Cuba Owes Billions to American Citizens. Litigation Avoidable.

After the 1959 Cuban communist revolution, the government of Cuba confiscated properties from American citizens and others including its own people. To date, this remains the largest[1] confiscation of American property by any foreign government in history.  The unlawful land grabs were done under the color of law. At times, done by bearded thugs using brute force, some landowners had to sign over their property to the state while staring down the barrel of a gun. A majority of the confiscations were also politically and ideologically motivated.

The Cuban government has refused to compensate the former owners of the property in violation of Cuban law and international law. A few years after the end of the Cold War and the economic collapse of its chief patron, the Soviet Union, it was clear Cuba had no intention to make Americans whole. In fact, there was evidence at the time Cuba was purposely trying to make it harder to settle property claims over the long run. Muddling title to a property, not necessarily the property records, is an official state policy. Remember, the people who run Cuba are members of the Communist Party.

Cuba’s communist intellectuals, among others, view property confiscations as reparations for alleged past wrongs by the Americans and anyone, including Cubans who did not tow the socialist line. This small cadre of Communist hardliners believes Cuba does not need to compensate Americans or anyone else for that matter. Ever. So rather than settling claims, there is a small but powerful group in the government that encourages trafficking in confiscated properties by foreigners. There are others who do not. Let’s see if the latter group prevails because if it does not, this process will be a long one.

There is a bitter battle taking place amongst Cuba’s 1%. Most are not interested in socialist revolutions, they’re interested in moving beyond the quixotic dreams of the revolutionary class and rebuilding the nation. America is a natural trade partner. We want to build, not destroy. It will take time, but we need America’s help.

A former Cuban government official to the author (2016)

This sort of deliberate targeting of lands by encouraging trafficking in properties that are the subject of claims, a practice I believe continues to this day, was, and remains, unprecedented in the history of foreign government confiscation of American property owned by foreign nationals. There is no question a sovereign nation power, and some legal scholars argue an obligation, to set the ground rules for who owns what; however, stealing the property without compensation to change policy is against international law.

To address the issue of uncompensated property claims, in 1995 the U.S. Congress reminded Cuba, foreign investors, and the world that America defends the property rights of her citizens, no matter how long it takes. If Cuba had settled with U.S. taxpayers, there would’ve been no need for such as far-reaching law that includes lawsuits against persons who traffick in stolen property. For a variety of reasons, reasons no longer relevant as a matter of policy, the section of the law that allowed American citizens to defend their property rights in U.S. courts was never enacted. That changed a few weeks ago.

While Poblete said stricter enforcement of Helms-Burton would be great, “it’s not a cure-all.” He said the best outcome would be to use it as a tool to get Cuba and the United States to the negotiating table to finally settle pending claims against Cuba. “The claims have been waiting a very, very long time,” said Jason Poblete.

The Miami Herald, July 21, 2018

I believe at least a year ago or more, President Donald Trump decided it was time to start a discussion about settling, once and for all, the property claims dispute with Cuba. Rather than tinker on the margins of U.S. policy, he issued a broad national security directive that set out a re-orientation of U.S. Cuba policy. The lawsuits are a small, but critically important part of a larger process that I think will take years to resolve. The goal is not a rush to the courthouse, but the resolution of claims. As part of this new U.S.-Cuba policy, on April 17, 2019, Secretary of State Mike Pompeo announced that effective May 2, 2019, the United States would allow American citizens to defend their property rights in U.S. courts.

After decades of working on U.S.-Cuba policy matters, I know this was not an easy decision for the administration. I suspect there was a lot of opposition to it coming from the business sector and likely allies whose foreign nationals do business in Cuba. The Canadians and the Europeans will likely complain the most, but they can also be part of the solution if they choose to be. Rather than focus on short-term fire sales, they can be part of a long-term solution that will impact well beyond Cuba.

