On May 2nd Canadian Companies doing business in Cuba Could be Exposed to Substantial US Civil Liability under Title III of the U.S. LIBERTAD Act
On 17 April 2019, U.S. Secretary of State Pompeo announced that the suspensions that have applied to the civil remedies provisions in Title III of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996 since its inception will not be continued and civil remedies will be available to certain United States nationals effective on May 2nd.
In general terms, the provisions specify that any person that “traffics” in property which was confiscated by the Cuban Government on or after 1 January 1959, shall be liable to any United States national who owns the claim to such property for money damages. The term “traffics” is broadly defined to include the leasing, possessing, controlling, managing and profiting from such property without the authorization of any United States national who holds a claim to the property and extends to direct and indirect trafficking through other persons.
Pompeo’s announcement was quickly responded to in a joint EU-Canada statement. The statement includes the following which identifies three EU and Canadian responses— (i) a WTO challenge; (ii) a ban on enforcement and recognition of US judgements; and (iii) and the allowance of counter-suits:
“We are determined to work together to protect the interests of our companies in the context of the WTO and by banning the enforcement or recognition of foreign judgements based on Title III, both in the EU and Canada. Our respective laws allow any US claims to be followed by counter-claims in European and Canadian courts, so the US decision to allow suits against foreign companies can only lead to an unnecessary spiral of legal actions”.
All three responses are credible.
The WTO legality of Title III not settled. Shortly after the LIBERTAD Act was passed in 1996, the European Communities (as it was then known) initiated a WTO challenge in United States – The Cuban Liberty and Democratic Solidarity Act. The challenge included Title III of the LIBERTAD Act and alleged that the Act violated the provisions of the General Agreement on Tariffs and Trade, 1994 (GATT 1994) and the General Agreement on Trade in Services (GATS). Canada, Japan, Malaysia, Mexico and Thailand reserved their third-party rights in the challenge. The challenge was suspended when the US and EC entered into negotiations for a mutually agreed solution and was not reactivated within the required 12-month period. The authority for the dispute settlement panel therefore lapsed and the challenge went no further.
Ban on the Enforcement and Recognition of US Judgements (Canada’s “blocking” provisions)
In Canada, the power to ban the enforcement and recognition of US judgements is implemented in the Foreign Extraterritorial Measures Act (FEMA). Section 7.1 of the Act specifies that “any judgement given under the law of the United States entitled Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1994 shall not be recognized or enforceable in any manner in Canada”.
Counterclaims in Canadian Courts (Canada’s “claw back” provisions)
The right to bring counterclaims where a judgement has been given under the LIBERTAD Act is implemented in sections 8 and 9 of the FEMA. Under these provisions, Canadian citizens and residents, Canadian corporations (federal and provincial) and persons carrying on business in Canada can sue for and recover damages from a person in whose favour the judgement is given.
Our lawyers have extensive experience in addressing the extraterritorial application of the United States’ Cuba legislation going back to 1996 as counsel for a third party WTO Member in the 1996 WTO challenge. Since that time we have advised clients on a wide range of issues concerning the interpretation and application of the FEMA. Should you have any questions regarding this matter, we are at your disposal.