United States: Turnabout: Preparing For The Trump Administration's New Cuba Restrictions And Lawsuits On "Trafficking" In Confiscated Property

The Trump Administration announced that it would continue to reverse course on changes to US sanctions laws against Cuba that had been implemented under President Obama in order to ease the decades-old embargo.1 The anticipated changes will be the second round of heightened restrictions involving Cuba imposed by the Trump Administration, the first having gone into effect in November 2017, after President Trump first announced the broader policy change toward Cuba in June 2017.2

In the latest announcement, the Trump Administration made clear that the second round of amendments to the embargo against Cuba would be even more restrictive. Not only did President Trump indicate he intends to reverse certain major elements of President Obama's Cuba policy—including by restricting more travel to Cuba by Americans and by prohibiting a wider range of financial transactions involving Cuba—but the Administration also intends to allow lawsuits against non-US persons who "traffic" in property in Cuba expropriated from Americans. Specifically, on April 17, Secretary of State Mike Pompeo announced that he will no longer suspend application of Title III of the Cuban Democracy and Solidarity (Libertad) Act (known as the Helms-Burton Act), which permits US nationals to sue any person who "traffics in property which was confiscated by the Cuban Government on or after January 1, 1959."  Title III has been suspended every six months by every President since it was enacted in 1996, but the Trump Administration has announced it intends to allow it to go into effect for the first time ever, effective May 2.

The activation of Title III will allow nearly 6,000 US companies and persons who hold claims certified by the US Foreign Claims Settlement Commission (FCSC) as well as US nationals with uncertified claims—estimated to be up to 200,000 citizens—to sue US and non-US companies alike in the United States.3   The likely defendants include non-US companies that are leasing property or engaged in hotel, construction, or other operations in Cuba, as well as Cuban government entities and companies that now own confiscated property. Although US companies will be able to file lawsuits, they are also likely to be drawn into litigation filed by others (including many individuals) and subsequent efforts to attach assets of defendant entities in the United States. US companies may also be targeted for reciprocal legal actions by foreign governments.

An End to the Détente

Particularly during his second term, President Obama took a number of steps to thaw relations between the US and Cuba, to cultivate dialogue and connection between Cubans and Americans, and to empower the Cuban people. President Trump appears poised to largely overturn those efforts. The President's announcement on April 17 indicates that the Administration may undertake—or at least order the implementation of, through regulation—the following policy changes on or after May 1:

  • Banking Restrictions. A renewed prohibition on so-called "U-Turn" transactions involving Cuba, which are currently permitted (subject to certain conditions) by general license.4 U-Turn transactions are transactions that begin and end outside of the United States, but that flow through or are cleared through a US financial institution, in order to clear US dollar-denominated transactions or otherwise. Most US dollar transactions are cleared by US intermediary banks. Thus, US banks are often involved in and process US dollar-denominated transactions, even if those transactions neither begin nor terminate in the US. These types of U-Turn transactions (which often result in a non-US party being deemed to have "caused" a US bank to violate sanctions by processing prohibited transactions) have been a predominant source of liability, particularly for non-US financial institutions and other companies. The Trump Administration's reimposition of the U-Turn transaction prohibition on Cuba will make international financial transactions involving Cuba far more difficult and risky under US sanctions law. In short, this potential change has the potential to have a major impact on foreign businesses.
  • Travel Restrictions. On April 17, the President also stated he intends to restrict "non-family travel" involving Cuba.5 The Treasury Department has not yet released new regulations implementing this policy change, so it is difficult to predict how this statement will ultimately be implemented, but it likely means that the Administration intends to terminate or modify some of the travel-related general licenses issued under President Obama that permitted Americans to travel to Cuba.6 National Security Advisor John Bolton noted in a speech on April 17, 2019 that the Administration intended to restrict non-family travel to Cuba that was "veiled tourism."7 In 2017, over 600,000 Americans visited Cuba, which was more than six times pre-Obama rates of travel.8 The President's new policy appears intended to diminish that number.
  • Helms-Burton Visa Restrictions. The Administration also appears to intend to step up enforcement of Title IV of the Helms-Burton Act, which permits the US government to deny US visas to "corporate officers, principals, or shareholders with a controlling interest of an entity" (as well as to spouses, minor children, and agents of these individuals) involved in trafficking in confiscated property subject to a claim by a US person.9 As explained in detail below, "trafficking" is defined very broadly under Helms-Burton, and could be read to include virtually any involvement in business that is connected to "confiscated" property claimed by a US person. Enforcement of Title IV has been sporadic since enactment of the Helms-Burton Act, but denial of visas in previous Administrations has caused significant friction with European allies.10

The Potential Impact of Title III

While the policy changes cited above are important and represent a reversal from President Obama's Cuba policy, the April 17 announcement that the Trump Administration will cease to suspend Title III of the Helms-Burton Act for the first time in 33 years is the most significant shift in US policy toward Cuba. It may result in dozens, hundreds, or even thousands of lawsuits in US courts and cause significant friction with US allies. Potential claimants, which range from individuals holding relatively small claims to large companies holding hundreds of millions of dollars in claims, may also see this as the first opportunity in more than three decades to obtain compensation for their confiscated property.  

