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II (/.\ Illllf!)/11/. /) . (."
_')().·-)_·)()
LEGAL CONSIDERATIONS REGARDING
TITLE III OF THE LIBERTAD BILL
The U.S. Government has long condemned as a violation of
international law the confiscation by the Cuban Government of
properties taken from U.S. nationals without compensation, and
has taken steps to ensure future satisfaction of those claims
consistent with international law.
Congress recognized the key
role of international law in this respect. Title V of the
International Claims Settlement Act of 1949, as amended, pursuant
to which the Foreign Claims Settlement Commission (FCSC)
certified the claims against Cuba of 5,911 U.S. nationals,
accordingly applies to claims "arising out of violations of
international law."
The State Department, however, opposes the creation of a
civil remedy of the type included in Title III of the "Cuban
Liberty and Democratic Solidarity (LIBERTAD) Act of 1995" (the
"LIBERTAD bill") currently under consideration by the Congress.
The LIBERTAD bill would be very difficult to defend under
international law, harm U.S. businesses exposed to copy-cat
legislation in other countries, create friction with our allies,
fail to provide an effective remedy for U.S. claimants and
seriously damage the interests of FCSC certified claimants.
It
would do so by making U.S. law applicable to, and U.S. courts
forums in which to adjudicate claims for, properties located in
Cuba as to which there is no United States connection other than
the current nationality of the owner of a claim to the property.
Specifically, the LIBERTAD bill would create a civil damages
remedy against those who, in the language of the bill, "traffic"
in property of a U.S. national.
The bill defines so-called
"trafficking" as including, among other things, the sale,
purchase, possession, use, or ownership of property the claim to
which is owned by a person who is now a U.S. national.
The civil remedy created by the LIBERTAD bill would
represent an unprecedented extra-territorial application of U.S.
law that flies in the face of important U.S. interests. Under
international law and established state practice, there are
widely-accepted limits on the jurisdictional authority of a state
to "prescribe," i.e., to make its law applicable to the conduct
of persons, as well as to the interests of persons in things.
In
certain circumstances a state may apply its law to extraterritorial conduct and property interests.
For example, a state
may do so in limited circumstances when the conduct has or is
intended to have a "substantial effect" within its territory.
The Senate version of the bill appears to imply that so-called
-2-
"trafficking" in confiscated property has a 11 substantial effect"
within the United States. Some have explicitly defended the
LIBERTAD bill on this ground.
Asserting jurisdiction over property located in a foreign
country and expropriated in violation of international law would
not readily meet the international law requirement of
prescription because it is difficult to imagine how subsequent
11
trafficking 11 in such property has a 11 substantial effect" within
the territory of the United States.
It is well established that
under international law 11 trafficking 11 in these confiscated
properties cannot affect Cuba's legal obligation to compensate
U.S. claimants for their losses. The actual effects of an
illegal expropriation of property are experienced at the time of
the taking itself, not at any subsequent point. An argument that
subsequent use or transfer of expropriated property may interfere
with the prospects for the return of the property would be hard
to characterize as a 11 substantial effect 11 under international
law. Under international law, the obligation with respect to the
property is owed by the expropriating state, which may satisfy
that obligation through the payment of appropriate compensation
in lieu of restitution.
As a general rule, even when conduct has a 11 substantial
effect 11 in the territory of a state, international law also
requires a state to apply its laws to extra-territorial conduct
only when doing so would be reasonable in view of certain
customary factors.
Very serious questions would arise in
defending the reasonableness under international law of many
lawsuits permitted by Title III of the LIBERTAD bill. The
customary factors for judging the reasonableness of extraterritorial assertions of jurisdiction measure primarily
connections between the regulating state, on one hand, and the
person and conduct being regulated, on the other. Title III
would cover acts of foreign entities and non-U.S. nationals
abroad involving real or immovable property located in another
country with no direct connection to the United States other than
the current nationality of the person who holds an expropriation
claim to that property. Moreover, the actual conduct for which
liability is created -- private transactions involving the
property -- violates no established principle of international
law. Another customary measure of reasonableness is the extent
to which the exercise of jurisdiction fits with international
practice. The principles behind Title III are not consistent
with the traditions of the international system and other states
have not adopted similar laws
International law also requires a state assessing the
reasonableness of an exercise of prescriptive jurisdiction to
balance its interest against those of other states, and refrain
from asserting jurisdiction when the interests of other states
are greater.
