Increasing impact of the Helms-Burton Act on EU companies and individuals

Last year, the US enacted a provision of the Helms-Burton Act that allows US citizens to claim compensation from alleged beneficiaries of Cuban expropriations in the aftermath of the 1959 revolution. Subsequently, several EU companies have been sued before US courts. Most recently, the US increased pressure and – as far as we know – for the first time excluded European individuals from entry to the US under the Helms-Burton Act. In light of this, EU citizens and companies concerned should consider recovering any damages caused by the application of the Helms-Burton Act on the basis of the EU Blocking Regulation.

Claims under the Helms-Burton Act brought against European companies in the US

Title III of the Helms-Burton Act of 1996 – the official title is the Cuban Liberty and Democratic Solidarity Act – allows US citizens who, from the perspective of the US, were wrongfully expropriated in the wake of the Cuban Revolution of 1959 to bring compensation claims before US courts. While US governments always suspended Title III, it was the Trump administration that brought it into force as of 2 May 2019, as part of its political and economic pressure on the regime of Venezuelan leader Nicolas Maduro, an ally of Cuba (see our News of 6 May 2019).

Title III of the Helms-Burton Act allows in particular for actions by US citizens against alleged beneficiaries of expropriation: On this basis, US citizens are entitled to sue companies or individuals for compensation that, in the US view, ‘traffic’ in confiscated property. This covers persons and undertakings that, inter alia, sell, transfer, distribute, broker, manage, purchase, lease or possess confiscated property, but also persons and undertakings that engage in a commercial activity using or otherwise benefiting from confiscated property. The scope of the provision is extremely broad and thus allows for extensive legal action. Damages on this basis may include the current market value of the confiscated property, as well as court and reasonable lawyers’ fees, and may, under certain circumstances, even be tripled.

Since the US enacted Title III of the Helms-Burton Act, many US individuals and companies have filed claims on this basis and brought actions against EU companies such as the Spanish airline Iberia, the Dutch reservations platform Booking, the Spanish hotel group Meliá and the German company Trivago GmbH. According to the U.S.-Cuba Trade and Economic Council, 21 lawsuits have been filed so far, and more are expected to follow. However, some have already been rejected by US courts.

As an important line of defence against facing action under Title III of the Helms-Burton Act, EU citizens and EU companies can assert that they do not fall within the jurisdiction of US courts. Such jurisdiction requires a sufficient link between the defendant or his conduct at issue, respectively, and US territory.

Exclusion from entry to the US as a further measure under Helms-Burton

As a further measure against alleged beneficiaries of Cuban expropriations, Title IV of the Helms-Burton Act provides for the exclusion of foreign persons who ‘traffic’ in confiscated property from entry to the US.

Last week, it was announced that Gabriel Escarrer, CEO of the Spanish Meliá hotel group and a Spanish citizen, was excluded from entry to the US on the basis of Meliá’s business activities in Cuba – apparently the first such procedure. According to Meliá, other foreign persons and companies have also been subject to similar measures.

Compensation for EU companies on the basis of the European Union Blocking Regulation

The specific consequences of the Trump administration’s enactment and application of the aforementioned provisions of the Helms-Burton Act remain to be seen. In particular, it is not clear at this stage whether and to what extent US courts will uphold claims by US citizens and US companies and grant damages.

If EU citizens or EU companies are actually ordered by US courts to pay compensation, the question arises as to whether these judgments can be enforced. The EU Blocking Regulation (see also our News of 7 August 2018) prohibits EU citizens and legal entities registered in the EU as well as any other natural person residing in the EU from complying with the provisions of Titles III and IV of the Helms-Burton Act, or from enforcing any resulting decisions in the EU.

For all EU companies with US operations or even subsidiaries in the US, the EU Blocking Regulation offers little consolation at first glance. However, they are not defenceless: Article 6 of the Blocking Regulation explicitly provides that EU citizens and EU companies are entitled to recover any damages, including legal costs, caused by the application of the Helms-Burton Act and the actions based thereon or resulting therefrom. Such recovery may be obtained from the natural or legal person or any other entity causing the damages or from any person acting on its behalf or intermediary. . On this basis, claims for damages may be brought not only against the US itself, but also against US companies or citizens who have obtained compensation from EU companies under the Helms-Burton Act in the US. Such claims for damages could be brought before the courts of any EU Member State in which the US party liable for damages holds assets. No such proceedings are known of yet, but they could prove to be effective safeguards.

Context

The activation of the Helms-Burton Act reflects a US foreign and trade policy that aims to impose US political and economic interests by way of extra-territorial sanctions, with less and less regard for US allies, especially the EU and its Member States. It remains to be seen whether this will have any impact. Last summer, the EU already described the US action as illegal under international law and announced further measures to counteract it.