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Under Helms-Burton Act, Entities
With Business Ties to Cuba Now
at Risk of Lawsuits
05 / 09 / 19
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Skadden, Arps, Slate, Meagher & Flom
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In April 2019, Secretary of State Mike Pompeo announced that the U.S. government
would allow a private right of action, created by Title III of the Cuban Liberty and
Democratic Solidarity (Libertad) Act of 1996 (also known as the Helms-Burton Act),
22 U.S.C. §§ 6021-6091, to become available to plaintis. Enacted in 1996 but contin-
uously suspended for the last 23 years, Title III of the Helms-Burton Act provides a
private cause of action allowing U.S. nationals to sue a range of persons and entities that
“trac” (see definition below) in property expropriated by the Cuban government.
Liability for “tracking” is potentially severe, as the statutory damages for such activity
are deemed to be the value of the property itself. Those damages are also subject to
trebling in some cases. Liability for “tracking” can potentially attach to any dealings
in property confiscated since 1959.
The creation of this private civil claim, which claimants may argue has extraterritorial
eect, drew criticism from some quarters when it was enacted in 1996 particularly
among countries that do not subject Cuba to economic sanctions and saw the statute
as an attempt to create a “secondary boycott” of Cuba. This diplomatic pushback was
likely among the factors prompting successive U.S. administrations to suspend Title III’s
private right of action until this year. Now that the suspension has expired, all compa-
nies, individuals and governments with business ties to Cuba are potentially at risk of
Helms-Burton lawsuits.
Private Right of Action Against Persons ‘Trafficking’ in Confiscated Property
President Bill Clinton signed the Helms-Burton Act on March 1, 1996, by which point
Cuba’s then-president, Fidel Castro, had been in power for over three decades. Much of
the law addressed or codified sanctions and other matters directed against Cuba, includ-
ing setting certain requirements for a termination of the U.S. embargo of Cuba.
The Helms-Burton Act is accompanied by congressional findings that reference the Castro
government’s past history of confiscating private property without compensation. It finds
that allowing this previously confiscated property to be used in business transactions
would “undermine[]” U.S. eorts to create a “general economic embargo.”
1
Against that
background, Title III seeks to create a private right of action for U.S. nationals against
persons who have “tracked” in property confiscated by the Cuban government.
Specifically, the Helms-Burton Act states that, with certain exceptions, “any person that,
after the end of the 3-month period beginning on the effective date of [Title III], traffics
in property which was confiscated by the Cuban Government on or after January 1, 1959,
shall be liable to any United States national who owns the claim to such property
for money damages ...”
2
The cause of action runs for a period of two years after the
alleged tracking ceases.
3
The definition of “person” is broad and includes “ any person
or entity, including any agency or instrumentality of a foreign state.”
4
Claims may be
brought in a U.S. district court.
5
1
22 U.S.C. § 6081(6)(A).
2
22 U.S.C. § 6082(a)(1)(A) (emphasis added). Despite the long dormancy of the private right of action, plaintiffs
are likely to argue that the “effective date” of Title III was August 1, 1996.
3
22 U.S.C. § 6084.
4
22 U.S.C. § 6023(11). An action against a foreign government (or government-owned entity) would, of course,
have to come within an existing jurisdictional exception to sovereign immunity, as set forth in a separate
statute, 28 U.S.C. § 1602-1611.
5
22 U.S.C. § 6082(c)(1).
2 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates
Damages in a private Helms-Burton Act lawsuit will be the
greater of (i) fair market value at the time of taking plus
interest; (ii) current market value; or (iii) the amount certified
by the U.S. Foreign Claims Settlement Commission (FCSC) (on
those cases where that body has adjudicated).
6
Damages may
be trebled, however, in cases where a defendant has been on
specific notice that it is tracking in property and fails to cease
doing so within 30 days.
7
Damages are also trebled in any case
where the FCSC has already ascertained (in the course of one
of its prior statutory reviews of Cuban expropriations) that the
property was confiscated.
8
The “act of state” doctrine (which might otherwise have barred
consideration of these claims) is abrogated,
9
and the congres-
sional findings include a statement that “a nation has the ability
to provide for rules of law with respect to conduct outside its
territory that has or is intended to have substantial eect within
its territory.”
10
Notably, a plainti’s ability to bring a claim is restricted in the
case of property confiscated after March 1, 1996. If a claim for
confiscation was acquired through an “assignment for value,” the
statutory cause of action is not available.
11
There are also certain
exclusions for plaintis that had the opportunity to lodge their
claim before the FCSC during its past statutory inquiries into
Cuban expropriation but failed to do so.