It would be very problematic to argue that U.S.
-3-
interests in discouraging "trafficking" outweigh those of the
state in which the property is located, be it Cuba or elsewhere,
International law recognizes as compelling a state's interests in
regulating property present within its own borders. The United
States guards jealously this right as an essential attribute of
sovereignty.
In contrast, discouraging transactions relating to
formerly expropriated property has little basis in state
practice.
That international law limits the United States' exercise of
extra-territorial prescriptive jurisdiction does not imply that
U.S. courts must condone property expropriations in cases validly
within the jurisdiction of the United States. Our courts may
refuse to give affect to an expropriation where either (i) the
expropriation violated international law and the property is
present in the United States or (ii) in certain cases, the
property has a legal nexus to a cause of action created by a
permissible exercise of prescriptive jurisdiction.
In fact,
generally speaking, our laws prohibit our courts from applying
the "Act of State" doctrine with respect to disputes about
properties expropriated in violation of international law.
If
applied the doctrine might otherwise shield the conduct of the
foreign state from scrutiny.
Indeed, in a number of important
cases the Department of State has actively and affirmatively
supported these propositions in cases before U.S. courts to the
benefit of U.S. claimants, including with respect to claims
against Cuba. The difficulty with Title III of the LIBERTAD bill
sterns not from its willingness to disaffirm expropriations that
violate international law, but from its potentially indefensible
exercise of extra-territorial prescriptive jurisdiction.
Some supporters of the LIBERTAD bill have advanced seriously
flawed arguments in defending the extra-territorial exercise of
jurisdiction contemplated by Title III. Some have defended Title
III on the deeply mistaken assumption that international law
recognizes the wrongful nature of so-called "trafficking" in
confiscated property. No support in state practice exists for
this proposition, particularly with regard to property either
held by a party other than the confiscator or not confiscated in
violation of international claims law (if, for example, the
original owners were nationals of Cuba at the time of loss.)
Many of the suits allowed by Title III would involve
11
trafficking" in properties of this type, where an
internationally wrongful act would seem extremely difficult to
establish.
Regrettably, the support in international state practice
offered by some for viewing so-called 11 trafficking" as wrongful
has generally confused a state's power to assert jurisdiction
over conduct with the "Act of State" doctrine, discussed
previously. The unwillingness of our courts to give effect to
foreign state expropriations violative of international law in
-4-
matters over which they have valid jurisdiction under
international law, however, does not imply that international law
recognizes as wrongful any subsequent entanglement with the
property. Others have suggested that general acceptance of
domestic laws relating to conversion of ill-gotten property makes
"trafficking" wrongful under international law.
This argument is
extremely unpersuasive as many universally accepted domestic
laws, including for example most criminal laws, have no
international law status. So-called "trafficking'' has no readily
identifiable international law status.
International law does
condemn a state's confiscation of property belonging to a foreign
national without the payment of prompt, adequate and effective
compensation.
In such circumstances the U.S. Government has been
largely successful in assuring that U.S. claimants obtain
appropriate compensation, precisely because of the protection
afforded by international law.
Some supporters have maintained incorrectly, in addition,
that Title III is similar to prior extra-territorial exercises of
jurisdiction by the United States over torts committed outside
the United States.
The Alien Tort Statute (ATS) and the Torture
Victim Protection Act of 1991 (TVPA) have been cited as examples
in this context.
