First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. This month we share an update on a first-of-its-kind lawsuit brought under the Helms-Burton Act against a foreign sovereign’s agencies and instrumentalities. As regular readers may recall, the Helms-Burton Act, enacted by Congress in 1996, deals generally with US-Cuban relations (memorializing the American embargo against Cuba, among other things) and its Title III creates a cause of action that permits a US national to use US courts to sue “traffickers” of its property that was confiscated by the Cuban government after the Cuban revolution in 1959. Title III was suspended by presidents of both political parties until President Trump ended the suspension in April 2019. The lifting of the suspension prompted a wave of lawsuits, which have been making their way through federal district and appellate courts. Over the past two years, 36 lawsuits have been filed, the vast majority of the suits are against US companies that do business in Cuba in the travel and tourism sector. Four of these lawsuits were dismissed or otherwise resolved at the district court stage and subsequently appealed, while several others survived motions to dismiss and proceeded to discovery.
Steptoe is counsel to Plaintiffs in the only two active Helms-Burton Act lawsuits against foreign sovereigns. Both of these suits, Exxon Mobil Corp. v. Corporación CIMEX S.A., et al. (Case No. 19-cv-01277) and King Ranch, Inc. v. Empresa Agropecuaria Nuevitas, et al. (Case No. 21-cv-00594), are against Cuban agencies and instrumentalities that are trafficking in confiscated property. On April 20, 2021, Judge Mehta of the US District Court for the District of Columbia issued an opinion in Exxon v. Corporación CIMEX, S.A. regarding the Court’s jurisdiction to hear Exxon Mobil’s (Exxon) claims. The Defendants in this suit, Corporación CIMEX, S.A. (CIMEX-Cuba and CIMEX-Panama) and Unión Cuba-Petróleo (CUPET), are multi-billion-dollar conglomerates that are wholly-owned, controlled, operated, and dominated by the government of Cuba. Defendants continue to traffic in confiscated property in which Exxon has an interest by, among other things, using Exxon’s former refinery to produce oil and gas products and selling products and services at Exxon’s former service stations.
Exxon possesses a “certified claim” valued at $71,611,002.90 by the Foreign Claims Settlement Commission (FCSC), which was established by Congress to evaluate claims of US nationals concerning the value of their property that was expropriated by foreign nations. Title III includes a rebuttable presumption that traffickers are liable to the claimant for an amount equal to the certified claim award plus interest. Since the defendants in this case are trafficking in property subject to a certified claim, the Helms-Burton Act further provides that they are liable for treble damages. As a result, Exxon seeks damages equal to $214,833,008.70, plus pre- and post-judgment interest and costs as applicable. The FCSC currently reports that it has certified 5,913 awards to claimants with a total value of $1,902,202,284.95.
Defendants moved to dismiss Exxon’s complaint primarily on the basis that the Court lacked subject-matter jurisdiction to hear the suit. Defendants argued that Exxon’s complaint failed to establish sufficient facts to meet an exception under the Foreign Sovereign Immunities Act (FSIA) that would negate immunity from suit in the US. Defendants also argued that the Court lacked personal jurisdiction and Plaintiff lacked standing for the suit.
The Court denied defendants’ motion and held the following: (i) Exxon has standing to bring the suit, (ii) Exxon established that CIMEX-Cuba does not have sovereign immunity and is subject to the Court’s jurisdiction under the commercial activity exception of the FSIA, and (iii) Exxon is entitled to jurisdictional discovery on its claims against CUPET and CIMEX-Panama. The Court did not issue a decision on personal jurisdiction as the parties had jointly agreed to postpone the resolution of those claims.
As an initial matter, the Court declined to follow Exxon’s view that Congress intended Title III to provide a separate grant of subject-matter jurisdiction over the defendants. The Court also rejected defendants’ argument that the commercial activity and expropriation exceptions were mutually exclusive. Rather, the Court looked at both exceptions as potentially independent bases for jurisdiction. Ultimately, the Court concluded that the expropriation exception of the FSIA did not provide jurisdiction over the defendants. The Court found that Cuba’s taking of the property of Exxon’s subsidiary was not in violation of international law on the basis that customary international law requires an expropriation of a subsidiary’s property to completely destroy the beneficial and productive value of the subsidiary in order to be a violation of international law. The Court concluded that such a taking did not occur because Exxon’s then-subsidiary continued to operate after Cuba’s taking of its property.
However, the Court concluded that it had subject-matter jurisdiction to hear Exxon’s claim against CIMEX-Cuba under the commercial activities exception and that Exxon pled sufficient facts to warrant jurisdictional discovery as to CIMEX-Panama and CUPET. The commercial activities exception primarily turned on whether the defendants engaged in activity that caused a direct effect in the United States. Exxon showed that CIMEX-Cuba created a direct effect through its remittance business and food imports that were available at service stations that CIMEX-Cuba operated on Exxon’s former property. While the Court concluded that Exxon did not possess sufficient facts at this juncture to show that CUPET and CIMEX-Panama are subject to the Court’s jurisdiction, it granted Exxon jurisdictional discovery to allow Exxon to make these showings.
The Court’s opinion will likely serve as a guidepost for future plaintiffs who wish to file suit under Title III against a foreign sovereign, particularly a Cuban agency or instrumentality, for trafficking in confiscated property. While suits against any foreign sovereign in US courts have unique jurisdictional challenges, those issues may be mitigated through diligent factfinding and a thorough litigation strategy. Title III of the Helms-Burton Act remains available for claimants at the moment, but the Biden Administration may choose to suspend the cause of action in the future. Potential litigants may wish to monitor developments in this area carefully. The Biden Administration must inform Congress of a suspension to Title III at least 15 days before such suspension comes into effect. The Title III lawsuits filed before the new suspension comes into effect would be allowed to proceed despite the suspension.
Courts around the country continue to grapple with the Helms-Burton Act for the first time. One trend appears likely to continue in these cases in the near future. Several courts have held that a plaintiff must have acquired its claim prior to the enactment of the Helms-Burton Act in 1996 even if that acquisition was via inheritance. In March 2021, the US District Court for the District of Delaware became the most recent adherent to this view in its dismissal of two suits against US-based credit card and travel companies. This dismissal marked the second time that a federal district court has held contrary to the view of two sponsors of the Helms-Burton Act who participated as Amici Curiae. Several of the cases dismissed on this basis are currently pending appeal. We expect that decisions later this year will have important implications for numerous potential claimants.