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The Habana Libre Hotel, formerly the Havana Hilton, could face lawsuits under a newly implemented US law (AFP Photo/YAMIL LAGE)
Havana (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.