The assertion is plainly false and the LIBERTAD
bill differs significantly from the examples cited. While the
ATS and TVPA do empower U.S. courts to adjudicate certain
tortious acts committed outside the United States, they do so
only with respect to acts that violate international law. The
ATS covers only torts "committed in violation of the law of
nations or a treaty of the United States." Similarly, the TVPA
creates liability for certain conduct violating fundamental
international norms of human rights (i.e. torture and extrajudicial killing).
In contrast, as explained previously,
supporters of the LIBERTAD bill have failed to identify any basis
in international law permitting the use of U.S. courts for the
adjudication of suits regarding extra-territorial "trafficking."
Title III of the LIBERTAD bill also deviates substantially
from accepted principles of law related to the immunity of
foreign sovereign states, as well as their agencies and
instrumentalities. Although much of the discussion of the bill
has focussed on suits against certain foreign corporations and
individuals, in its current form the Senate version of the bill
would allow a suit to be brought against "any person or entity,
including any agency or instrumentality of a foreign state in the
conduct of commercial activity" that "traffics" in confiscated
property.
Since "trafficking" is defined to include such things
as possessing, managing, obtaining control of, or using property,
it would appear at a minimum that Title III authorizes suits
against many Cuban or other foreign governmental agencies or
instrumentalities.
To the extent Title III provides for such
suits, they would be highly problematic and difficult to defend.
-5-
The Foreign Sovereign Immunities Act (FSIA), enacted in 1976
after careful deliberation, is consistent with international law
principles of foreign sovereign immunity. To the extent the
LIBERTAD bill would permit suits against agencies and
instrumentalities of foreign governments it would go far beyond
current exemptions in the FSIA. The LIBERTAD bill, unlike the
FSIA, would not require the agency or instrumentality to be
"engaged in commercial activity in the United States." Moreover,
the LIBERTAD bill contemplates suits against agencies or
instrumentalities of foreign states for any conduct that
constitutes so-called 11 trafficking 11 ; as defined in the LIBERTAD
bill this notion is broader than owning or operating property,
the FSIA standard.
Similarly, to the extent the provisions of the LIBERTAD bill
permitting suits against "entities" is construed to authorize
suits against foreign governments as well, it would go well
beyond current exemptions in the FSIA and under international law
for claims involving rights in property. Under the FSIA, a
foreign state (as distinguished from its agencies and
instrumentalities) is not immune only when the "property or any
property exchanged for such property is present in the United
States in connection with a commercial activity carried on in the
United States by the foreign state." The LIBERTAD bill would
appear not to impose those requirements.
In addition, suits
against "entities" would in these circumstances include those
brought against foreign governments other than Cuba that may have
acquired confiscated property in violation of no principle of
international claims law.
These potential expansions of the
exceptions from the immunity of foreign states, as well as their
agencies and instrumentalities, from the jurisdiction of U.S.
courts and their implications for U.S. liability in other
countries represent matters of great concern.
Some have suggested that even though the creation of a cause
of action such as that contemplated in Title III of the LIBERTAD
bill is not currently defensible under international law, the
United States should enact these provisions of the bill to
promote the development of new international law principles in
this area.
Suggestions of this sort in this context rest on a
dubious premise of how state practice contributes to international law. While the practice of states represents a source
of international law, state practice makes law only when it is
widespread, consistent and followed out of a sense of legal
obligation. The enactment of Title III in the face of serious
questions about its consistency with international law, and
without the support of the international community, would not
contribute positively to international law relating to the
expropriation of property.
In addition to being very difficult to defend under
international law, enactment of Title III would also undermine a
-6-
number of important U.S. interests connected to these significant
international law concerns. General acceptance of the principles
reflected in Title III would harm U.S. business interests around
the world. At present and in general, the laws of the country in
which the property lies govern the rights to that property,
particularly with respect to real property. United States
businesses investing all over the world benefit from their
ability to rely on local law concerning ownership and control of
property. Under the precedent that would be set by Title III, a
U.S. business investing in property abroad could find itself
hailed into court in any other country whose nationals have an
unresolved claim to that property. Such a precedent could
increase uncertainties for U.S. companies throughout the world.