12
Also notable are the statute’s sunset provisions, which provide
that “[a]ll rights created under this section to bring an action for
money damages with respect to property confiscated by the Cuban
Government” can be terminated upon a congressional determina-
tion that Cuba has been restored to democracy (or suspended by
presidential order, during a transition to democracy).
13
6
22 U.S.C. § 6082(a)(1). The FCSC is a “quasi-judicial, independent agency
within the Department of Justice which adjudicates claims of U.S. nationals
against foreign governments” as prescribed by statute. See U.S. Dep’t of
Justice, “About the Commission.” In the case of Cuba, the FCSC previously
administered past programs designed to ascertain the extent of claims against
Cuba and the identity of the claimants. See 22 U.S.C. § 1643f(a).
7
22 U.S.C. § 6082(a)(3)(B)-(C).
8
22 U.S.C. § 6082(a)(3).
9
22 U.S.C. § 6082(a)(6). The “act of state” doctrine ordinarily “precludes” a U.S.
court from “inquiring into the validity of the public acts a recognized foreign
sovereign power committed within its own territory.” Banco Nacional de Cuba
v. Sabbatino, 376 U.S. 398, 401 (1964). Aside from the Helms-Burton Act, some
statutory exceptions to this doctrine exist, including the “Second Hickenlooper
Amendment,” 22 U.S.C. § 2370(e)(2), curtailing the doctrine’s operation in
certain expropriation cases.
10
22 U.S.C. § 6081(9).
11
22 U.S.C. § 6082(a)(4)(C).
12
22 U.S.C. § 6082(a)(4).
13
22 U.S.C. § 6082(h)(1); see also 22 U.S.C. § 6064(a). The statute purports
to preserve “suits commenced before the date of such suspension or
termination.” 22 U.S.C. § 6082(h)(2).
Assuming a plainti can show it is a U.S. national that owns
the compensation claim in question, the critical element of the
statutory cause of action is that the defendant “tracked” in
confiscated property. The scope of this phrase was extremely
controversial at the time of enactment and may well have been
among the factors that contributed to its eective date being
postponed.
14
Tracking is defined in the statute as follows:
a person “tracs” in confiscated property if that person
knowingly and intentionally —
i. sells, transfers, distributes, dispenses, brokers,
manages, or otherwise disposes of confiscated
property, or purchases, leases, receives, possesses,
obtains control of, manages, uses, or otherwise
acquires or holds an interest in confiscated property,
ii. engages in a commercial activity using or otherwise
benefiting from confiscated property, or
iii. causes, directs, participates in, or profits from,
tracking (as described in clause (i) or (ii)) by
another person, or otherwise engages in tracking
(as described in clause (i) or (ii)) through another
person,
without the authorization of any United States national
who holds a claim to the property.
15
Excluded from this definition are a number of activities such as
telecommunications with Cuba, lawful travel to Cuba or trans-
actions between private Cuban citizens (i.e., persons who are not
part of the government).
16
The definition of “trac” has a “knowledge” element.
17
The stat-
ute might not, however, require a causal nexus between the act
of “tracking” and the value of the property being “tracked.”
This was among the aspects of the legislation that was strongly
criticized at the time of enactment.
18
14
See Andreas F. Lowenfeld, “Congress and Cuba: The Helms-Burton Act,”
90 Am. J. Int’l L. 419, 425 (1996) (contending that the term “trafficking”
had “heretofore [been] applied in legislation almost exclusively to dealing in
narcotics”).
15
22 U.S.C. § 6023(13)(A).
16
22 U.S.C. § 6012(9)(B).
17
22 U.S.C. § 6023(8). (“The term ‘knowingly’ means with knowledge or having
reason to know.”)
18
See Lowenfeld, supra note 13 at 426 (writing that, on that author’s interpretation
of the legislative text, “[t]here is no necessary connection between the value
of the property on which the claim is based and the value of the transaction on
which the assertion of ‘trafficking’ rests”).
Under Helms-Burton Act, Entities
With Business Ties to Cuba Now
at Risk of Lawsuits
3 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates
Private Right of Action Becomes Generally Available
on May 2, 2019
Although the Helms-Burton Act originally provided that its private
cause of action would become available on November 1, 1996,
19
the statute also gave the executive branch the power to suspend
the private right of action. In respect of certain actions against
the Cuban government, the suspension expired on March 19,
2019.
20
In respect of all other actions, the suspension expired
on May 2, 2019.
