-based organization and be accompanied by a U.S. representative of the group.”[1]

This blog post will first provide a list of the Treasury Department’s 12 categories of general licenses for approved travel to Cuba, only two of which are directly affected by the new regulations. These two categories will be discussed followed by the new regulations ban on transactions with certain Cuban entities that affects all 12 categories.

Categories of Approved Travel[2]

“Travel-related transactions are permitted by [OFAC’s] general license for certain travel related to the following activities, subject to the criteria and conditions in each general license: (1) family visits; (2) official business of the U.S. government, foreign governments, and certain intergovernmental organizations; (3) journalistic activity; (4) professional research and professional meetings; (5) educational activities; (6) religious activities; (7) public performances, clinics, workshops, athletic and other competitions, and exhibitions; (8) support for the Cuban people; (9) humanitarian projects; (10) activities of private foundations or research or educational institutes; (11) exportation, importation, or transmission of information or information materials; and (12) certain authorized export transactions.”

Only the two categories in bold are affected by the new regulations—travel for “educational” reasons (organized and people-to-people) and “support for the Cuban people.”

Formal Educational Travel[3]

OFAC states, “Among other things, this general license authorizes, subject to conditions, faculty, staff, and students at U.S. academic institutions . . . to engage in certain educational activities, including study abroad programs, in Cuba, Cuban scholars to engage in certain educational activities in the United States, and certain activities to facilitate licensed educational programs. U.S. and Cuban universities may engage in academic exchanges and joint non- commercial academic research under the general license. This provision also authorizes persons subject to U.S. jurisdiction to provide standardized testing services and certain internet-based courses to Cuban nationals.

In addition, “educational exchanges, including study abroad programs, sponsored by Cuban or U.S. secondary schools involving secondary school students’ participation in a formal course of study or in a structured educational program offered by a secondary school or other academic institution, and led by a teacher or other secondary school official are authorized. Such exchanges must take place under the auspices of an organization that is a person subject to U.S. jurisdiction, and a person subject to U.S. jurisdiction who is an employee, paid consultant, agent, or other representative of the sponsoring organization (including the leading teacher or secondary school official) must accompany each group traveling to Cuba. For a complete description of what this general license authorizes and the restrictions that apply, see 31 CFR § 515.565(a)(2)(vi). This authorization allows for participation of a reasonable number of adult chaperones to accompany the secondary school students to Cuba.”

“People-to-People” Educational Travel[4]

“OFAC is amending the general license for people-to-people educational activities in Cuba to remove the authorization for individual people-to-people educational travel. This general license now authorizes, subject to conditions, persons subject to U.S. jurisdiction to engage in certain educational exchanges in Cuba under the auspices of an organization that is a person subject to U.S. jurisdiction and sponsors such exchanges to promote people-to-people contact. Travelers utilizing this general license must ensure they maintain a full-time schedule of educational exchange activities intended to enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities, and that will result in meaningful interaction between the traveler and individuals in Cuba.”

“The predominant portion of the activities must not be with a prohibited official of the Government of Cuba, as defined in 31 CFR § 515.337, or a prohibited member of the Cuban Communist Party, as defined in 31 CFR § 515.338.”

“A person subject to U.S. jurisdiction who is an employee, paid consultant, agent, or other representative of the sponsoring organization must accompany each people-to-people educational group traveling to Cuba to ensure that each traveler has a full-time schedule of educational exchange activities. Individuals traveling under the auspices of an organization that is a person subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact may rely on the entity sponsoring the travel to satisfy his or her recordkeeping obligations with respect to the requirements described above. OFAC is amending this general license to exclude from the authorization direct financial transactions with entities and subentities identified on the State Department’s Cuba Restricted List.”