Perversely, Title III would hurt U.S. businesses most directly in
Cuba. U.S. businesses seeking to rebuild a free Cuba once a
transition to democracy begins will find themselves easy targets
of Title III suits, as U.S. corporations generally are subject to
the jurisdiction of our courts.
Congress should expect that the enactment of Title III of
the LIBERTAD bill, with its broad extra-territorial application
of U.S. law, significant departures from established claims
practice and possible contravention of international law, will
create serious disputes with our closest allies, many of whom
have already voiced their objections. The United States must
expect the friction created by Title III to hurt efforts to
obtain support in pressing for change in Cuba. Moreover, once
the transition to democracy does begin, Title III will greatly
hamper economic reforms and slow economic recovery as it will
cloud further title to confiscated property.
Perhaps most importantly, Title III of the LIBERTAD bill
would not benefit U.S. claimants. The private right of action
created by Title III, furthermore, would likely prove ineffective
to U.S. claimants.
Past experience suggests that countries
objecting to the extra-territorial application of U.S. law
reflected in Title III, most likely some of our closest allies
and trading partners, could be expected to take legal steps under
their own laws to block adjudication or enforcement of civil
suits instituted against their nationals. Moreover, many foreign
entities subject to suit would deem U.S. jurisdiction
illegitimate and fail to appear in our courts. Title III would
in those circumstances merely produce unenforceable default
judgements.
In addition, some commentators have estimated
potential law suits to number in the hundreds of thousands, so
the LIBERTAD bill would also clog our courts and result in
enormous administrative costs to the United States. As the
lawsuits created under Title III might not result in any increase
in or acceleration of compensation for U.S. claimants, these
costs would be unjustifiable.
-7-
In so far as it departs from widely accepted international
claims law, Title III of the LIBERTAD bill undermines widelyestablished principles vital to the United States' ability to
assure that foreign governments fulfill their international
obligations for economic injury to U.S. nationals.
In doing so,
Title III hurts all U.S. citizens with claims against another
government. With respect to claims against Cuba specifically,
the cause of action contemplated in Title III of the LIBERTAD
bill will hamper the ability of the U.S. Government to obtain
meaningful compensation for certified claimants.
Consistent with
our longstanding and successful claims practice, at an
appropriate time when a transition to democracy begins in Cuba,
the United States will seek to conclude a claims settlement
agreement with the Cuban government covering certified claimants,
or possibly create some other mechanism to assure satisfaction of
their claims.
If Title III is enacted into law and U.S.
claimants have an opportunity, at least on paper, to receive
compensation for claimed properties from third party
"traffickers," the Cuban Government may simply refuse to address
these claims on the grounds that the claimants must pursue
alternative remedies in U.S. courts. Yet, as indicated
previously the prospects for broad recoveries in this manner are
very poor.
Even if Cuba accepts its international law responsibilities
with respect to U.S. claims, the United States can expect that a
large quantity of private suits would profoundly complicate
claims-related negotiations, as well as subsequent claims payment
procedures. Cuba might easily demand that the United States
demonstrate that each person holding an interest in any of the
nearly 6,000 certified claims, and possibly the tens of thousands
of uncertified claims, has not already received compensation via
a lawsuit or private settlement. As the United States will not
have records of private suits, let alone non-public out of court
settlements, doing so would be extremely difficult.
In addition,
dealing with unpaid judgments in this context would likely prove
particularly difficult.
Finally, the Castro regime has already used, and if enacted
into law would continue to use, the civil cause of action
contemplated by Title III of the LIBERTAD bill to play on the
fears of ordinary citizens that their homes or work places would
be seized by Cuban-Americans if the regime falls.
The United
States must make it clear to the Cuban people that U.S. policy
toward Cuban property claims reflects established international
law and practice, and that the future transition and democratic
governments of the Cuban people will decide how best to resolve
outstanding property claims consistent with international law.
