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What is the Helms-Burton law, the law that keeps Spanish companies in check in Cuba?

| News | Cuban Desk

Ignacio Aparicio explains the keys to the Helms Burton law in a guide published in Vozpópuli

Section III of this law allows U.S. citizens, including Cubans who emigrated to the country and acquired nationality, to sue foreign companies that benefit from property expropriated or confiscated from them after the triumph of the 1959 Revolution and Fidel Castro's arrival to power.

There are already several class action lawsuits filed against companies with similar businesses and in which mainly individuals or families participate. But what exactly does it consist of, what kind of companies does it affect and what consequences can it have? Ignacio Aparicio, partner and head of the Cuban Desk at Andersen Tax & Legal, explains to Vozpópuli the keys elements of the law.

What is the Helms-Burton law?

Cuba's 1996 Freedom and Democratic Solidarity Act (also known as the "Helms-Burton Act") was enacted by Bill Clinton in March 1996 with the aim of discouraging foreign investment and internationalizing the Cuban blockade.

This law codified the regulations of the U.S. economic blockade against Cuba, extended its extraterritorial scope (application to countries other than the one enacted by the law) and establishes the possibility of denying entry to the general directors of international companies (and their families) who have invested in properties "confiscated" after the Castro revolution (Title IV) into U.S. territory.

The Act entered into force in March 1996. However, the application of Title III -which gives the right to sue in U.S. territory anyone who deals with goods confiscated from Americans by the Cuban government- has been systematically suspended by the different presidents of the United States until May 2, 2019, the Donald Trump government activated without any limit, the application of Title III of the Helms-Burton Act.

What type of compamies does it affect?

The law affects all companies that "traffic" in goods confiscated after the revolution, knowingly and intentionally. Given the breadth of the term "trafficking" in the Act, which includes any type of use that results in an exploitation of confiscated assets in the business of companies, in practice it affects any type of company that is related to those assets and makes a profit understood in a broad sense.

The Act provides that the recovery of the asset is not permitted but to obtain financial compensation and to deny the exploiters of the confiscated property any benefit from them. Given then that by nature the asset must endure so that it can be the object of traffic at present, the most affected sectors are those that use confiscated real estate, those that are being exploited fundamentally but not exclusively by the tourist and hotel sector, one of the most important in Cuba's economy.

Who can sue?

Any U.S. citizen or entity may sue before the U.S. federal courts the natural or juridical person who, as of the effective date of Title III, trades with goods that were confiscated by the Cuban Government as of January 1, 1959, both from them and from their legal successors. The term thus includes the large number of Cuban exiles who later acquired U.S. nationality.

The plaintiff must prove his right to the confiscated property, presuming as conclusive proof of ownership of the property a certification by the U.S. Foreign Claim Settling Commission under Title V of the International Claims Settlement Act of 1949.

The amount of the claim must exceed $50,000. In addition, in order to be able to sue on the basis of certified claims, the interested party must be the holder of his or her claim prior to March 12, 1996, the effective date of the Helms-Burton Act. The Act expressly prohibits the assignment of rights to claim after that date.

How does this affect Spanish companies?

Spain maintains trade and investment relations with Cuba of great tradition; it is the country with more mixed companies and more branches on the island, with an outstanding presence in the tourism and services sector, being Cuba's third largest supplier (behind China and Venezuela); its exports continue to grow this year with record figures. In the tourism sector, 8 of the top 9 hotel chains are Spanish.

Helms Burton affects companies to the extent that they can "traffic" in these assets and above all, if they have interests in the United States, since a possible conviction by application of the Blocking Regulation would not be enforceable in Europe, but its effects would survive over time in the United States, for example, in its projects for future implementation in that country, with the risk of seeing the flow of payments coming from or going to the US or made through US banks blocked, the amount of the sentence being recorded as a credit risk when wishing to have access to international financing, or by application of Title IV, etc.

In short, the law seeks to continue the hostile political climate, hinder Cuba's economic, commercial and financial relations with third countries and undermine its ability to attract direct foreign capital investment for its development.

What means do you have to defend yourself?

Undoubtedly, the most relevant action is the invocation of Council Regulation 2271/96 of 22 November 1996 on the protection against the effects of the extraterritorial application of legislation adopted by a third country and against actions based thereon or resulting therefrom. The Regulation provides that judgments of courts or tribunals and decisions of administrative authorities located outside the EU which give effect, directly or indirectly, to the Helms-Burton Act or actions based thereon or arising therefrom, shall not be recognised or complied with in any way.

It also recognises the right of affected persons to be compensated for any damage caused by them or any person acting on their behalf or as an intermediary (the claimants under Helms-Burton and their representatives). The provision provides that "compensation may take the form of seizure and sale of assets held by such persons, entities, persons acting on their behalf or intermediaries within the Community, including shares held in a legal person incorporated in the Community.

Spanish companies with commercial interests or investment projects in Cuba should be duly advised to anticipate future difficulties or consequences of the application of the aforementioned Law. Under the Regulation, if the undertakings concerned have their economic or financial interests affected by the Helms-Burton Act, they shall notify the Commission within 30 days, either directly or through their respective Member State.

How has the European Union reacted?

The EU totally rejects the extraterritorial application of Helms Burton and will use, as indicated in its various official communiqués, all the means at its disposal to protect the investments of its nationals. After the failure of the various communications and negotiation attempts on the part of the European Union, the European Union is still considering a possible lawsuit against the United States before the World Trade Organisation (WTO).

It should not be forgotten that, at the time, following the enactment of the Helms Burton Act in 1996, the reaction of the EU and other countries to the WTO led to an agreement under which the US government suspended the application of Title III, although it reserved the right of its president to lift the waiver every six months. Both Clinton, George W. Bush and Barack Obama maintained the suspension until President Trump decided to lift it on May 2.

Likewise, the EU is working with other countries that have been affected by the Helms-Burton Act, mainly Canada, to see how to prevent the application of its provisions III and IV.

You can read the guide in Vozpópuli

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