Helms-Burton: Will US citizens soon be suing European companies operating in Cuba?

Given the continuing support for the at least de facto governing Venezuelan regime headed by Nicolas Maduro, the US is stepping up the pressure on Cuba by implementing the third part of the Helms-Burton Act. This procedure entails considerable risk for European companies, too, of being sued in US courts in connection with business done in Cuba.

Title III of the Helms-Burton Act

With effect from 2 May 2019, the US government will apply the formerly suspended Title III of the Helms-Burton Act, officially the Cuban Liberty and Democratic Solidarity Act. This enables US citizens who from a US perspective were expropriated during the revolution of 1959 to bring lawsuits for compensation before US courts. The right to sue is held both by US citizens who were already US citizens in 1959 as well as by Cuban-Americans who only obtained US citizenship later on.

The lawsuits may also be aimed in particular at supposed beneficiaries of expropriations. Thus US citizens will probably be entitled after 2 May 2019 to sue foreign companies or persons as tenants, lessees or the like of property expropriated during the Cuban revolution. This may therefore also affect European companies operating in Cuba and using what from a US perspective is “infected” property. Therefore any risk assessment should look closely at the history of the property used.

However, the Helms-Burton Act is not a new phenomenon. It has already been around since 1996. But since that time, every American president refrained from applying the opportunity to sue laid down in Title III. When the US implemented the Helms-Burton Act, the EU responded with its Blocking Regulation (for more details of how the Blocking Regulation works, see our News of 7 August 2018). In particular, this forbids compliance with the provisions of the Helms-Burton Act or enforcing decisions resulting from the Act in the EU. The truth is, however, that for all companies with US business or even subsidiaries in the US the Blocking Regulation offers little consolation. While the opportunity to sue the USA in the EU for compensation does exist, it is actually purely theoretical.

So the activation of Title III of the Helms-Burton Act harbours not only a legal dilemma but also economic and political dynamite.

Outlook

While it is still uncertain how US courts will deal with any expropriation lawsuits, these cases may give rise to complex factual and legal issues. There are no judicial precedents. Potential for such lawsuits does exist, though. According to Kimberly Breier, Assistant Secretary of State for Western Hemisphere Affairs, expropriation claims worth several billion dollars have been filed to date.

The High Representative of the Union for Foreign Affairs and Security Policy, Federica Mogherini, and EU Trade Commissioner Cecilia Malmström have called the application of Title III of the Helms-Burton Act a contravention of international law and have already announced consequences. They referred not only to the EU Blocking Regulation, but stated that the EU was also considering suing the US for breach of WTO law. The situation remains very interesting, and we will keep you up to date.