.
II (/.\ Illllf!)/11/. /) . (."
_')().·-)_·)()
LEGAL CONSIDERATIONS REGARDING
TITLE III OF THE LIBERTAD BILL
The U.S. Government has long condemned as a violation of
international law the confiscation by the Cuban Government of
properties taken from U.S. nationals without compensation, and
has taken steps to ensure future satisfaction of those claims
consistent with international law.
Congress recognized the key
role of international law in this respect. Title V of the
International Claims Settlement Act of 1949, as amended, pursuant
to which the Foreign Claims Settlement Commission (FCSC)
certified the claims against Cuba of 5,911 U.S. nationals,
accordingly applies to claims "arising out of violations of
international law."
The State Department, however, opposes the creation of a
civil remedy of the type included in Title III of the "Cuban
Liberty and Democratic Solidarity (LIBERTAD) Act of 1995" (the
"LIBERTAD bill") currently under consideration by the Congress.
The LIBERTAD bill would be very difficult to defend under
international law, harm U.S. businesses exposed to copy-cat
legislation in other countries, create friction with our allies,
fail to provide an effective remedy for U.S. claimants and
seriously damage the interests of FCSC certified claimants.
It
would do so by making U.S. law applicable to, and U.S. courts
forums in which to adjudicate claims for, properties located in
Cuba as to which there is no United States connection other than
the current nationality of the owner of a claim to the property.
Specifically, the LIBERTAD bill would create a civil damages
remedy against those who, in the language of the bill, "traffic"
in property of a U.S. national.
The bill defines so-called
"trafficking" as including, among other things, the sale,
purchase, possession, use, or ownership of property the claim to
which is owned by a person who is now a U.S. national.
The civil remedy created by the LIBERTAD bill would
represent an unprecedented extra-territorial application of U.S.
law that flies in the face of important U.S. interests. Under
international law and established state practice, there are
widely-accepted limits on the jurisdictional authority of a state
to "prescribe," i.e., to make its law applicable to the conduct
of persons, as well as to the interests of persons in things.
In
certain circumstances a state may apply its law to extraterritorial conduct and property interests.
For example, a state
may do so in limited circumstances when the conduct has or is
intended to have a "substantial effect" within its territory.
The Senate version of the bill appears to imply that so-called
-2-
"trafficking" in confiscated property has a 11 substantial effect"
within the United States. Some have explicitly defended the
LIBERTAD bill on this ground.
Asserting jurisdiction over property located in a foreign
country and expropriated in violation of international law would
not readily meet the international law requirement of
prescription because it is difficult to imagine how subsequent
11
trafficking 11 in such property has a 11 substantial effect" within
the territory of the United States.
It is well established that
under international law 11 trafficking 11 in these confiscated
properties cannot affect Cuba's legal obligation to compensate
U.S. claimants for their losses. The actual effects of an
illegal expropriation of property are experienced at the time of
the taking itself, not at any subsequent point. An argument that
subsequent use or transfer of expropriated property may interfere
with the prospects for the return of the property would be hard
to characterize as a 11 substantial effect 11 under international
law. Under international law, the obligation with respect to the
property is owed by the expropriating state, which may satisfy
that obligation through the payment of appropriate compensation
in lieu of restitution.
As a general rule, even when conduct has a 11 substantial
effect 11 in the territory of a state, international law also
requires a state to apply its laws to extra-territorial conduct
only when doing so would be reasonable in view of certain
customary factors.
Very serious questions would arise in
defending the reasonableness under international law of many
lawsuits permitted by Title III of the LIBERTAD bill. The
customary factors for judging the reasonableness of extraterritorial assertions of jurisdiction measure primarily
connections between the regulating state, on one hand, and the
person and conduct being regulated, on the other. Title III
would cover acts of foreign entities and non-U.S. nationals
abroad involving real or immovable property located in another
country with no direct connection to the United States other than
the current nationality of the person who holds an expropriation
claim to that property. Moreover, the actual conduct for which
liability is created -- private transactions involving the
property -- violates no established principle of international
law. Another customary measure of reasonableness is the extent
to which the exercise of jurisdiction fits with international
practice. The principles behind Title III are not consistent
with the traditions of the international system and other states
have not adopted similar laws
International law also requires a state assessing the
reasonableness of an exercise of prescriptive jurisdiction to
balance its interest against those of other states, and refrain
from asserting jurisdiction when the interests of other states
are greater.
