Companies in Cuba Face Legal Risks as U.S. Changes Stance on Seized Property

By Mengqi Sun 

The Trump administration's decision to implement a long-suspended provision of a 23-year-old federal law is expected to pose legal quandaries for companies operating in Cuba.

The administration is ending the suspension of Title III of the 1996 Helms-Burton Act, which sought to strengthen the U.S.'s embargo against Cuba's Communist government. The provision that goes into effect Thursday allows certain U.S. nationals with claims to properties confiscated by the Cuban government to sue companies that are operating on that property for compensation. The law applies to properties confiscated in or after 1959.

There are nearly 6,000 claims for property confiscated in Cuba certified by the U.S. Justice Department's Foreign Claims Settlement Commission with a value of about $2 billion, or roughly $8 billion with interest, according to U.S. Assistant Secretary of State for Western Hemisphere Affairs Kimberly Breier. Based on a 1996 estimate, the number of uncertified claims could be as high as 200,000, with a value in the tens of billions of dollars, Ms. Breier said.

It is unclear how many of those claims will translate to lawsuits, but several companies -- including Belgium brewer Anheuser-Busch InBev SA and Canadian nickel producer Sherritt International Corp. -- already have disclosed risks related to the end of the suspension. And lawyers say clients have received letters notifying them of alleged claims of rights to the property the companies are using.

Any company potentially could be a target, said Aymee Valdivia, a partner at law firm Holland & Knight LLP who works with companies on international transactions.

Title III was suspended by President Clinton shortly after it became law in 1996. The suspension was in response to complaints by the European Union that the law overreached its jurisdiction and restricted the EU's trade with Cuba. The suspension had been renewed by every president, including previously by Mr. Trump.

The Trump administration said April 17 that it would lift the suspension to apply more pressure to Cuba over alleged human-rights violations and for its support of the Nicolás Maduro regime in Venezuela. The U.S., which says Mr. Maduro is a corrupt and illegitimate president, has used sanctions to pressure Mr. Maduro to hand over power to Washington-backed opposition leader Juan Guaidó, who called for this week's uprising against the president.

Title III could apply to any company that is profiting from the use of a confiscated property in Cuba. Such companies could face litigation and may have to compensate a U.S. individual or company that owned the property before confiscation. Compensation could include the fair market value of the property, among other things.

For example, take a restaurant company that is operating on property seized by the Cuban government in 1963. If a U.S. citizen owns a claim to the property, the restaurateur could be sued in U.S. court by the citizen under Title III. The same concept could apply to a mining company or a hotel -- just about any industry.

And it isn't only real estate. Intellectual property also could be affected.

AB InBev, the world's largest brewer, began disclosing to investors in 2010 that it received a notice of a claim related to the use of a trademark by Cervecería Bucanero SA, a Cuban brewer. Cervecería Bucanero is indirectly owned by AB InBev, according to a March AB InBev filing. The other half is owned by the Cuban government, the filing said.

The claim alleged that the trademark has been confiscated by the Cuban government and trafficked by AB InBev, the filing said. Cervecería Bucanero in 2018 sold 1.6 million hectoliters of beer, which was about 0.3% of AB InBev's global volume for the year, according to the filing.

AB InBev, which declined to comment for this article, said in the filing that it has attempted to evaluate the validity of the claim. "Due to the uncertain underlying circumstances, we are currently unable to express a view as to the validity of such claim or as to the claimants' standing to pursue it," the company said in the filing.

Sherritt International, which has worked in Cuba since 1993 and has extensive oil and power operations there, doesn't expect the U.S. law to have a material impact, said Joe Racanelli, a Sherritt spokesman.

The company disclosed in February that its indirect, 50% interest in Moa Nickel SA, a joint venture with a Cuban state-owned company, has been deemed by the U.S. a form of trafficking under the Helms-Burton Act. Under another provision of the same law, the company's senior management, including its chief executive and chief financial officer, are restricted from traveling to the U.S., according to a regulatory filing.

The company hasn't received any notice of claims under the law. "For us, " Mr. Racanelli said, "its business as usual."

Write to Mengqi Sun at [e-mail]

(END) Dow Jones Newswires

May 02, 2019 05:44 ET (09:44 GMT)

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