Except for the narrow list of activities excluded from the
definition of “tracking,” the range of activities covered by the
Helms-Burton Act is potentially broad, conceivably touching a
variety of industries and financial services. In practical terms,
the statute has been described as a “secondary boycott” of Cuba,
designed to force other countries to join in the U.S. embargo.
21
Given the potentially high damages levels (coupled with the risk
of treble damages for companies after they are put on specific
notice of a “tracking” activity), companies with links to Cuba
may now wish to review their Cuba-related activities.
Certain jurisdictions, such as the European Union and Canada,
have so-called blocking statutes in place that are intended to
mitigate the impact of U.S. sanctions on their citizens or enti-
ties conducting (in their view) legitimate business in Cuba.
They could potentially impose criminal and/or administrative
penalties for complying with U.S. sanctions. The EU blocking
statute, Council Regulation (EC) No 2271/96, as amended, was
first adopted in November 1996 and prohibits EU persons from
directly or indirectly complying with U.S. sanctions on Cuba
unless the EU person can demonstrate that compliance with
the statute would seriously damage their interests or those of
19
22 U.S.C. § 6085(a), (c)(2).
20
See U.S. Dep’t of State, Media Note, “Secretary Enacts 30-Day Suspension
of Title III (LIBERTAD Act) With an Exception” (Mar. 4, 2019). A similar 30-day
suspension was announced on April 3, 2019, creating an expiration date of
May 1, 2019. See U.S. Dep’t of State, Media Note, “Secretary Pompeo
Extends for Two Weeks Title III Suspension With an Exception (LIBERTAD
Act)” (Apr. 3, 2019); see also id. (stating that the suspension does not apply to
“[t]he right to bring an action against a Cuban entity or sub-entity identified by
name on the State Department’s List of Restricted Entities and Sub-entities
Associated with Cuba (known as the Cuba Restricted List), as may be updated
from time to time”).
21
See Lowenfeld, supra n. 13, at 429-30.
the European Community. The EU blocking statute specifically
identifies the Helms-Burton Act as one of the U.S. laws that trig-
gers the blocking statute’s provisions. It also nullifies the eect
of any third country judgment or decision of a court, tribunal or
administrative authority, such as a U.S. court, that gives eect to
the laws covered by the blocking statute. Individual EU member
states are responsible for the implementation of the blocking
statute, including setting the applicable penalties for noncompli-
ance and enforcement of the blocking statute.
Companies that face actual litigation under the Helms-Burton
Act (as well as plaintis bringing such claims) will need to
grapple with the special challenges and unresolved questions
presented by the act, such as:
- the meaning and scope of the term “tracking” (and the mean-
ing of the various statutory exceptions);
- potential diculties in proving title to the claim to the confis-
cated property;
- what degree of contact with “property” will rise to the level of
“tracking”;
- the challenges in laying venue and establishing personal
jurisdiction against foreign defendants (and, in the case of state
entities, overcoming sovereign immunity);
- possible constitutional infirmities in, or challenges to, Title III
(including regarding its extraterritorial eect, the definitions
of tracking, the purported attempt to create a private right of
action based on past events, the automatic setting of damages
for any “tracking” activity at the “fair market value” of the
subject property, and the eect, if any, of the 23-year suspen-
sion of the right of action on the ability to claim in respect of
past conduct); and
- the eect of “blocking statutes” and other measures in foreign
jurisdictions (e.g., shielding foreign nationals against extrater-
ritorial jurisdiction or U.S. treble damages awards).
Litigation under the act has already been filed in several
instances (both against private companies and against Cuban
government agencies), and more will likely follow in the ensuing
months. Proceedings brought under the EU and other blocking
statutes are also a possibility.
Under Helms-Burton Act, Entities
With Business Ties to Cuba Now
at Risk of Lawsuits
4 Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates
Under Helms-Burton Act, Entities
With Business Ties to Cuba Now
at Risk of Lawsuits
Boris Bershteyn
Partner / New York
212.735.3834
boris.bershteyn@skadden.com
Jamie L. Boucher
Partner / Washington, D.C.
202.371.7369
[email protected]
Eytan J. Fisch
Partner / Washington, D.C.
202.371.7314
eytan.fisch@skadden.com
Steve Kwok
Partner / Hong Kong
852.3740.4788
steve.kwok@skadden.com
Timothy G. Nelson
Partner / New York
212.735.2193
timothy.g.nelson@skadden.com
Elizabeth Robertson
Partner / London
44.20.7519.7115
elizabeth.robertson@skadden.com
Jennifer L. Spaziano
Partner / Washington, D.C.
202.371.7872
jen.spaziano@skadden.com
Contacts