It would be very problematic to argue that U.S.
-3-
interests in discouraging "trafficking" outweigh those of the
state in which the property is located, be it Cuba or elsewhere,
International law recognizes as compelling a state's interests in
regulating property present within its own borders. The United
States guards jealously this right as an essential attribute of
sovereignty.
In contrast, discouraging transactions relating to
formerly expropriated property has little basis in state
practice.
That international law limits the United States' exercise of
extra-territorial prescriptive jurisdiction does not imply that
U.S. courts must condone property expropriations in cases validly
within the jurisdiction of the United States. Our courts may
refuse to give affect to an expropriation where either (i) the
expropriation violated international law and the property is
present in the United States or (ii) in certain cases, the
property has a legal nexus to a cause of action created by a
permissible exercise of prescriptive jurisdiction.
In fact,
generally speaking, our laws prohibit our courts from applying
the "Act of State" doctrine with respect to disputes about
properties expropriated in violation of international law.
If
applied the doctrine might otherwise shield the conduct of the
foreign state from scrutiny.
Indeed, in a number of important
cases the Department of State has actively and affirmatively
supported these propositions in cases before U.S. courts to the
benefit of U.S. claimants, including with respect to claims
against Cuba. The difficulty with Title III of the LIBERTAD bill
sterns not from its willingness to disaffirm expropriations that
violate international law, but from its potentially indefensible
exercise of extra-territorial prescriptive jurisdiction.
Some supporters of the LIBERTAD bill have advanced seriously
flawed arguments in defending the extra-territorial exercise of
jurisdiction contemplated by Title III. Some have defended Title
III on the deeply mistaken assumption that international law
recognizes the wrongful nature of so-called "trafficking" in
confiscated property. No support in state practice exists for
this proposition, particularly with regard to property either
held by a party other than the confiscator or not confiscated in
violation of international claims law (if, for example, the
original owners were nationals of Cuba at the time of loss.)
Many of the suits allowed by Title III would involve
11
trafficking" in properties of this type, where an
internationally wrongful act would seem extremely difficult to
establish.
Regrettably, the support in international state practice
offered by some for viewing so-called 11 trafficking" as wrongful
has generally confused a state's power to assert jurisdiction
over conduct with the "Act of State" doctrine, discussed
previously. The unwillingness of our courts to give effect to
foreign state expropriations violative of international law in
-4-
matters over which they have valid jurisdiction under
international law, however, does not imply that international law
recognizes as wrongful any subsequent entanglement with the
property. Others have suggested that general acceptance of
domestic laws relating to conversion of ill-gotten property makes
"trafficking" wrongful under international law.
This argument is
extremely unpersuasive as many universally accepted domestic
laws, including for example most criminal laws, have no
international law status. So-called "trafficking'' has no readily
identifiable international law status.
International law does
condemn a state's confiscation of property belonging to a foreign
national without the payment of prompt, adequate and effective
compensation.
In such circumstances the U.S. Government has been
largely successful in assuring that U.S. claimants obtain
appropriate compensation, precisely because of the protection
afforded by international law.
Some supporters have maintained incorrectly, in addition,
that Title III is similar to prior extra-territorial exercises of
jurisdiction by the United States over torts committed outside
the United States.
The Alien Tort Statute (ATS) and the Torture
Victim Protection Act of 1991 (TVPA) have been cited as examples
in this context.
