Trafficking in Confiscated Cuban Property: Lender Liability under the Helms‐Burton Act
| Pages | 207-222 |
| Date | 01 January 1998 |
| DOI | https://doi.org/10.1108/eb025834 |
| Published date | 01 January 1998 |
| Author | Kern Alexander |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 5 No. 3 — Analysis
ANALYSIS
Trafficking in Confiscated Cuban Property: Lender
Liability under the Helms-Burton Act
Kern Alexander
The Cuban Liberty and Democratic Solidarity Act
(the Act) provides for extraterritorial jurisdiction
and sanctions against foreign companies which
traffic in confiscated US-owned Cuban property.
The Act provides US nationals with a private right
of action in US courts against foreign companies
which benefit from the use of confiscated prop-
erty. The Act also authorises the exclusion from
US territory of any corporate officers, directors, or
controlling shareholders, including their spouses
and minor children, of companies which derive
any economic benefit from the use of confiscated
Cuban property. Moreover, s. 103(a) of Title I of
the Act imposes civil liability against any lending
institution with a US presence which knowingly
makes any loans to persons who benefit from the
use of
confiscated
Cuban property.
The first part of this article will focus on the
events which led to passage of
the
Act and on how
some countries have responded. The second part
will analyse the civil liability provisions of Title III
of the Act, with particular emphasis on how they
affect lending institutions which finance transac-
tions involving confiscated property in Cuba. The
third part will describe the alien exclusion provi-
sions of Title IV and how they are applied to the
officers and directors of non-US companies which
traffic in confiscated Cuban property. The fourth
part argues that Titles III and IV of the Act violate
certain principles of customary international law.
THE HELMS-BURTON ACT —
BACKGROUND
On 12th March, 1996, President Clinton signed
into law the Cuban Liberty and Democratic
Sol-
idarity (LIBERTAD) Act (the Act).1 The Act,
better known as the Helms-Burton law,2 purports
to increase pressure on the Cuban Government by
tightening the 35-year-old US trade embargo
against Cuba. Title III of the Act contains sweep-
ing language which permits US nationals whose
property was expropriated without compensation
by the Castro regime to sue foreigners in US
fed-
eral courts if they benefit from the use of such
confiscated property.3 Title IV of the Act requires
the revocation of travel visas issued by the US
Government to any foreign person who is the
offi-
cer, director or controlling shareholder of
a
busi-
ness entity which does business affecting
expropriated property in Cuba.4 These provisions
have already angered US trading partners and have
prompted some to enact retaliatory measures
against US exporters.5
In addition, the Act codifies the existing trade
embargo, which has imposed sanctions through
executive orders since 1962,6 and increases direct
and indirect economic sanctions against Cuba. The
four major provisions of the Act have the stated
purposes of: (1) increasing international sanctions
against the present Cuban Government; (2) assist-
ing Cuba in the transition to a democratically elec-
ted government; (3) protecting the property rights
of US nationals who had Cuban property expro-
priated by the Castro Government after the 1959
revolution; and (4) excluding from US territory
aliens who have confiscated property of US
nationals in Cuba or who traffic in such confis-
cated property.7 The latter two provisions of the
Act are found respectively in Title(s) III and IV
and have been widely criticised by several states as
an illegal attempt by the USA to extend its law
cxtra-territorially in violation of customary inter-
national law and of US treaty obligations.
