Can property owners affected by Cuban government's expropriations since 1959 claim against investors in Spain?
Abriendo la ‘Caja de Pandora’: la aplicación del Título III de la Ley Helms-Burton por la administración Trump en EE.UU. da nuevo impulso ante los tribunales españoles a las reclamaciones de los antiguos dueños de propiedades «confiscadas» por el gobierno cubano desde 1959.
El 2 de mayo de 2019, el gobierno de los Estados Unidos permitió la aplicación del Título III de la Ley Helms-Burton, por primera vez desde que se promulgó la ley en 1996, para permitir a los nacionales de los Estados Unidos demandar a las personas que «trafican» con propiedades privadas «confiscadas» por el gobierno cubano desde 1959.
The Trump Administration has also imposed restrictions on the entry into the United States of corporate executives and non-U.S. persons determined to be trafficking in such confiscated property, pursuant to Title IV of the Helms-Burton Act.
This action has opened the door to a flood of lawsuits against companies with active interests in Cuba, and not only in the United States.
Among other companies on a long list, there have been lawsuits in the United States under the Helms-Burton Act, Amazon, the hotel and tourist search platforms Expedia, Hotels.com, Orbitz, Travelocity.com, Trivago, Bookings.com, the cruise company Carnival or American Airlines.
Spanish subsidiaries of Meliá, Barceló, Iberostar have been sued in the United States, and the same plaintiffs, who invoked Title III of the Helms-Burton Act, have also sued or announced the imminent filing of a lawsuit against their parent companies in Spain. Some of the lawsuits, such as that filed by the Sanchez-Hill family against Melia, may finally be heard in Spain,after the Court of Appeals of Palma de Mallorca decided to dismiss the appeal based on the alleged lack of jurisdiction of the defendant's domicile court, ultimately ordering the Court of First Instance to try the case.
Es necesario valorar, según el derecho español, las posibilidades de los demandantes que pretendan reclamar ante los juzgados y tribunales españoles a las personas o empresas que «trafican» con propiedades privadas «confiscadas» por el gobierno cubano desde 1959, el enfoque o las teorías doctrinales y jurisprudencia que podrían servir de base a su demanda, los requisitos probatorios y las especialidades de derecho internacional privado que tiene este tipo de reclamaciones.
What were the nationalizations that occurred with the 1959 Revolution in Cuba?
On February 7, 1959, the revolutionary government in Havana enacted the so-called Basic Law of the Republic, the new Cuban "constitution". This marked the beginning of a radical change in the country's model of government, both politically and economically.
The organized and centralized economy desired by the new government involved, among many other things, the destruction of private property. The first sign of this came with the Agrarian Reform Law. The new regulations were intended to eliminate the large estates, in fact, they were all reduced to 30 caballerias (403 hectares), expropriating the surplus land. The acquisition of land by foreign citizens was completely forbidden, and all Cuban citizens who worked the land became usufructuaries of the expropriated land.
In 1963, a new Agrarian Reform Law was enacted, whose content did not differ especially from the first one, but added new provisions that implied the expropriation of all rustic properties with an extension of more than 5 caballerias (67 hectares).
However, the real nationalizations began with Law No. 851, enacted on 6 June 1960, followed by Laws No. 890 and 891. While the first law was aimed at American companies, the rest of the subsequent regulations ended up affecting all private companies in the country. On the basis of these regulations, not only land would be expropriated, but also legal entities, real estate, and all personal and business possessions of the large businessmen on the island would be nationalized.
Were there financial compensations for all these nationalizations?
The Agrarian Reform laws provided for compensation for expropriated lands that were being worked. All those lands considered unproductive were not compensated, and in any case the value of the compensation set for productive lands was much lower than the real value of the same.
In the laws that nationalized the industrial and commercial sectors, compensation was also established, as well as a whole procedure for forced expropriation. The payment of these indemnities was made dependent on the bonds of the Republic, the repayment of which was made exclusively dependent on the island's sugar trade.
The result of Cuban nationalizations was the confiscation of property without payment of compensation, either because of insufficient or unpaid compensation.
The Cuban State reached several bilateral agreements with several countries, such as Spain, the United Kingdom, Canada and France, for the payment of compensation to the nationals of these countries for the expropriations. These compensations have been systematically considered insufficient by the courts, and do not extinguish the right to be compensated for the rest.
What about the United States?
The struggle between Cuba and the United States has been going on since the beginning, and it continues today. After many years and not a few negotiations and judicializations, Cuba never came to compensate American companies for their nationalizations, and in response to this, the Cuban Liberty and Democratic Solidarity Act, known as the Helms-Burton Act, was passed in 1996.
This is a law of eminently political content, but whose Title III has been particularly controversial since its enactment. To summarize, Title III of the Helms-Burton Act allows for legal claims to be brought against any third party, natural or legal person, who traffics in the assets and properties nationalized in Cuba under the aforementioned regulations.
This is a title whose application, given the date on which the law came into being, could significantly affect many companies with properties and activities in the United States, and which led to the successive suspension of the entire title for periods of 6 months.
