The US government announced on April 17 that it will allow US nationals to file lawsuits against foreign persons and entities that have "trafficked" in property confiscated by the Cuban regime. This move ended the longstanding suspension of the Title III of the 1996 Cuban Liberty and Democratic Solidarity (LIBERTAD) Act (the "Helms-Burton Act") since its enactment, and could lead to a wave of US litigation against companies doing business in Cuba.
As anticipated in our March e-bulletin, the US government has signaled this move by only extending the current suspension of claims until May 1, rather than for a sixmonth period as had historically been the practice. Effective May 2, the right to bring an action under Title III will be implemented in full.
As we have previously noted, Title III lawsuits could introduce risks to many parties currently conducting business in Cuba because Title III has a broad extraterritorial reach and its statutory language encompasses a broad range of dealings with confiscated property, including using or profiting from such property. Also, the damages provision provides for a remedy of the current fair market value of the property confiscated, which could greatly exceed the original value of the property at the time of its confiscation.
Notably, persons who initiate a Title III action could face "clawback" actions in the EU under European blocking statutes. This might deter some lawsuits against potential defendants that are EU persons, but potential plaintiffs who have no operations or property in Europe may not in practice be facing such potential "clawback" liability.
The US government also announced that it is adding five entities owned by the Cuban military to its restricted list, prohibiting Americans from transacting with them.
Companies with Cuban business interests should prepare for any anticipated Title III lawsuits before May 2, 2019. If this has not been done, screening the property involved in current dealings in Cuba against the current Foreign Claims Settlement Commission claim list should be taken, and considering potential contractual suspension or termination options is also an important option to manage the risks. For European companies, any action should be taken with full consideration of compliance issues under the EU blocking regulation.