The assertion is plainly false and the LIBERTAD
bill differs significantly from the examples cited. While the
ATS and TVPA do empower U.S. courts to adjudicate certain
tortious acts committed outside the United States, they do so
only with respect to acts that violate international law. The
ATS covers only torts "committed in violation of the law of
nations or a treaty of the United States." Similarly, the TVPA
creates liability for certain conduct violating fundamental
international norms of human rights (i.e. torture and extrajudicial killing).
In contrast, as explained previously,
supporters of the LIBERTAD bill have failed to identify any basis
in international law permitting the use of U.S. courts for the
adjudication of suits regarding extra-territorial "trafficking."
Title III of the LIBERTAD bill also deviates substantially
from accepted principles of law related to the immunity of
foreign sovereign states, as well as their agencies and
instrumentalities. Although much of the discussion of the bill
has focussed on suits against certain foreign corporations and
individuals, in its current form the Senate version of the bill
would allow a suit to be brought against "any person or entity,
including any agency or instrumentality of a foreign state in the
conduct of commercial activity" that "traffics" in confiscated
property.
Since "trafficking" is defined to include such things
as possessing, managing, obtaining control of, or using property,
it would appear at a minimum that Title III authorizes suits
against many Cuban or other foreign governmental agencies or
instrumentalities.
To the extent Title III provides for such
suits, they would be highly problematic and difficult to defend.
-5-
The Foreign Sovereign Immunities Act (FSIA), enacted in 1976
after careful deliberation, is consistent with international law
principles of foreign sovereign immunity. To the extent the
LIBERTAD bill would permit suits against agencies and
instrumentalities of foreign governments it would go far beyond
current exemptions in the FSIA. The LIBERTAD bill, unlike the
FSIA, would not require the agency or instrumentality to be
"engaged in commercial activity in the United States." Moreover,
the LIBERTAD bill contemplates suits against agencies or
instrumentalities of foreign states for any conduct that
constitutes so-called 11 trafficking 11 ; as defined in the LIBERTAD
bill this notion is broader than owning or operating property,
the FSIA standard.
Similarly, to the extent the provisions of the LIBERTAD bill
permitting suits against "entities" is construed to authorize
suits against foreign governments as well, it would go well
beyond current exemptions in the FSIA and under international law
for claims involving rights in property. Under the FSIA, a
foreign state (as distinguished from its agencies and
instrumentalities) is not immune only when the "property or any
property exchanged for such property is present in the United
States in connection with a commercial activity carried on in the
United States by the foreign state." The LIBERTAD bill would
appear not to impose those requirements.
In addition, suits
against "entities" would in these circumstances include those
brought against foreign governments other than Cuba that may have
acquired confiscated property in violation of no principle of
international claims law.
These potential expansions of the
exceptions from the immunity of foreign states, as well as their
agencies and instrumentalities, from the jurisdiction of U.S.
courts and their implications for U.S. liability in other
countries represent matters of great concern.
Some have suggested that even though the creation of a cause
of action such as that contemplated in Title III of the LIBERTAD
bill is not currently defensible under international law, the
United States should enact these provisions of the bill to
promote the development of new international law principles in
this area.
Suggestions of this sort in this context rest on a
dubious premise of how state practice contributes to international law. While the practice of states represents a source
of international law, state practice makes law only when it is
widespread, consistent and followed out of a sense of legal
obligation. The enactment of Title III in the face of serious
questions about its consistency with international law, and
without the support of the international community, would not
contribute positively to international law relating to the
expropriation of property.
In addition to being very difficult to defend under
international law, enactment of Title III would also undermine a
-6-
number of important U.S. interests connected to these significant
international law concerns. General acceptance of the principles
reflected in Title III would harm U.S. business interests around
the world. At present and in general, the laws of the country in
which the property lies govern the rights to that property,
particularly with respect to real property. United States
businesses investing all over the world benefit from their
ability to rely on local law concerning ownership and control of
property. Under the precedent that would be set by Title III, a
U.S. business investing in property abroad could find itself
hailed into court in any other country whose nationals have an
unresolved claim to that property. Such a precedent could
increase uncertainties for U.S. companies throughout the world.
