Presidential authority to allow investment and negotiations on confiscated properties by US persons, including Cuban-Americans
Cuba seized the Cuban situs properties of U.S. citizens, other foreign nationals and Cubans in Cuba starting in 1959, with the bulk of the expropriations taking place in the second half of 1960. The laws issued by the Cuban government to implement the expropriation of the holdings of U.S. and Cuban nationals contained undertakings by Cuba to provide compensation to the owners. Nevertheless, in almost all cases, no compensation was ever paid.
The Cuban Liberty and Democratic Solidarity Act, (Helms-Burton) in its Title III (the "Act") allows all U.S. nationals as of March 1996 including those who were not eligible to file an expropriation claim with the Foreign Claims Settlement Commission ("FCSC") under the Cuban Claims Program in earlier years, to bring an action for damages against third-country nationals "trafficking" in the properties that were confiscated from them by the Cuban government. U.S. nationals include Cuban naturalized US citizens prior to March, 1996. There is, however, a significant restraint in this right of action under the Act. The President of the United States has authority to suspend the effective date of Title III for discrete six-month periods if the President determines that the suspension is necessary to the national interests of the United States and will expedite a transition to democracy in Cuba" (See Section 306(b)(1)(a) of the Act). This suspension has been applied for consecutive periods since the enactment of the Act. The President can also, at any time, rescind any suspension of the applicability of Title III by "reporting to the appropriate Congressional Committees that doing so will expedite a transition to democracy in Cuba" (See Section 306(d) of the Act).
The Act also allows the confiscated claimant and the trafficking defendant to settle any lawsuit without obtaining licenses from any U.S. government agency, thereby bypassing the licensing procedure by the U.S. Department of Treasury that would otherwise apply under the terms of 31 C.F.R. Part 515 (See Section 302(7) of the Act). This provision could be utilized by claimants and potential defendants to settle their claims, and would permit the defendants to continue their activities in Cuba without further hindrance from the former owners.
This process was applied in at least one instance, the case of ITT and the Italian telecommunications firm STET in connection with STET's investment in the Cuban telephone company, confiscated from ITT in the early days of the Cuban Revolution. In July 1997, the U.S. State Department approved an agreement between STET and ITT stating it constituted a major step toward the enforcement of the Act, reinforcing the principle of respect for the property rights of U.S. citizens, and serving as a disincentive to other foreign firms currently operating or considering investment in confiscated U.S. property in Cuba without authorization of the U.S. prior owner claimant.
Article 2 of the U.S. Constitution, gives the President the constitutional authority to settle U.S. Claims with the Republic of Cuba on behalf of any American claimant, for any amount and under any terms whatsoever. Federal courts have held this "Doctrine of Espousal" to effectively supersede the Fifth Amendment prohibition against the taking of private property without due process of law or just compensation, and to be binding upon the claimants, being the sole remedy for the claimant even when the amount obtained is a fraction of the certified value.
The U.S. government has rarely negotiated a settlement that truly meets the international law requirement for "prompt, adequate and effective" compensation for expropriation by a foreign government. Precedent shows that U.S. courts defer to the Executive Branch's prerogative to sacrifice bona fide fair compensation to claimants in order to normalize diplomatic relations with the expropriating foreign government.
The recent announcement from both the US and Cuban Presidents to reestablish relations and to open an agenda to discuss among other subjects the expropriation of the properties would create a unique opportunity to implement a "self-help" strategy to maximize the compensation of the expropriation claims for both US certified claimants and legitimate Cuban-Americans before the governments settle the claims for political purposes.
The President of the United States under his authority to alter the specific requirements and conditions applicable to each of the existing general and specific license provisions of the Cuban Assets Control Regulations (CACR) should permit legitimate owners of claims to properties confiscated by the Cuban government to:
• Negotiate lease-license agreements with foreign companies authorizing the use of confiscated properties in Cuba;
• Negotiate the settlement of the claims with the Cuban government or a compensation schedule with a foreign entity;
• Negotiate transfer of titles, assignments and other property rights with the current possessor of such confiscated properties;
• Permit direct or indirect investments in confiscated properties by the prior owner and assignees;
• Permit the purchase, re-acquisition, usufruct and assignment of property rights on industrial, commercial and agricultural properties with the consent of the legitimate claimant and approval of the Cuban government;
• Permit the purchase of residential dwellings in Cuba with the consent of the prior owner and legitimate claimant as permitted by Cuban laws;
• Permit the remittance of money to improve such properties, the exportation of renovation and construction materials and the hiring of Cubans to make such improvements; and
• Permit travel to engage in all the above activities.
Therefore, we recommend adding these paragraphs and a note to Section 515.208 of the CACR:
"The entry into a transaction affecting property or interests in confiscated properties (as defined at §336 of these Regulations) in this section may be authorized either by a general license or on a case-by-case basis by a specific license".
"The transfer of a Foreign Claims Settlement Commission (FCSC) certified claim or interests in certified claimants are prohibited absent specific authorization by the Department of the Treasury's Office of Foreign Assets Control (OFAC). These transfers should be authorized in the interest of the fair compensation process.
"Note 1 to §515.208: Each person relying on the general authorization in this section must retain specific records related to the authorized transactions. See §§501.601 and 501.602 of this chapter for applicable recordkeeping and reporting requirements."