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The Sanchez family (which became U.S. citizens in the 1970s) has filed a claim against Sol Melia, a Spanish hotel chain, claiming it is operating on the family's former property in Cuba. Under great pressure from the Senate Foreign Relations Committee (which is holding up appointments), the Dept. of State has commenced an investigation. The claim includes what are described as "ambiguous" allegations as the Sanchez family argues it is entitled to damages for the "illegal" use of its former land holdings. These sorts of claims can be complicated at best. Often there is little or no documentation. In some instances, the family split up and upon fleeing Cuba went to different countries with one branch selling rights without the consent of another branch of the family.

The Spanish government has let its displeasure be known. To avoid a WTO challenge to Helms-Burton, in mid-1998, the U.S. and E.U. sought to work out a compromise. That understanding allowed the E.U. to obtain a waiver in exchange for agreeing to prevent its companies from doing business on expropriated property. The waiver from Congress has yet to be sought by the Clinton Administration because there is little likelihood of it being approved in the current political climate.

Sherritt International of Canada and GM Group of Israel are reported to have been hit with the sanction of its executives and their families being unable to obtain U.S. visas. Grupo Domos of Mexico had its deal fall through so the threat of sanctions was averted.

Another Extraterritorial Application Of United States' Law?

On March 12, 1996, the United States enacted "The Cuban Liberty and Democratic Solidarity Act" (commonly referred to as Helms-Burton) (the Act). This controversial legislation, which was introduced on February 14, 1995 by Sen. Jesse Helms and Rep. Dan Burton, expanded the U.S. economic embargo against Cuba through measures aimed at penalizing third countries, firms and individuals trading with Cuba. The Act is designed to further tighten the economic embargo against Fidel Castro's government with the intent of forcing democratic political reform in Cuba. Its purposes include strengthening international sanctions against the Castro regime, providing for the national security of the United States in the face of continuing threats of terrorism, theft of property from United States nationals by the Castro government; political manipulation by the Castro government of the desire of Cubans to escape that results in mass migration; protecting United States' nationals against confiscatory takings and the wrongful trafficking in confiscated property by the Castro government.

The Act's provisions include a new private right of action by providing for civil suits in U.S. courts against foreign nationals using, dealing, or trafficking in property in Cuba to which U.S nationals have claims; denies U.S. visas to executives and majority shareholders (and their immediate families) of companies trafficking in such property. The Act defines trafficking to include selling, transferring, leasing, purchasing and other activities and any "commercial activity using or otherwise benefiting from confiscated property" and directing, participating in or profiting from a company that "traffics" in "confiscated property."

The Act also permits U.S. courts to award treble damages plus court costs and reasonable legal fees to successful litigants in certain circumstances. It forbids financing by U.S. nationals (including their foreign branches) of transactions involving expropriated property subject to a U.S. claim; codifies in their current form existing U.S. sanctions against Cuba; urges the President to pursue an international embargo against Cuba and sanction countries which continue their trading relationships with Cuba.

Helms-Burton is the most recent of many actions taken by the U.S. against Cuba since its revolution in 1959 and the subsequent creation of its Communist government. Past economic measures against Cuba are set forth primarily in the regulations of the U.S. Department of the Treasury (Cuban Assets Control Regulations) at 31 C.F.R. Part 515 and the United States Commerce Department's Export Administration Regulations, 15 C.F.R. Parts 770 through 785. Civil penalties may be imposed, with "knowing" violations punishable as criminal offenses with prison terms, substantial fines or both.

The new law, like the other U.S. measures seeking to change the political situation in Cuba, poses serious questions regarding whether or not Helms-Burton violates basic principles of international law. A fundamental principle of international law is territorial sovereignty, i.e. each nation is sovereign and so has the right to exercise jurisdiction and control over matters within its territory. From its inception, territorial sovereignty has been derived from three broad principles: 1) All States are formally equal; 2) No State may legally interfere in the purely internal affairs of another State; and 3) Territory and Jurisdiction are coextensive. Walker, A Manual of Public International Law (1984). There are two other important concepts related to territorial jurisdiction: 1) territorial integrity which gives a state the right to demand that other states refrain from committing acts which violate the independence or territorial supremacy of that state; and 2) nonintervention which requires that a state not interfere with the internal or external affairs of another state. A state may thus make laws that pertain to persons and activities within its territory and with which no other state may interfere. (Note, The Cuban Democracy Act: Another Extraterritorial Act That Won't Work, Brooklyn J. of Int'l Law, v. 20, p. 397-442 (1994). Extending a state's authority beyond its territory (extraterritorial jurisdiction) may be permitted if such acts are not punishable by the laws of the state where committed or if such acts endanger the security of the state, its money, official seals or marks. Rhyne, International Law, p.117 (1971).