The U.S. government has previously certified and registered $1.9 billion ($8 billion, including interest) of private claims by U.S. citizens against the Cuban government for expropriation through two programs of the Foreign Claims Settlement Commission (FCSC). In addition, official U.S. government estimates suggest that there may be as many as 200,000 additional uncertified claims, valued in the tens of billions of U.S. dollars, that could be the subject of claims made possible by the application of Title III..
On 2 May 2019, the Administration of President Donald Trump decided not to suspend the application of the title, becoming active.
What has been the reaction of the rest of the countries?
Given that most of the companies affected were American, and that bilateral agreements were reached with many countries following the nationalizations, there has been no noticeable reaction from the rest of the countries to the island's decisions.
On the contrary, over time, relations have been reestablished, mainly with Europe, with Spain standing out as the country that maintains constant commercial relations in Cuba to this day. It is precisely for this reason that the international reaction has been against the Helms-Burton Act.
On 24 December 1996, Cuba enacted the Act on the Reaffirmation of Cuban Dignity and Sovereignty, another law which, like the Helms-Burton Act, has a mainly political content, and which, among other things, declares American law to be illegal. Previously, in October 1996, the Canadian Foreign Extraterritorial Measures Acthad been updated to counteract the effects of the American law, as had the Protection of Trade and Investment of Foreign Standards Act, which contravened Mexico's international law, for the same purpose.
Likewise, the European Union approved what is known today as the EU Blockade Statute, i.e. Regulation (EC) No. 2271/96.
All these "antidote laws" imply the non-recognition of the extraterritorial effects of Title III of the Helms-Burton Act in the different countries. This has led to a very clear practical reality: in the United States, the rights of those affected by the nationalizations of Cuba can be claimed, but also only in that country can the judicial decisions obtained in order to see the recognized rights fulfilled.
What is the current situation after the activation of Title III?
Many of the international companies present in Cuba are prosecutable in the United States, although there is no doubt that with the activation of Title III they have all taken measures to reduce the economic impact of the flood of claims.
The reality is that it is impossible under American law to obtain compensation of the expected amounts. In the first place, because it does not correspond to the compensation or justification for the expropriation, which can only be given by the Cuban government. And, secondly, because we are talking about multi-million dollar amounts, which will only be obtained through the persecution of assets in the United States.
Furthermore, the EU Blockade Statute provides for measures to mitigate the damage. If, as a result of the application of Title III of the Helms-Burton Act, a company of EU nationality is obliged to pay compensation, it can be compensated for the same amounts in the European Union, and can even react with a lawsuit in the Community courts against intermediaries, representatives, plaintiffs, etc., in order to obtain this compensation.
In our opinion, all this leads to something that has not been sufficiently explored, namely litigation under the national regulations of each country.
Is it possible to obtain compensation without resorting to the Helms-Burton Act?
Certainly. The legal issue behind Cuba's nationalizations is that they are contrary to international law. In international public doctrine there is a clear distinction between three figures: confiscations, nationalizations and expropriations. While the latter two are protected by law, the former is not. Any expropriation or nationalization carried out contrary to the requirements of international law will be considered illicit, and therefore, confiscation.
The nationalizations carried out by the Cuban government are illegal for many legal reasons: lack of specific public interest, discriminatory character, lack of prior delimitation and definition of those affected, lack of contradictory administrative procedures, etc., but one stands out above all, and that is the most indispensable, the lack of fair, sufficient and effective compensation to those affected.
Based on this principle of international law, any court in any legal system could consider the expropriations carried out in Cuba to be illegal.
Why has this not been done before?
The fact that there is consensus on a certain legal concept does not mean that it is feasible to obtain its recognition. Most legal systems regulate immunity from jurisdiction. The illegality of Cuba's nationalizations clashes head-on with the acts of sovereignty protected by immunity from jurisdiction. A national court in one country cannot rule that another country is obliged to undo a sovereign act or assume the consequences of its execution. Not only because of immunity from jurisdiction, but because it would be an unenforceable sentence.
The solution that can be found by private individuals is to turn to private international law and, without attacking the Cuban State, to claim from companies that have been able to obtain illegitimate profits or to unjustly enrich themselves from nationalizations illegally carried out in Cuba.
What legal arguments could be used against private companies?
It would be necessary to review case by case, and legislation by legislation. But in Spain there is a long-standing legal doctrine on the prohibition of unjust enrichment and case law supporting it.
The lack of adjustment to law of Cuban nationalizations does not seem to be a controversial fact. And, in any case, there have been many complaints before many courts and instances after the events of the 1960s. So that today, any foreign company that exploits or trades in goods, land, brands, or offers services on the island using the confiscation to its legitimate owners, will not be exempt from the risks that derive from such exploitation or trade.
Spanish law prohibits this type of conduct, which is classified as unjust enrichment, since the fruits would be obtained from an illegally exploited asset, and with knowledge of this illegality, while the real owner is unjustly dispossessed of both the asset and its fruits.
Have there been any previous lawsuits filed in Spain for this concept?
