US ends Helms Burton waiver and announces new sanctions

The US Administration has announced a series of new sanctions intended to bring about change in Cuba. The measures have been condemned by the European Union, Canada and other nations which have said they will retaliate. Cuba has suggested that the US is trying to “asphyxiate” it.

Although every US President has suspended Title III of the 1996 Helms Burton legislation which allows US citizens to take legal action against those who have trafficked in (benefitted from) properties expropriated following the Cuban revolution, on 17 April the Trump Administration said that it would no longer do so. The decision means that as of 2 May all US claimants may bring cases against those deemed to have befitted from expropriated assets in Cuba. The decision unilaterally abrogates  two formal agreements reached with the EU in 1997 and 1998.

The measures form a part of the messaging for the Trump Administration’s 2020 re-election campaign in South Florida but are likely to create a period of uncertainty in relation to investment, trade and travel in Cuba, divide Washington and its allies, and create significant problems for the Cuban economy.

Talks on resolving the issue were briefly resurrected with Cuba during the second term of the Obama Administration, but the Trump Administration has shown no inclination to continue the dialogue. Cuba had previously compensated other foreign nationals for assets seized following its revolution, however the severing of diplomatic ties with the US in 1961 effectively stalled compensation for US claims.

The new measures

The Trump Administration’s announcement tightens the US embargo in a manner that affects third countries, enabling lawsuits to be brought against anyone including US companies deemed to be trafficking in confiscated property in Cuba.

Helms Burton Titles III and IV: Under the previously waived Title III of the 1996 Helms Burton legislation any US national whose property was seized by the Cuban government after 1959 can seek damages in the US courts against anyone alleged to have ‘trafficked’ in such assets. In a unique departure from the norms of sovereignty and contrary to international law, the Title affords claimant rights to Cuban Americans who were Cuban citizens at the time their property was confiscated.

Although there are 5,913 certified claims of seized American property in Cuba, the number of Cuban Americans who since became US citizens whose property was seized could result in as many as 0.2m claims, although many could be too small to qualify.

More potent from an external investor’s perspective, Title IV of the legislation is now to be pursued aggressively.  Little used to date, this directs the State Department to deny visas to any foreign nationals who traffic in confiscated property or are corporate officers or shareholders of involved entities.

In addition, a series of other measures were announced aimed at weakening the Cuban economy.

Remittances: Washington has imposed a cap on Americans’ ability to send general/non-emigration remittances to Cuba so that US nationals may now only send US$1,000 per quarter, per person to individuals living in Cuba. The decision is expected to severely impact on the up to US$4bn estimated to be sent annually in remittances largely from the US following the previous lifting of all limits on remittances by President Obama.

The measure is likely to affect many Cubans including cuentapropistas who depend on remittances from relatives and friends in the United States at a time when reduced US travel has already dealt a huge blow to Cuban private income flows.

U-turn financial transactions: The Administration announced it will end U-turn financial transactions in which one party is a Cuban national or the Government of Cuba. U-turn transactions occur when parties outside the United States transfer funds that pass through a US financial institution before being redirected to the recipient of the transfer.

By reinstating the measure, foreign banks undertaking such transactions will incur substantial fines for processing any related transfers in US dollars, and foreign entities will once again find funds which touch the US banking system being seized and not returned. The new regulation is expected to further complicate cross border business payments to and from Cuba and act as a disincentive to investment.

Non-family travel: Washington intends restricting non-family travel to Cuba but has yet to issue the details of what changes it will make to its existing travel licensing regulations which presently allow travel in one of twelve permitted forms.

Engage Cuba, the US pro-Cuba business lobby, speculate that the Administration could opt to ban most non-family travel to Cuba by ceasing OFAC approval for licenses in most authorised categories, or it could require specific licenses for all categories, which would involve OFAC approving each trip on a case-by-case basis. Either interpretation would reverse the Obama’s era changes that allowed US travellers to self-certify their purpose of travel without acquiring a license.

It remains unclear how the announced restriction on travel might affect existing tour operators, airlines and cruise ship companies who are expected to make strenuous representations to mitigate the impact on what had been the Caribbean’s fastest growing travel market.

According to Engage Cuba, particularly disruptive would be a specific license requirement for group people-to-people travel – the authorisation used by US cruise passengers – as it would diminish the present number of US travellers to Cuba dramatically.