The Clinton administration initially opposed a
more moderate version of the Helms-Burton bill
primarily because it appeared to violate inter-
national law and would be likely to prompt retalia-
tion from US trading partners.8 However, after
two Cuban MIGs intercepted and shot down two
small civilian planes piloted by four Cuban-Amer-
ican citizens9 in the Florida straits in February
1996, President Clinton, under political pressure,
reversed his policy and signed a more stringent
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Journal of Financial Crime — Vol. 5 No. 3 — Analysis
version of
the
bill into
law.10
While the law may be
aimed at blocking new foreign investment in
Cuba,
it has instead caused much concern amongst
many US trading partners and has prompted some
of
them
to enact retaliatory
measures.11
The civil liability provisions of Title III of the
Act impose money damages against any person
who traffics or derives any benefit from the use of
expropriated property.12 Title III creates a private
right of action against 'persons' who 'traffic' in
property that was once owned by US nationals or
entities but was expropriated without compensa-
tion by the Cuban Government after the 1959 rev-
olution.13
Title III also imposes civil liability on
any lending institution (US or foreign) which
finances any type of business activity between non-
US persons and the Cuban Government which
affects expropriated property.14 Moreover, Title III
explicitly rejects the Act of State Doctrine and
empowers US courts to adjudicate the property
claims arising from the Cuban Government's
expropriations of property located within Cuban
territory which occurred after
1st
January,
1959.15
In addition, Title IV of the Act imposes broad
immigration exclusions from US territory against
aliens who have confiscated the Cuban property of
US nationals or have trafficked in or derived com-
mercial benefit from such property.16 The provi-
sion is broad in the sense that it defines excludable
aliens to include not only the individuals respon-
sible for the property taking but also anyone who
directed or supervised a confiscation or trafficked
or benefited from using confiscated property. This
provision applies to corporate officers and control-
ling shareholders of companies that have been
'involved'
in the expropriation or trafficking of
such property.17
The primary purpose of the Helms-Burton law
is to increase pressure on third-country nationals
to stop investing in Cuba and to reduce or elim-
inate their holdings of expropriated Cuban assets.
By exposing third-country nationals to liability, the
Act essentially permits US claimants to enforce
their property rights under international law by
authorising US courts to adjudicate their claims
and award damages.
Although Helms-Burton has become US law,
the President has the authority to suspend or waive
the filing of private claims under Title III for six
month intervals if the President determines that to
do so is in the US national interest.18 The Act
requires the President to make this determination
every six months beginning in July of 1996.19 The
first of
these
waivers went into effect on 16th July,
1996, when President Clinton suspended author-
isation for filing actions, presumably to avoid the
immediate rash of filings and consequent reaction
from other countries. President Clinton has main-
tained the suspension of claims under Title III
since July 1996.
The international reaction to Helms-Burton has
been overwhelmingly negative. Most countries
contend that the Act violates international law.20
Canada and Mexico both claim that the Act vio-
lates US obligations under the North American
Free Trade Agreement (NAFTA). Both countries
have taken domestic legislative action to counter
the Act. The Canadian Parliament responded by
amending existing blocking laws to make it illegal
for Canadian businesses, including Canadian sub-
sidiaries of US companies, to comply with the
provisions of the Act.21 In addition, the Canadian
Parliament has enacted an amendment to its For-
eign Extraterritorial Measures Act (FEMA) to pro-
vide Canadian companies a means to countersue in
Canadian courts to recover damages awarded by
US courts under Title III of the Act.22 In early
September 1996, Mexico's Senate unanimously
approved a Helms-Burton 'antidote' law which
fines Mexican companies that allow themselves to
be fined under Helms-Burton.23
The Council of Ministers of the European
Union (EU) has formally approved a Regulation
which is intended to neutralise the impact of the
Helms-Burton law and any similar future laws on
the trading activities of EU nationals. The Regula-
tion authorises nationals of its constituent states to
file countersuits in European courts against plain-
tiffs who have filed actions against them under
Title III of the Act.24 Moreover, the Regulation
effectively blocks the recognition and enforcement
within the EU of any judgment by a court or
tribunal outside the Community which gives effect
to the US legislation. It also makes non-compli-
ance with
a
judgment under the Act obligatory and
permits EC persons and companies to recover the
amounts obtained by US nationals under Title III
of
the
Act.
In addition, Canada, Mexico and the EU have
threatened to employ the dispute resolution mech-
anisms of international trade agreements against
the USA to determine whether Helms-Burton
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