It seems as if the non-application of Title III of the Helms-Burton Act in the United States has had the equivalent effect of suspending the rights of those affected outside that country as well, since it is at least curious that they have not been claimed previously, given the public and notorious exploitation of property that had been the object of confiscation. In any case, only after the activation of Title III, and after weighing up the real estate pursuit in the event of a favorable ruling, the Sánchez-Hill family, one of those affected by the confiscations, decided to file a lawsuit against the Meliá hotel company in Palma de Mallorca.
After a previous attempt of conciliation, the U.S. nationality company CENTRAL SANTA LUCIA L.C., sued Meliá for an undetermined amount based on the unjust enrichment from which it allegedly benefited by the exploitation of the hotels Sol Río and Luna Mares, located in Playa Esmeralda, Cuba. Playa Esmeralda was part of the land that made up the Central Santa Lucía sugar mill in Holguín province, owned by the Sánchez-Hill family.
However, on September 2, 2019, the First Instance Court No. 24 of Palma de Mallorca issued Order 153/2019, dismissing the lawsuit filed by the Sánchez-Hill family for lack of international jurisdiction.
Are the Spanish courts competent?
The lawsuit in question was based on the general jurisdiction of the defendant's domicile, since the company MELIA, S.A. is incorporated in Palma de Mallorca, which is why the lawsuit was filed there. However, the defense of the hotel company presented a plea, which was based on two main points: immunity from the jurisdiction of the Cuban State and lack of territorial jurisdiction due to the real nature of the action.
The Order, although it left aside the direct question of immunity from jurisdiction, because it was a matter between private individuals, understood that the action was of a real nature, because it revolved around real estate, and therefore it had to pass judgment on the legitimacy of Cuban nationalizations, which was in conflict with immunity from jurisdiction.
There is sufficient consolidated case law of the Spanish courts to refute the reason for the lack of jurisdiction, which consists of the alleged impossibility of assessing the legitimacy of the expropriations of Cuba.
The Spanish Supreme Court has previously pronounced on these issues, in particular, in judgments no. 7198/1992 and no. 7666/2010 of the Civil Chamber of the Supreme Court, where it is established that Spanish courts cannot assess the legitimacy of the acts of the Cuban government, but they can assess their repercussion on the Spanish legal system.
This has been the understanding of the Court of Appeals of Palma de Mallorca, which has resolved the appeal against the order of inadmissibility in favor of the plaintiff. The judges' decision is made with much more emphatic statements than those offered by the Supreme Court, and which are a new hope for those affected by the nationalizations.
Has the 'ban' in Spain been opened on the basis of unjust enrichment?
It seems to be so, at least as far as the procedural barrier of international jurisdiction is concerned. These judicial pronouncements are confirmation that Spanish companies can be prosecuted for the profits obtained from the exploitation of goods and land confiscated in Cuba.
It is a different matter to prove that obtaining an award of compensation, with the recognition of economic compensation. Certain obstacles must be overcome, in particular:
- The strength of the factual account and its evidence. The facts and evidence must be sufficient and precise (characteristics and delimitation of the property, titles, etc.) to support the legal grounds for the claim and "prove" the illegality of the expropriation by the Cuban government.
- The "country" factor. In order to obtain judicial recognition of compensation in favor of a foreign plaintiff based on an exploitation that has resulted in unjust enrichment, one must abide by the Lex fori, Spanish law, in particular, Spanish legal doctrines and jurisprudence, especially the requirements of unjust enrichment and the configuration of expropriations in Spanish law.
- The repeated use of favorable elements of public international law. References to the Agreement between the Kingdom of Spain and the Republic of Cuba on the expropriations that have taken place in Cuba, within the framework of international public law. The case law of the Spanish Supreme Court recognizes the right of those Spanish citizens to whom the agreement applies to be compensated.
How we can help you in Gowper
Companies with business interests in Cuba, particularly those related to or derived from expropriated assets, should carefully consider the risks posed by Title III of the Helms-Burton Act, and, among other precautions, conduct due diligence procedures and develop an effective mitigation strategy (which may include greater flexibility for an amicable or out-of-court settlement).
These companies face the possibility of being sued not only in the federal courts of the United States, but also in Spain, in accordance with private international laws.
Those who have been harmed by the seizures in Cuba should carefully consider when filing a lawsuit whether to do so in the United States, knowing that if they obtain a favorable ruling, they may not be compensated in the case of the foreign assets of the defendants. If, on the contrary, they decide to go to the Spanish domicile of the companies, they will first have to overcome the procedural barrier of competent international jurisdiction, using the existing elements of Spanish law to support their claim. Secondly, to provide their claim with sufficient elements of fact and law for the Spanish judge to be able to assess the right they are seeking, without regard to the extraterritoriality of US law.
 Foreign Claims Settlement Comm’n of the U.S., Completed Programs – Cuba, U.S. Dep’t of Justice, https://www.justice.gov/fcsc/claims-against-cuba; Cuba: U.S. Policy in the 116thCongress, Congressional Research Serv. (Mar. 29, 2019), 45.