Helms-Burton would appear to violate these principles as well as the United Nations' Declaration on Principles of International Law (Declaration) concerning friendly relations and co-operation among states called for in the charter of the United Nations. The Declaration, which was adopted by the General Assembly in 1970, prohibits a state from using or encouraging the use of economic, political or any other type of measures to coerce another state in order to obtain from it the subordination of the exercise of its sovereign rights and to secure from it advantages of any kind.

Helms-Burton may also violate the General Agreement on Trade in Services and the North American Free Trade Agreement investment and services rules (Chapter 11) and the rules on temporary entry for business persons (Chapter 16).

Not surprisingly, Helms-Burton is not the first time the U.S. has sought to influence behavior in other countries through enactment of laws in the U.S. Other examples of U.S. laws which are extraterritorial in their impact include the Iran and Libya Sanctions Act of 1996 which imposes new sanctions on foreign companies that engage in specified economic transactions with Iran or Libya. The U.S. has also recently taken actions regarding rules of origin for textile products which completely altered the applicable rules on a unilateral basis without regard to bilateral agreements then in place with its various trading partners.

In response to criticism from U.S. trading partners such as Canada, Mexico and the European Union, President Clinton suspended for six months the Helms-Burton provision which allows Americans to file suits in U.S. courts against any foreign interest doing business using assets seized by the Castro regime from U.S. owners during and after the Cuban revolution. The other provisions of the act were left intact. On July 11, 1996, the U.S. announced that it would deny visas to seven top executives and directors of Sherritt International Corp., a Canadian mining company accused of "trafficking" in confiscated U.S. property in Cuba. On August 20, 1996, the U.S. State Department also warned several top executives of a Mexican telephone company (Grupo Domos) that they were in danger of losing their U.S. visas because of the company's investments in Cuba.

There is little hope the new economic measures imposed under Helms-Burton Act will be removed or relaxed in the foreseeable future. Prior to removing or relaxing the embargo, Helms-Burton requires the President to submit a determination to Congress that a "transition government" is in power in Cuba. What constitutes a "transition government" has been defined in the Act to include, for example, a specification that such a government may not include Fidel Castro or his brother, Raul Castro, in an active or inactive role or position. Further, all political activity must be legalized in Cuba and there must be a public commitment to free and fair elections and a release of all political prisoners.

Seeing no likelihood of short term relief in the form of convincing the U.S. government to revoke Helms-Burton, the European Union (EU), Mexico and Canada have threatened to retaliate against the U.S. in kind. Canadian lawmakers are expected to introduce legislation this fall which allows descendants of people who fled the U.S. for Canada during the American Revolutionary war in the 1770's to sue in Canadian courts for the return of their property. The EU's reprisal list includes freezing U.S. assets, special procedures in EU courts allowing firms to "reclaim" awards entered against them in U.S. courts, "blocking statutes" to prevent damage awards from being enforced and denying U.S. business executives entry visits into EU countries.

In addition, all three governments are looking at invoking World Trade Organization dispute resolution mechanisms, while Canada and Mexico are also viewing formation of a dispute resolution panel under NAFTA as an additional means of addressing the problems raised by Helms-Burton. The U.S. response to threatened WTO and/or NAFTA action is to suggest that it will seek to invoke the national security exemption provided in both schemes.

Additionally, Canada has already enacted one law to block the application of Helms-Burton which, among other things, prohibits Canadian corporations, their officers, directors and managers in positions of authority to comply with any "extraterritorial measure of the United States" and with any "communications" received from persons in a position to direct or influence the policies of such corporations.

The question Helms-Burton raises is just how far is may a country go when it (the U.S.) tries to change the political climate in another country (Cuba)? What makes the Cuban situation unique is that, unlike Libya and Iran which have been condemned by the world for their support of terrorism, Cuba does not share similar condemnation. The other question Helms-Burton raises is why is it proper for the United States to engage in a boycott when the U.S. has for years condemned the Arab League for its boycott of Israel (see Section 999 of the Internal Revenue Code and 15 C.F.R. Part 769)?




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