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Flood of lawsuits, flight of investors on cards with US Cuba move
HAVANA, April 18, 2019 (BSS/AFP) – The US decision to enforce a tough but
long-delayed law in Cuba could have far-reaching effects, including
triggering an avalanche of lawsuits as well as action before the World Trade
Organization.
President Donald Trump’s administration said Wednesday it would allow
lawsuits in US courts over properties seized by Cuba’s communist government,
enforcing a key provision of the 1996 Helms-Burton Act that had been waived
by successive presidents.
Here are a few potential effects:
– Flood of lawsuits –
“It is highly likely there will be a flood of claims in south Florida,
many of them frivolous, from Cuban Americans — against foreign companies,
but also against Cuban entities,” said Chris Bennett, managing director of
the Caribbean Council, a London-based trade consultancy focused on the
region.
But he said that many of the claims would have little chance of success.
With two million Cuban Americans living in Florida, “it is likely that the
volume of claims will seriously congest the south Florida courts and the
courts will need to take a view of how many of them to accept,” he said.
Pedro Freyre, the Miami-based chair for international practice of law firm
Ackerman, said that a diverse range of companies from Western hotel chains to
Brazilian sugar producers could be targeted for participating in projects
nationalized by the communists.
Among them, he said, is Canadian mining group Sherritt International, which
has a stake in a major nickel plant, Pedro Soto Alba, whose former owner, the
Moa Bay Mining Company, has claimed $88 million.
A high-profile target could be the emblematic Hotel Habana Libre, which was
once the Havana Hilton and is now operated by Spain’s Melia chain.
The Foreign Claims Settlement Commission, which falls under the US Justice
Department, has taken note of 6,000 claims in Cuba worth $1.9 billion.
With a six-percent interest rate, the total would now be $6 billion,
according to a study by Richard Feinberg of the Brookings Institution.
A US official, speaking on condition of anonymity, said that the 6,000
figure came from 1996 and only included certified claims, with the actual
number potentially as high as 200,000.
– Flight of investors –
A major effect — and one explicitly sought by the Trump administration —
will be to discourage foreign investment in Cuba.
“This is so investors tell themselves, instead of investing in Cuba, I’m
going to go to Punta Cana” in the Dominican Republic, said Alberto Navarro,
the EU ambassador in Havana.
With the implementation of Helms-Burton, “I suspect there will be an
initial chilling effect on potential investments in Cuba, followed by a more
thoughtful assessment of the true extent of the risk,” Freyre said.
Several diplomats and a veteran French businessman in Cuba said that the
talk of Helms-Burton had already been creating nervousness among investors in
recent weeks.
According to the Spanish business newspaper Cinco Dias, the Melia and
Iberostar hotel groups have hired lawyers to study their risks.
But the biggest loser could be Cuba. Since the fall of the Soviet Union
cut off a vital lifeline, the communist island has increasingly turned to
foreign investment to prop up the economy.
In 2017, Cuba drew $2 billion in investment, well below its target of $5
billion seen as necessary to ensure growth, according to official figures.
– Action before WTO –
The European Union warned when the Helms-Burton Act was passed in 1996
that it would take cases before the World Trade Organization, a key factor in
leading presidents Bill Clinton, George W. Bush and Barack Obama to use their
powers to suspend the implementation.
With Wednesday’s announcement, the European Union again warned that it
could take the matter to the WTO, potentially entangling any lawsuits in US
courts with parallel procedures in Geneva.
EU foreign affairs supremo Federica Mogherini and Trade Commissioner
Cecilia Malmstrom said that the United States was violating international
trading rules by trying to apply its laws abroad — an argument to which the
WTO may be receptive.
The European Union is the top foreign investor to the island but it has
been joined in its campaign against Helms-Burton by Canada, Japan and Mexico.
BSS/AFP/RY/1536 hrs