The future of U.S. engagement with Cuba is at risk.
The Trump administration is considering a policy that would subject U.S. and foreign companies to lawsuits for "trafficking" in confiscated Cuban property.
Since the passage of the Helms-Burton Act, a key component of the U.S. embargo, every administration has suspended Title III of the law. Title III allows U.S. nationals to file suits in U.S. courts against entities trafficking in their confiscated property in Cuba. If this provision of the law were activated, it would mean that U.S. and foreign companies could face a barrage of lawsuits.
On March 4, the Trump administration for the second time declined to waive Title III of the Helms-Burton Act for the full six months, opting instead for a shorter 30-day period beginning March 19. This followed another short-term, 45-day waiver issued February 1. The current 30-day suspension of Title III allows an exception for suits against the roughly 200 entities on the State Department’s Cuba Restricted List. This means that if Cuban companies on the restricted list “traffic” in confiscated property, claimants can sue them in U.S. courts under Title III.
The administration has signaled that they are evaluating additional options for partial activation. Failure to waive Title III would incite litigation that could have a crippling effect on U.S.-Cuba trade.
Background: Title III in brief.
The Cuban Liberty and Democratic Solidarity Act, commonly referred to as the Helms-Burton Act after its sponsors, is a core statutory pillar of the U.S. embargo on Cuba. It codifies the trade embargo into law and prohibits the president from unilaterally lifting sanctions until Cuba meets specific conditions for democratization.
Title III allows U.S. nationals whose property was seized by the Cuban government after 1959 to sue for damages in the U.S. court system. After the Cuban Revolution, the new regime nationalized property regardless of ownership, and many Cubans who fled the revolution and emigrated to the U.S. were among those whose property was seized. In a unique departure from the norms of sovereignty and in opposition to international law, Title III affords claimant rights to Cuban Americans who were Cuban citizens at the time their property was confiscated.
President Bill Clinton was the first to suspend Title III after facing opposition from U.S. allies whose companies were doing business in Cuba. Claimants can file suits under Title III against any company, U.S. or foreign, that profits from using their property. The suspension must be renewed every six months.
Implications for U.S. policy.
Currently, there are 5,913 certified claims of seized American property in Cuba. Based on the number of living Cuban Americans whose property was seized, the State Department estimates there could be a flood of up to 200,000 claims if the suspension were ended.
In truth, property claimants would be more successful in earning compensation through high-level diplomatic engagement, given that foreign companies are unlikely to cooperate.
The tidal wave of litigation that could result from Title III going into effect would not only burden the U.S. court system and fail its objectives, it could have disastrous effects for the U.S.-Cuba relationship, U.S. businesses, and relations with our allies:
Stifling years of progress. Future attempts to encourage legal business with Cuba would be much more difficult. Over the past four years, we’ve seen strengthened commercial ties between the U.S. and Cuba. But U.S. companies, already wary of assuming the risks associated with business in Cuba during the Trump administration, would be unlikely to subject themselves to potential lawsuits when the long-term benefits of business on the island are difficult to quantify and dependent on politics. In turn, this would have a chilling effect on the broader effort to continue normalizing relations and could spill into other areas like travel, academic exchange, and research collaboration.
Burden on U.S. business. Title III could affect any companies currently operating in Cuba on confiscated property, as well as companies that profit from such trafficking. As U.S companies are not exempt from Title III suits, they could face a slew of lawsuits and would be extremely unlikely to expand operations in Cuba despite their past success on the island.
Compromising U.S. strategy in Venezuela. The U.S. has instituted a policy of democracy promotion in Venezuela by recognizing National Assembly President Juan Guado as Venezuela’s head of state. It is critical to maintain a unified front with key allies, especially the EU and Canada, in rejecting Nicolas Maduro as illegitimate. Fueling a trade war with our allies would at best create unhelpful tension within the coalition and at worst compromise our entire strategy to stabilize Venezuela.
Strained relations with allies. Companies based in Europe and Canada are among the top foreign investors in Cuba. Mexico, Canada, and the U.K. all have laws prohibiting their companies from complying with Title III suits. When Congress first passed the Helms-Burton Act, the European Union immediately disputed Title III in the WTO and has indicated it will do so again if the law goes into effect. The result could be a retaliatory measure that allows litigation against U.S. companies. These legal tensions could also spill over into other aspects of bilateral relationships with U.S. allies, as in Venezuela.
Empowering U.S. adversaries. Thousands of U.S. lawsuits against Chinese companies could upset an already delicate trade relationship and provoke retaliation. Meanwhile, the U.S. has already left a vacuum in Cuba for adversarial influence, particularly from Russia and China. As business with U.S. companies becomes less viable for the Cubans, they will increasingly turn to our adversaries, who offer them favorable credit terms and invest in high-profile projects.
Human rights accountability. Isolation rarely allows for improvements in human rights, and Cuba is no exception. Strained relations with our allies will only escalate this problem. Without a multilateral effort to hold the Cuban government accountable, the U.S. will have a harder time pushing Cuba toward greater freedom.
We are urging Congress to put pressure on the administration and leverage any contacts in the White House or Departments of State, Treasury, Commerce, and Justice. Please reach out to us if you'd like talking points or any further clarification. We are always happy to help.