Perversely, Title III would hurt U.S. businesses most directly in
Cuba. U.S. businesses seeking to rebuild a free Cuba once a
transition to democracy begins will find themselves easy targets
of Title III suits, as U.S. corporations generally are subject to
the jurisdiction of our courts.
Congress should expect that the enactment of Title III of
the LIBERTAD bill, with its broad extra-territorial application
of U.S. law, significant departures from established claims
practice and possible contravention of international law, will
create serious disputes with our closest allies, many of whom
have already voiced their objections. The United States must
expect the friction created by Title III to hurt efforts to
obtain support in pressing for change in Cuba. Moreover, once
the transition to democracy does begin, Title III will greatly
hamper economic reforms and slow economic recovery as it will
cloud further title to confiscated property.
Perhaps most importantly, Title III of the LIBERTAD bill
would not benefit U.S. claimants. The private right of action
created by Title III, furthermore, would likely prove ineffective
to U.S. claimants.
Past experience suggests that countries
objecting to the extra-territorial application of U.S. law
reflected in Title III, most likely some of our closest allies
and trading partners, could be expected to take legal steps under
their own laws to block adjudication or enforcement of civil
suits instituted against their nationals. Moreover, many foreign
entities subject to suit would deem U.S. jurisdiction
illegitimate and fail to appear in our courts. Title III would
in those circumstances merely produce unenforceable default
judgements.
In addition, some commentators have estimated
potential law suits to number in the hundreds of thousands, so
the LIBERTAD bill would also clog our courts and result in
enormous administrative costs to the United States. As the
lawsuits created under Title III might not result in any increase
in or acceleration of compensation for U.S. claimants, these
costs would be unjustifiable.
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In so far as it departs from widely accepted international
claims law, Title III of the LIBERTAD bill undermines widelyestablished principles vital to the United States' ability to
assure that foreign governments fulfill their international
obligations for economic injury to U.S. nationals.
In doing so,
Title III hurts all U.S. citizens with claims against another
government. With respect to claims against Cuba specifically,
the cause of action contemplated in Title III of the LIBERTAD
bill will hamper the ability of the U.S. Government to obtain
meaningful compensation for certified claimants.
Consistent with
our longstanding and successful claims practice, at an
appropriate time when a transition to democracy begins in Cuba,
the United States will seek to conclude a claims settlement
agreement with the Cuban government covering certified claimants,
or possibly create some other mechanism to assure satisfaction of
their claims.
If Title III is enacted into law and U.S.
claimants have an opportunity, at least on paper, to receive
compensation for claimed properties from third party
"traffickers," the Cuban Government may simply refuse to address
these claims on the grounds that the claimants must pursue
alternative remedies in U.S. courts. Yet, as indicated
previously the prospects for broad recoveries in this manner are
very poor.
Even if Cuba accepts its international law responsibilities
with respect to U.S. claims, the United States can expect that a
large quantity of private suits would profoundly complicate
claims-related negotiations, as well as subsequent claims payment
procedures. Cuba might easily demand that the United States
demonstrate that each person holding an interest in any of the
nearly 6,000 certified claims, and possibly the tens of thousands
of uncertified claims, has not already received compensation via
a lawsuit or private settlement. As the United States will not
have records of private suits, let alone non-public out of court
settlements, doing so would be extremely difficult.
In addition,
dealing with unpaid judgments in this context would likely prove
particularly difficult.
Finally, the Castro regime has already used, and if enacted
into law would continue to use, the civil cause of action
contemplated by Title III of the LIBERTAD bill to play on the
fears of ordinary citizens that their homes or work places would
be seized by Cuban-Americans if the regime falls.
The United
States must make it clear to the Cuban people that U.S. policy
toward Cuban property claims reflects established international
law and practice, and that the future transition and democratic
governments of the Cuban people will decide how best to resolve
outstanding property claims consistent with international law.