Title III authorizes US nationals to sue persons who "traffic" in property confiscated by the Cuban government on or after January 1, 1959. As used in both Title III and Title IV of the Helms-Burton Act, the term "traffic" is defined very expansively to include:

  • transferring, distributing, dispensing, brokering, or otherwise disposing of confiscated property;
  • receiving, obtaining control of, or otherwise acquiring confiscated property;
  • improving (other than for routine maintenance), investing in (by contribution of funds or anything of value, other than for routine maintenance), or managing, leasing, possessing, using, or holding an interest in confiscated property;
  • entering into a commercial arrangement using or otherwise benefiting from confiscated property; or
  • causing, directing, participating in, or profiting from, trafficking (as described above) by another person, or otherwise engaging in trafficking (as described above) through another person.11

Thus, this definition could even include participating in, or profiting from, trafficked property, which may include providing ancillary services to companies that hold an interest in confiscated property.

Title III provides that trafficking individuals or companies will be liable to the US claimants for monetary damages equaling the greatest amount of an applicable certified FCSC claim, plus interest or other amount in the case of non-FCSC claims (or if a litigant can prove that their FCSC claim is worth more than the certified claim).12  Treble damages may apply if the trafficking relates to property for which the claimant has either a certified FCSC claim or has provided proper notice to the trafficking individuals or companies at least 30 days prior to initiating or joining in a Title III action.

Given how aggressive litigants have been in pursuing claims against Cuba or related to allegedly confiscated Cuban property under other, more limited theories and legal bases, and given how expansive the definition of "trafficking" is under Helms-Burton, it is unlikely that a company that does business in or related to Cuba can insulate itself entirely from a potential lawsuit. However, the filing fee for bringing suit under Title III is a substantial $6,548 in addition to the ordinary filing fees for bringing a civil action.13  This may discourage entirely frivolous claims.

Whether and when lawsuits under Title III will ultimately be successful is less clear. One significant issue anticipated in this litigation will be claimants' ability to prove chain of title of the property at issue. Although Title III provides that a claim certified by the FCSC is deemed conclusive proof of ownership in a claimant's interest in trafficked property, claimants will still have to prove a link between the property that is the subject of their claim and a defendant company's activities, and that such activities qualify as "trafficking" under the Helms Burton Act. In other words, trafficking in confiscated property will still have to be proven and in some cases that may be difficult.

A company that wishes to check its potential exposure to trafficking claims may want to search the US government's Cuban FCSC claims index. While there is limited information available in this database about each claim, the database does include some useful data points, such as the name of the underlying interest of each claim (i.e., the company involved) and, for real estate, the general location of the claimed property in Cuba. Each claim decision is also publicly available, as is the FCSC's final report on the Cuba claims process from 1972, which may contain additional useful information regarding the claims that exist. These resources may be useful in assessing exposure under Helms-Burton.

Of course, it is also important to note that lawsuits brought under Title III are not limited to persons with claims certified by the FCSC. There may be up to 200,000 other claimants with uncertified claims. There are limitations on other claimants (for example, claims that could have been brought before the FCSC but were not are generally barred), and the high filing fee makes entirely frivolous claims unlikely, but creative litigants could bring new claims that are not based on FCSC certified claims, and the existence of such claims would not be identifiable in FCSC materials.

*          *          *

Given the likely new limitations on travel and financial transactions involving Cuba that will be implemented by the Trump Administration, as well as the legal exposure of companies involved in business in or involving Cuba (and the personal risk to officials of such companies that their visas could be denied), the forthcoming changes to US sanctions laws are likely to have a serious impact on US and non-US persons and companies alike. Non-US companies, in particular, should assess potential exposure to lawsuits and visa denials under the Helms-Burton Act, and more generally under the US Cuban embargo, in the coming weeks in order to be prepared for any Title III litigation filed against them.

Footnotes

1 See White House Fact Sheet (April 17, 2019), President Donald J. Trump Is Taking A Stand For Democracy and Human Rights In the Western Hemisphere.

2 See Arnold & Porter Advisory (Nov. 13, 2017), Trump Administration Implements Tightening of Cuba Sanctions,

3 Reuters, "Trump lifts ban on U.S. lawsuits against foreign firms in Cuba," April 17, 2019,

4 See 31 C.F.R. §515.584(d).

5 See White House Fact Sheet (April 17, 2019), President Donald J. Trump Is Taking A Stand For Democracy and Human Rights In the Western Hemisphere.

6 See White House Fact Sheet  (April 17, 2019), President Donald J. Trump Is Taking A Stand For Democracy and Human Rights In the Western Hemisphere.

7 Reuters, "Trump security adviser Bolton unveils new U.S. sanctions to pressure Cuba," April 17, 2019.

8 Yes, Americans Can Still Travel to Cuba; see also 31 C.F.R. § 515.560.

9 22 USC § 6091(a)(3).

10 See, e.g., Pablo Bachelet, "Embargo law due for another tweak, says author," Miami Herald (Mar. 18, 2006); George Gedda, "Citing Ties to Cuba, U.S. Bars Resort Execs," Miami Herald (May 21, 2004).

11 22 U.S.C. § 6091.

12 22 U.S.C. § 6082.

13 https://www.uscourts.gov/services-forms/fees/district-court-miscellaneous-fee-schedule

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