Support for the Cuban People” Travel[5]

“This general license authorizes, subject to conditions, travel-related transactions and other transactions that are intended to provide support for the Cuban people, which include activities of recognized human rights organizations; independent organizations designed to promote a rapid, peaceful transition to democracy; and individuals and non-governmental organizations that promote independent activity intended to strengthen civil society in Cuba. OFAC is amending this general license to require that each traveler utilizing this authorization engage in a full-time schedule of activities that enhance contact with the Cuban people, support civil society in Cuba, or promote the Cuban people’s independence from Cuban authorities and that result in meaningful interactions with individuals in Cuba. OFAC is also amending this general license to exclude from the authorization certain direct financial transactions with entities and subentities identified on the State Department’s Cuba Restricted List. The traveler’s schedule of activities must not include free time or recreation in excess of that consistent with a full-time schedule in Cuba. For a complete description of what this general license authorizes and the restrictions that apply, see 31 CFR § 515.574.”

“ Renting a room in a private Cuban residence (casa particular), eating at privately owned Cuban restaurants (paladares), and shopping at privately owned stores run by self-employed Cubans (cuentapropistas) are examples of authorized activities; however, in order to meet the requirement of a full-time schedule, a traveler must engage in additional authorized Support for the Cuban People activities.”

Ban on Transactions with Certain Cuban Entities[6]

The new regulations also ban U.S. travelers and businesses from transactions with “the large military-run corporations that dominate the Cuban economy. These include GAESA and CIMEX, the holding companies that control most retail business on the island; Gaviota, the largest tourism company; and Habaguanex, the firm that runs Old Havana.” The regulations include a list of forbidden hotels, including Havana’s “Manzana Kempinski, which opened with great fanfare this year as Cuba’s first hotel to meet the international five-star standard.”

This “Cuba Restricted List,” which will be maintained and updated by the State Department, has the following categories of organizations (and the number of entities in each category): Cuban Ministries (2) ; Cuban Holding Companies (including CIMEX,GAESA, Gavotte and Companies Touristic Habituate S.A.) (5) ; Hotels in Havana and Old Havana (27); Hotels in Santiago de Cuba (1); Hotels in Varadero (13); Hotels in Pinar del Rio (2); Hotels in Baracoa (7); Hotels in Cayos de Villa Clara (15); Hotels in Holguín (11); Hotels in Jardine’s del Rey (5); Hotels in Topes de Collates (3); Tourist Agencies (2); Marinas (5); Stores in Old Havana (10);  Entities Directly Serving the Defense and Security Sectors (38); Additional Subentries of CIMEX (16); Additional Subentities of GAESA (13); Additional Subentries of GAVIOTA (4); and Additional Subentries of HABAGUANEX (1).

Conclusion

All of these new regulations are meant to implement President Trump’s National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba, which he signed on June 16, 2017, at an event in Miami Florida.[7]

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[1] U.S. Treasury Dep’t, Treasury, Commerce, and State Implement Changes to the Cuba Sanctions Rules (Nov. 8, 2017); U.S. Treasury Dep’t (Office of Foreign Assets Control), Frequently Asked Questions Related to Cuba (updated Nov. 8, 2017); Reuters, Trump Administration Tightens Sanctions Against Cuba, N.Y. Times (Nov. 8, 2018); Assoc. Press, US Takes Steps to Make It Harder for Americans to Visit Cuba, N.Y. times (Nov. 8, 2017); DeYoung, White House implements new Cuba policy restricting travel and trade, Wash. Post (Nov. 8, 2017).

[2] U.S. Treasury Dep’t (Office of Foreign Assets Control), Frequently Asked Questions Related to Cuba (updated Nov. 8, 2017).

[3] Id.

[4] Id.

[5] Id.

[6] U.S. State Dep’t, List of Restricted Entities and Subentities Associated With Cuba as of November 9, 2017 (Nov. 8, 2017); U.S. State Dep’t, Frequently Asked Questions on the Cuba Restricted List (Nov. 8, 2017).

[7]  White House, Trump’s National Security Presidential Memorandum on Strengthening the Policy of the United States Toward Cuba (June 16, 2017). This Memorandum and the Miami event were discussed in a prior post.