High court rules €72mn debt case can proceed against Banco Nacional

10th April 2023

The High Court in London has ruled that the Cuban State has no direct responsibility for €72mn (US$78.5mn) of accumulated Cuban debt held by CRF I Ltd, but that the Banco Nacional de Cuba (BNC) is responsible for meeting the claim (Background Cuba Briefing 6 February 2023).

In a 94-page judgement, Judge Sarah Cockerill said that Cayman registered CRF I lawfully purchased the debt with the BNC’s approval, but it lacked the authority to consent on behalf of Cuba.  As a consequence, the Cuba State is no longer part of the continuing court case since it is not a guarantor for the debt.

Justice Cockerill, however, also ruled that CRF I has the right to demand payment of the debt from the BNC, should at trial the court order it to repay the amount owing. As such, subject to appeal, she wrote, the case can continue solely against the BNC. This appears to mean that the sum owed can only be recovered from the BNC’s assets and resources.

Subsequently, Cuba’s Minister of Justice, Oscar Silvera, said the judgement will be the subject of an appeal in May.

If Cuba were to lose the appeal, it is expected that the High Court will then determine the merits of CRF I’s case, and Justice Cockerill would be, as she indicated, be “competent to judge the debt claims presented” at a future date.

Initial Cuban commentary described the ruling as “a victory,” with President Diaz Canel saying  in a Tweet: “[The] Republic of Cuba wins lawsuit in London: CRF is not a creditor of the Cuban State. Once again, the enemies of the nation failed. Their lies collided against a professional and prestigious court.”

In other remarks, Cuba’s Justice Minister told a press conference that the lawsuit had established that the Republic of Cuba and the Banco Nacional de Cuba were different entities.

“We are talking about two different entities, the Republic as a sovereign guarantor, a power that the State has to assume responsibilities in terms of guarantees in the face of debts awarded to other entities in the country, and the BNC as an economic and commercial entity,” he said.

Indicating that the ruling made clear that the Cuban State has no obligation to respond to the lawsuit and that it is immune from English jurisdiction, he said that the outcome should be regarded as a victory.  “The Republic as a sovereign entity is immune because at no time did the State approve guarantees on the debts assumed by CRF”, Silvera said.

In a statement issued following the ruling, CRF I’s Chairman, David Charters, noted “CRF remains committed to finding a solution with Cuba that has zero impact on its budget for at least five years, recognising the difficult economic situation the country is facing.”

 “Cuba won a technical point in this judgment which we have already remedied, and we do not expect this issue to impact the eventual final outcome, which is a complete victory for CRF,” he wrote. Charters also observed that “BNC was the central bank of Cuba and remains responsible for managing these unpaid Cuban debts.”

Earlier this year the Spanish news agency EFE reported that CRF I is the largest holder of Cuba’s sovereign debt and has accumulated bonds of €1.2bn” (US$1.3bn). It is a member of the private sector London Club of Creditors holding Cuban debt. CRF I has previously attempted to reach a settlement with Cuba, including a 2018 offer which it said received no response.

Cuba states that it has never ignored its debts or negotiations with “legitimate” creditors and has previously called CRF’s claims illegitimate, describing the firm as a “vulture fund.”. The Banco Central de Cuba (BCC) maintains that the debt was contracted by the BNC when it still operated as Cuba’s central bank. The BNC was dissolved and replaced in 1997 by BCC which took over many of the functions of the BNC. 

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