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Corporate Code of Conduct for Cuba Transactions

Editorial Note: There is a lot of legalese in this post, by design.  If you have any questions, please call or email. Thank you.

Update (added at 3:05 p.m., on 28 May) A lawyer in Cuba told a delegation of lawyers with the Florida Bar in Cuba this week: “Nothing changes [in Cuba]… [t]he system is disgusting. There is no due process,” posted at the Daily Business Review. A timely and surprisingly frank statement … read on …

We’ve seen a large spike in Cuba-related inquiries this year at our law firm. Yet, as I told the Wall Street Journal in February, there is a great deal of ‘irrational exuberance about Cuba right now’. The sanctions remain in force and that will be the case for the remainder of, at least, this year. And even if your company provides a product or service that can use existing exceptions to the embargo to engage in authorized transactions with the Cubans, Cuba remains a very high risk business proposition for the foreseeable future.

Worth Noting: (1) Under the Cuban Constitution, lawyers in Cuba have obligations to the revolution, foreign businesses are second fiddle; (2) As in most economies of this type, corruption is rampant; (3) property confiscations continue;
Worth Noting: (1) under the Cuban Constitution, lawyers in Cuba have obligations to the revolution, foreign businesses are second fiddle – get a second opinion from an American lawyer; (2) as in most economies of this type, corruption is rampant; (3) property confiscations continue; (4) Cuban government and Communist Party officials, on a daily basis, abuse human rights of workers, political prisoners, and civil society leaders; and (5) due diligence process should consider these factors before entering the Cuban market, and throughout the business process if you do so.

I strongly disagree with the way that the Obama Administration has gone about gutting U.S. law and policy with respect to Cuba. It will lead to the opposite of the desired and stated goal of U.S. law, a peaceful transition to a free society.

If you’re a person or entity subject to U.S. law (and required to comply with sanctions and export control laws and regulations, remember this): The only reason that Cuba eagerly seeks engagement with the United States at this juncture is because they know that they risk dealing with a Republican President and Congress come January 2017.

Remember that the Cuban government, among other things, uses its people as chattel, modern day slaves, to pay off debt to companies and countries. How you can expect a rule of law culture in a nation that does that to its own people? The government is not interested in change or reform. It is about regime survival, not reform of the Communist economic system. President Obama and his liberal supporters may be the last opportunity this regime has to consolidate power, something that they desperately need to do because the economy is in shambles and the people are growing restless, hungry, and destitute.

As for Congress, it seems to have thrown in the towel. It has been close to six months since the President made his December 17, 2014 Cuba speech. The Congress has yet to muster a single substantive response to block the mostly lawless executive actions that have created this climate of legal and political uncertainty. I keep hearing that proposals are coming, but proposals are not what is needed. Action is what is required and this Congress has allowed the President and his advisors free rein to do what they will on Cuba matters. When it comes to policy and lawmaking, acquiescence is akin to acceptance.

The first failure was allowing the President to remove Cuba from the state sponsors of terrorism list. Cuba belongs on that list and Congress could have stopped it. There were several non-Florida members in both chambers ready to fight the good fight, but special interests lobbied against it and the effort was ended. That was a big mistake and will set the tone for a more complicated legislative process later this year that will do little, if anything, to stop the Obama Administration’s overtures to Cuba or their repeated violations of U.S. law. And, for those of us on the outside trying to help clients, it is already making matters difficult and much more challenging.

Despite the political wrangling that will continue to muddle the clear roadmap in place with respect to Cuba since 1996, there is one thing that political and business leaders should’ve discussed a long time ago, even before December 2014: a Corporate Code of Conduct for Cuba. And while political leaders and regulators should be consulted, the process should be voluntarily, market-based, but adopted by every company that engages in authorized transactions with Cuba.

If persons subject to U.S. law (a term that covers a lot of people and corporations) are going to do business in Cuba, they should put the Cubans on notice, in writing, that they will do so consistent with the following principles (this is a preliminary list that I’ve created in collaboration with business, legal, and other experts interested in a truly market-focused approach to U.S.-Cuba policy under, and most importantly, existing laws):

  1. Consistent with U.S. law and international law, respect labor rights of Cuba workers.
  2. U.S. companies will not do business with Cuban entities, or persons, that violate human rights including the right of speech, assembly, and religion.
  3. Bribery will not be tolerated and will be immediately disclosed to U.S. authorities.
  4. Companies subject to U.S. will not engage tourism or medical apartheid or any other activity the discriminates against Cubans.
  5. All transactions and business activities in Cuba must be done on property that is not subject to a U.S. certified claim, or if known, potential uncertified claims held by Cuban-Americans.

There are a few more that I’ll publish in a few days I’ve also been researching what the cost would be for Congress to provide a corporate tax credit to any American entity subject to U.S. law that adopts a Code of Conduct for Cuba work.

The Cubans will probably balk at some, or all of these requirements; however, persons subject to U.S. law should know that most of these principles are rooted in non-sanctions U.S. law and if you ignore it, you’ll be the one exposing your company to legal liability. And for those items that are not legally required, you still face potential legal liability as well as public relations problems that could arise as more and more scrutiny is placed on the Cuba marketplace.

Keep in mind that the Cuban people are completely demoralized, exhausted, and, simply, plain tired of six decades of Communism. They are also mindful of those that helped party bosses get rich at their expense, such as European and Canadian companies. U.S. companies that engage in Cuba should set a higher standard. Lead by example. The Cuban worker and future consumers will take notice.

When the transition happens from Communism to freedom, and it will, you’ll have done a whole lot of good to advance U.S. interests with respect to Cuba as well as the Western Hemisphere. At that point, the U.S. will be better poised to be the largest foreign investor in Cuba, at the ready, to rebuild. Think of it as a long-term investment. A little bit of pain today for a long-term benefit that should result in a good bargain for all parties.


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