By Perry Bechky and Amiad Kushner*

On April 17, 2019, the Trump Administration opened the floodgates to lawsuits against parties “trafficking” in expropriated Cuban property, lifting a suspension of such lawsuits that had been in effect since 1996.  It is anticipated that many lawsuits will be filed under the federal law permitting such lawsuits, known as the Helms-Burton Act.  Chinese companies that do business in Cuba are among numerous companies that face massive potential exposure in these lawsuits.

The Helms-Burton Act created a federal cause of action that allows U.S. persons to sue any person who “traffics” in property expropriated by the Cuban government since January 1, 1959.  The Act defines “trafficking” extremely broadly to include knowingly engaging in a “commercial activity using or otherwise benefiting from” property confiscated from a U.S. national.  The Act purports to permit plaintiffs to recover massive damages based on the current market value of the expropriated property – which damages may be trebled in some cases, plus attorney fees – regardless of the benefit that the defendant actually derived from the expropriated property.  Under these damages provisions, it is estimated that a claim originally worth $1 million in the 1960s may give rise to a lawsuit seeking 12 times that amount today.  Lawsuits seeking massive damages may be filed not only against companies that directly own or operate expropriated property, but also companies that use, manage, finance, invest in, develop, or otherwise conduct business with such property.  

However, because the Act’s cause of action has never been tested in court, there is considerable uncertainty regarding the scope of liability and damages under the Act, as well as the defenses that may be available.  For example, the Act’s peculiar damages regime may be subject to constitutional limits.  There may also be constitutional limits on the ability of U.S. courts to assert personal jurisdiction over Chinese corporations based on their alleged conduct in Cuba.

We anticipate that many lawsuits under the Act will be filed in the U.S. against global Chinese companies that do business in Cuba.  China is Cuba’s largest trading partner, for both imports and exports.[1]Chinese companies have invested heavily in major sectors of the Cuban economy, including for example telecommunications, mining, and energy.[2]Chinese passenger aircraft have in recent years begun flying to Cuban airports.

Chinese companies that are doing business in Cuba and the U.S. should assess their exposure.  In this regard, the risk assessment should also take into account another provision of the Helms-Burton Act, which allows the U.S. government to deny entry to the U.S. to executives of companies that “traffic” in confiscated property.

* Amiad Kushner is a partner and head of litigation at Dai & Associates, P.C.  Perry Bechky is a partner at Berliner Corcoran & Rowe LLP.

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[1] Data for 2017 available at: https://atlas.media.mit.edu/en/profile/country/cub/

[2]See Scott B. MacDonald, Cuba’s Changing of the Guard and Sino-Cuban Relations, Center for Strategic and International Studies, Feb. 28, 2018 (available at: https://www.csis.org/ analysis/cubas-changing-guard-and-sino-cuban-relations )