These lawsuits do not necessarily mean the United States and Cuba will resolve the claims dispute. Far from it. Sooner or later, both nations will have to negotiate a global settlement agreement that details a solution to the U.S.-Cuba property dispute. The Trump administration should redouble efforts to sit down and negotiate claims with Cuba. In the meantime, claim holders will have another tool to defend their property rights. Claim holders will be able to sue Cuban government state-owned enterprises or, the more likely scenario, foreign companies profiting from transactions in Cuba that include properties confiscated from American citizens without compensation.

The Cuban Liberty and Democratic Solidarity Act of 1996 was enacted to, in part, to protect United States nationals against confiscatory takings and the wrongful trafficking in property confiscated by Cuba.”

22 U.S.C. § 6022 (6)

As expected, the European response has been swift. In a tersely-worded letter to Secretary Pompeo by senior European Council officials Federica Mogherini and the top trade official Cecilia Malmström said: “We are determined to work together to protect the interests of our companies in the context of the WTO,” adding that the U.S. action of allowing lawsuits “can only  lead to an unnecessary spiral of legal actions.” While I expected them to say something like, what about Cuba?

As I discussed with Real Clear Politics a few weeks ago:

“I wonder if the EU’s foreign minister and top trade official wrote a similar letter to [Rodriguez Parrilla] urging Cuba to consider negotiations to settle this matter once and for all?” Poblete told RCP. “My sense is they did not. As with the Iran deal, Europe has demonstrated they are not interested in solutions. America needs to look out for American interests first for a change.”

I guess any country would want to defend the rights of their companies from exposure to U.S. economic sanctions; however, the United States also the right, consistent with international law, to take steps to protect the rights of its nationals. If the legal arguments do not sway you, then the economics should. Cuba claims it needs foreign investment. What better way to increase confidence in its investment climate by settling claims with American citizens? Canada and European Union state parties, especially Spain, should work with the Trump administration to press a united message on the importance of Cuba, indeed any nation, respecting private property rights.

During an interview with France’s TV5Monde:

But without even predicting the outcome of each complaint (lawsuit), nor the execution of possible judgments, the prospect of prosecution represents an “important complication for Cuba,” noted the lawyer Jason Poblete, expert in international sanctions.

According to him, potential investors with interests in the United States will now think twice before making a transaction in Cuba involving a confiscated property. A view shared by other observers.

“The specter of political risk has always existed, but now this spectrum has become a reality and it is no longer just a political risk, but also a potentially legal risk,” Poblete continued.

The Canadian and European governments could make a dash to the WTO and complain; however, why would they want to do this? Are they willing to risk that political capital for such a small market for European and Canadian companies? Do the Europeans have enough political capital to challenge the United States on both Iran and Cuba? Iran has oil, Cuba does not. I think the choice is clear where the Europeans will invest most of their political capital, at least in the near term.

Just like the Iran/JCPOA scenario, if the Trump administration ops for a “maximum pressure” campaign on Cuba, most companies would choose to do business in the United States, not Cuba. Cuba is not an important global trade market. In light of what is happening in Nicaragua and Venezuela, it makes sense to seriously explore further enhancements to U.S.-Cuba policy. While the goal is not a rush to the courthouse or an economic embargo, there are many tools in the box with respect to Cuba that have never been used. The Trump administration will need to use them or these recent actions will not amount to much over the long run.

Cuba can avoid a “maximum pressure” campaign by, among other things, negotiating a global claims settlement agreement with the U.S. government. Releasing unlawfully detained Americans and extraditing fugitives from U.S. law would also be a good confidence-building measure. The Cuban government should also help the United States get to the bottom of what happened to Americans working in the U.S. Embassy starting a few months after President Obama left Cuba. It will go a long way to rebuild much-needed trust with the U.S. taxpayer and likely set the stage for a better U.S.-Cuba policy posture than what exists today.

[1] There are many ways a claim holder can be made whole. The options include the return of the same or a comparable property, the payment of money, and much more. Claim holders or potential claimants are strongly urged to consult with an attorney to discuss all legal options and related considerations.