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Prospects for foreign investment in Cuba

| News | Cuban Desk

Adargelio Garrido on investment in Cuba after activation of Title III of the Helms-Burton Act

Despite the shadow created since the activation of Title III of the Helms-Burton Act, not everything seems to be over for those who intend to invest in the largest of the Antilles, especially since the Cuban government continues to rely on foreign investment, at a time when the U.S. blockade is getting stronger.

The tightening of the blockade against Cuba is based on two groups of measures. One group aims to limit the activity of US citizens and companies and the other seeks to minimize foreign investment on the island.

The first group includes, among others, the limitation of foreign exchange remittances and the withdrawal of business licenses. In addition to this, there is a ban on U.S. nationals establishing relations with Cuban entities included on the U.S. State Department's Cuba Restricted List, commonly known as the Black List.

The second group includes regulations such as the Cuban Democracy Act, known as the Torricelli Act, of October 1992, which implements various restrictions, such as prohibiting foreign subsidiaries of US companies from trading with Cuba or with Cuban nationals.

In this group, the Cuban Freedom and Democratic Solidarity Act, known as the "Helms-Burton Act", was incorporated in 1996, enacted months after the entry into force of Act 77 for Foreign Investment of September 5, 1995. This law codifies the blockade regulations and extends their extraterritorial scope.

Title III of the Helms-Burton Act establishes the right of U.S. nationals to sue any natural or legal person who "traffics" in goods that have been confiscated by the Cuban government. This right is exercised as of three months from the date of entry into force of the aforementioned Title III.  This Title was suspended for 23 years for successive six-month periods from 1996 until May 2, 2019, when the Government of President Trump activated its application. With its entry into force, several American and foreign companies, including the Meliá hotel chain, were not made to wait for the filing of lawsuits.

Title IV of the same law establishes the possibility of denying entry to the United States to executives of foreign companies - and family members - who have invested in property confiscated in Cuba.

According to the provisions of Title III, the most complicated scenario for foreign investors corresponds to those who invest in confiscated property and who also own property in the United States.  The danger lies in the fact that these assets may be subject to embargo, in the event of convictions, in order to guarantee the collection of compensation from the plaintiffs.

Apart from the defence arguments that the defendant companies could put forward in the American courts, the European companies have the help of Council Regulation 2271/96 of 22 November 1996 protecting against the effects of the extraterritorial application of legislation adopted by a third country and against actions based thereon or resulting therefrom, known as the Blockade Regulation. This regulation aims to limit the extraterritorial application of the Helms Burton Act by protecting European Union nationals.

The Blocking Regulation is based on the non-recognition of decisions of courts located outside the European Union and, on the other hand, establishes the possibility of applying for the seizure of any type of property belonging to or associated with the plaintiffs in European Union territory, with the aim of recovering the damages caused to European companies as a result of such convictions.

With the aim of continuing its commitment to foreign investment, the Cuban government has incorporated 460 projects into the Foreign Investment Opportunities Portfolio 2019-2020, 47 of which are within the Special Mariel Development Zone, to be developed under the different forms of foreign investment provided for in the current Foreign Investment Law 118. The projects are distributed among different sectors of the Cuban economy, including the tourism sector, the agrifood sector, the medicine industry, the renewable energy industry and oil exploration at risk in Cuban territorial waters.

Regardless of whether the defendant companies have within their reach the support provided by the Blockade Regulation, Spanish businessmen have the option of investing in non-confiscated goods or in confiscated goods that have not been the object of a certified claim by the Foreign Claim Settlement Commission (FCSC). In the latter case, it cannot be ruled out that uncertified claims may arise, about which there is a large gap, since they are not properly defined in the Helms-Burton Act. It is assumed that those on property confiscated after 1996 or claims by persons who became U.S. citizens after the Act came into force are included.

In other words, despite the atypical nature of foreign investment in Cuba, given the impact of the regulations of the blockade on the island, foreign investors can invest on the island, provided that they receive adequate prior advice to ensure responsible investment.

You can see the article in El Economista

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