Cuba Restricted List: Beyond this the State Department has also added five new entities to its Cuba Restricted List which prohibits US nationals and companies from engaging in direct financial transactions with such named bodies which Washington says have links to the Cuban military. Those newly named are Aerogaviota, Santa Isabel, El Caney Varadero and Meliá Marina Varadero Apartment hotels, and the Diving Center-Marina Gaviota. The full list can be found at https://www.state.gov/e/eb/tfs/spi/cuba/cubarestrictedlist/290163.htm

Europe and Canada respond

In a joint statement the EU High Representative, Federica Mogherini, the EU trade Commissioner Cecilia Malmström and the Canadian Foreign Minister, Chrystia Freeland, reiterated their strong opposition to Washington’s unilateral extraterritorial application of Cuba-related measures which they said were contrary to international law.

Describing the decision as ‘regrettable’ and as having ‘an important impact on legitimate EU and Canadian economic operators in Cuba’, the joint statement said that the EU and Canada were ‘determined to work together to protect the interests of our companies in the context of the WTO and by banning the enforcement or recognition of foreign judgements based on Title III, both in the EU and Canada’.

‘Our respective laws allow any US claims to be followed by counter-claims in European and Canadian courts, so the US decision to allow suits against foreign companies can only lead to an unnecessary spiral of legal actions’, the joint statement said.

Noting that the decision breached US commitments made in EU-US agreements in 1997 and 1998 ‘which have been respected by both sides without interruption since then’, the EU additionally said that it would consider all options at its disposal to protect its legitimate interests in relation to its WTO rights and through the use of the EU Blocking Statute.

The EU statute prohibits the enforcement of US courts judgements relating to Title III of the Helms-Burton Act within the EU and allows EU companies sued in the US to recover any damages through legal proceedings against US claimants before EU courts.

It does so by preventing any European Court from recognising the validity of US court orders under the Helms Burton legislation making it impossible for assets in Europe to be seized. In addition, EU clawback legislation authorises EU economic interests to counter-sue in the EU courts any US corporation which has been awarded a claim against an EU economic operator.  

Consideration is also understood to be given as to how to respond to the activation of Title IV relating to visa denial.

In an earlier letter to the US Secretary of State, Mogherini and Malmstrom had said “We believe that the issue of outstanding US claims should not be conflated with the cause of furthering democracy and human rights in Cuba, or by our shared desire urgently to find a peaceful and democratic solution to the crisis in Venezuela.”

US reaction

In the US, the US Chamber of Commerce and pro-Cuba business groups including Engage Cuba, released statements critical of the new measures. Among those in Congress expressing concern about the potential damage to the Cuban people were the Chair of the House Foreign Affairs Committee Eliot Engel (D- New jersey), Kathy Castor (D-Florida), Jim McGovern (D-Massachusetts), Donna Shalala (D-Florida), and Barbara Lee (D-California).

In contrast Senator Marco Rubio (R-Florida), widely believed to be responsible for the development of the new policy together with the US National Security Adviser John Bolton, said in a Tweet that allowing US citizens to sue the Cuban regime for confiscated property in Cuba “is the right thing to do”.

Cuba repudiates the new US policy

A formal statement issued by the Cuban Government said that it rejected the new US measures in the strongest terms possible noting that they had “the fundamental goal of imposing colonial tutelage” on the country. It also repudiated the decision to reinstate limits on remittances, further restrict travel, and impose additional financial sanctions, describing US attempts to justify it actions as lies and coercion, and intended to cover up the failure of its policy in Venezuela.

The statement said that US intelligence agencies had more than enough evidence to know that Cuba has no troops in Venezuela, and that the 20,000 plus Cuban collaborators there, of whom more than 60% are women, were contributing to the provision of basic social services, and in particular healthcare.

Speaking on 25 April at a press conference, Cuba’s Foreign Minister reiterated that Cuba’s decree law 80 of 1996 had declared Helms-Burton illegal and unenforceable in Cuba. He also said that Cuba will continue to honour all its commitments in economic matters with its international partners. “I’m sure sanctions will have a probable economic impact,” Rodriguez said, but they are “destined to fail and result in the US’s international isolation in relation to the embargo”.

He also forcefully rejected a reference by the US National Security Adviser, John Bolton, to Cuba having “20,000 thugs” in Venezuela, describing him as a “pathological liar”.

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