Title III of the Helms Burton Act: How to protect yourself

What does Title III establish?

Title III of the Helms-Burton Act allows former US persons who were affected by the nationalizations of the Cuban Revolutionary Government, to claim compensation for damages against those who “traffic” with property and assets confiscated as of January 1, 1959.

The concept of “trafficking” includes, among others:

  • Investing in confiscated property.
  • Holding a legal interest in a confiscated property, such as a mortgage or other interest insured therein.
  • Conducting direct business with those properties and the administration or lease of the property.
  • Any commercial action benefiting from those properties.

Title III, which had been suspended by all US governments every six months since its approval in 1996, has ceased to be a vague threat that gravitated on foreign investors in Cuba to become a reality.

What happened?

On Wednesday, April 17th, Secretary of State Michael R. Pompeo announced that the United States will end the suspension of Title III of the Helms-Burton Act, that is, without granting “any exemption” to foreign companies that have businesses in Cuban territory.

The decision taken today will open the door to the presentation of the 6,000 claims included in the Registry of Settlement of International Claims, with a total certified value of 9 billion dollars, which could be substantially increased by interest and through increases provided by the law.

What are the consequences of this decision?

This policy change opens the door to the filing of lawsuits in the United States against companies around the world, including Spanish hotel chains or the Canadian company Sherritt, whicj is one of the main foreign investors on the island.

That decision could increase tensions with the European Union, since this month, the high representative for Foreign Policy, Federica Mogherini, warned in a letter to Mike Pompeo that the EU could sue the US before the World Trade Organization (WTO) if Washington applied this measure contrary to the doctrine of International Law according to which an investor should only subject its operations to the laws of the country in which it acts and those of its territory of origin, not to those dictated by a third State.

In addition Mogherini explained that the European Union is determined to activate all possible responses, including the possibility that US companies are also confiscated in Europe, in order to compensate for the losses suffered by European companies in Cuba.

How can investors be protected?

In general, Spanish and European investors who are threatened by laws of extraterritorial effect have at their disposal specific protection measures derived from what in the terminology of Public International Law is known as “blocking regulations” and that suppose an affirmation of the exercise of sovereignty.

European regulation

The Council of the European Union adopted on 22 November 1996 Regulation (EC) n. 2271/96, on protection against the effects of extraterritorial application of the legislation adopted by a third country, and against actions based on it or derived from it with the purpose of counteracting those effects.

This Blocking Regulations protects the interests of any of the national or resident natural persons or legal persons incorporated in one of the Member States engaged in international trade or the movement of capital and related commercial activities between the European Union and third countries. The antidote imposes some specific obligations or prohibitions on the aforementioned subjects as measures so that Title III of the Helms-Burton Law cannot have effects:

  1. The obligation to notify the European Commission of all situations in which its economic or financial interests are affected, directly or indirectly, by the application of the laws of extraterritorial effect listed in the Annex to the Regulation itself and among which, obviously, find the Helms-Burton Act.
  2. The prohibition to recognize or enforce judgments or court decisions and the decisions of administrative authorities located outside the European Community that enforce the rules related to the Regulation or actions based on it or derived from it. Therefore, the beneficiaries of such judicial or administrative resolutions may not avail themselves of the “exequatur” or any other mechanism, such as agreements or treaties, of recognition and enforcement of judgments or judicial decisions since they do not comply with the law and violate the International Law.
  3. The right to initiate actions against those who have sued them in the United States to obtain an integral reparation of the damages derived from such claim. This compensation covers any type of damages suffered, including the procedural costs and the liability extends to any natural or legal person that has caused them acting in their own name or also as intermediaries.
  4. Other measures aimed at hindering the plaintiffs’ investigation procedures under Title III prohibiting respecting whatever is established in the Helms-Burton Act in relation to the requirements of the US courts.

Authors: José María Viñals y Tania Esparza