Wachtell Lipton: Trump Administration Allows Suits for “Trafficking” in Cuban Property

On April 17, 2019, the Trump Administration announced that it will end waivers to Title III of the Helms-Burton Act, thereby allowing U.S. citizens to sue entities who are “trafficking” in their Cuban property that the Castro Regime “confiscated” from them on or after January 1, 1959.  The administration made this decision despite significant protestsfrom the international community, including the European Union, which may bring a claim before the World Trade Organization.  The brunt of Title III will likely be felt by non-U.S. companies with business interests in Cuba.

Passed in 1996 under the Clinton Administration — and divided into four Titles — Title III of the Helms-Burton Act has never actually gone into effect, having been suspended through periodic waivers since its passage.  The Trump Administration will allow Title III’s waiver to expire, activating the law on May 2, 2019.

The term “trafficking,” as defined in Title III, is exceptionally far-reaching, and may implicate entities that not only use “confiscated” property directly but also those which indirectly derive benefit from that property.  Accordingly, entities with even minor interests in Cuba may face exposure.  Furthermore, liability for violating Title III could be significant, with potential penalties including the current market value of the expropriated property and treble damages.

Additionally, press reports indicate that Title IV of the Helms-Burton Act, in effect since its passage but enforced sparingly, will now be more rigorously enforced.  Title IV provides for U.S. visa denial or immigration exclusion to individuals “trafficking” in “confiscated” properties in Cuba, including family members of the excludable individual.

Importantly, given Title III’s dormancy, its broad reach has never been tested in court and, therefore, the litigation landscape remains uncertain.  Prospective plaintiffs could face numerous challenges to bringing a successful action, including problems establishing personal jurisdiction and proving issues of fact such as property title.  Companies doing business in Cuba should evaluate their exposure risk, such as assessing their current business interests in Cuba that may implicate Title III, planning future business activities in Cuba with Title III in mind, and monitoring Title III litigation developments in the United States.