Staking a claim

D’ARCY JENISH June 24 1996

Staking a claim

D’ARCY JENISH June 24 1996

Staking a claim

Canadians prepare to fight a U.S. ban on trade with Cuba


Nicolas Gutierrez knows that his day in court may not arrive for two years or more. But the 32-year-Old Miami lawyer is prepared to be patient. His clients, about 85 CubanAmericans, including members of his own

family, say that the Cuban government confiscated their property after the 1959 Communist revolution that brought Fidel Castro to power. Gutierrez is researching the claims with an eye to suing foreign companies that are exploiting those assets under joint ventures with the Castro government. One of the lawyer’s principal targets is Sherritt International Inc. of Toronto, which has led a stampede of Canadian companies into Cuba since the early 1990s. “We’re going to use the law to the fullest,” vows Gutierrez. “We want foreign companies to leave Cuba and to stop financing the Castro government.”

The law on which Gutierrez and his clients are relying is the contentious Helms-Burton Act, which received presidential approval in March and has since been roundly denounced by Canada, Mexico and several European governments as an attempt to make foreign companies comply with U.S. policy on Cuba. Besides giving individuals and companies the right to sue, the legislation—named for its congressional sponsors, North Carolina Senator Jesse Helms and Indiana Republican Representative Dan Burton—allows Washington to bar business executives and their families from the United States if their companies have invested in expropriated Cuban property. In an escalating war of words over the

Helms-Burton law, International Trade Minister Art Eggleton said last week that Ottawa is considering retaliatory legislation that would allow Canadian firms to countersue U.S. companies. “The United States has an argument with Cuba,” Eggleton told Maclean's. “Let them go after the Cubans. It doesn’t give them a right to bully other countries into following their foreign policy.” Despite the high-octane rhetoric, many observers doubt that the law will spark a wave of court cases when the provisions allowing companies to sue take effect on Nov. 1, four days before the presidential election. Privately, some Canadian officials speculate that President Bill Clinton will disallow parts of the bill if he is returned to the White House, while American trade experts argue that he will let it stand. The U.S. government’s own records show that 5,911 American companies lost Cuban assets after the Castro revolution; today, those properties are worth an estimated $7.8 billion. But fully half the claims involve 10 high-profile companies, including Exxon, Coca-Cola and Texaco. Ignacio Sanchez, a Miami lawyer who specializes in international law, says that major corporations may hesitate to launch lawsuits given the politically charged atmosphere around the legislation. Sanchez also notes that the Cuban government has signed only about 210 joint ventures with foreign partners,

implying that many potential claimants have no one to sue. “Most corporations are relatively conservative when it comes to high-profile lawsuits,” he says. On the other hand, he adds, “I think there will be a rush to sue from Cuban-Americans because they still personally feel the injury and hurt of losing their assets.” Those old wounds remain a fact of life among many Cuban exiles in south Florida. Gutierrez, for example, was born in Costa Rica after his family fled Cuba but shares his parents’ resentment at the loss of assets, including interests in insurance, food distribution and textiles. “My family went about its business peacefully,” he said. “One day, armed militiamen showed up at our gates and said ‘This belongs to the Cuban state.’” Many Cuban-Americans complain bitterly that the Castro regime began selling confiscated properties after the Soviet Union collapsed in 1989 and cut off billions of dollars in annual subsidies to Cuba. “They’re desperate for cash,” said Sanchez. “So, typically, the terms are very favorable.”

Cuban-Americans must wait until March, 1998, the second anniversary of the Helms-Burton bill, before suing. But dozens of them have already hired lawyers to prepare their cases. Gutierrez says he has contacts inside and outside Cuba investigating the status of properties formerly owned by his

clients. Among other things, they have reported that one family’s cattle ranch is now the site of an oil refinery operated by a Mexican company. A sugar plantation has become the site of two Spanishowned hotels. And Gutierrez contends that Sherritt International is drilling for oil on properties once owned by his family.

Sherritt may eventually face lawsuits from several plaintiffs. Retired Miami lawyer Alberto Diaz-Masviadal is talking of suing the Toronto-based company for as much as $50 million. He alleges that a subsidiary is exploring for oil and gas on lands formerly controlled by a company that he helped found. Meanwhile, a New Orleans-based mining and fertilizer production

company, Freeport-McMoRan Inc., contends that it owns a huge Cuban nickel-cobalt property now being mined by Sherritt. Freeport officials decline to say whether they intend to sue. Along with the threat of lawsuits, Sherritt International received an advisory letter from the U.S. state department in late May warning that senior executives of companies that exploit confiscated property could be barred from entering the United States. Later this month, the department is scheduled to issue guidelines for enforcing the exclusion provisions.

The attacks on Sherritt reflect its status as one of the biggest and most aggressive foreign investors in Cuba. Since 1991, the company has plowed an estimated $275 million into joint

ventures in resort hotels, petroleum

exploration and production, and the Moa Bay nickel-cobalt mine. And the company’s ambitions do not end there. A November, 1995, prospectus issued as part of a Canadian share offering contained a letter from a Cuban cabinet minister stating that

the company had investment opportunities in communications, real estate and sugar, among other things. “We are operating legally in Cuba,” says Patrice Merrin Best, vice-president of corporate affairs. “The historic ownership of properties that have been nationalized is a government-to-government issue. The issue of compensation is one for governments.”

Executives with several Torontobased firms with much smaller investments insist that they cannot be sued under Helms-Burton because they are developing new businesses or operating facilities built long after the Cuban revolution. Frank Smeenk, president of MacDonald Mines Exploration Ltd., says his company is exploring for gold and other minerals rather than working existing mines. Diane Kalina, president of York Medical Inc., says her company has signed licensing agreements to market and sell Cuban pharmaceuticals on world

markets. And Simon Cooper, president of Delta Hotels and Resorts Ltd.,

says his company manages five resort hotels built by or for the Castro regime. “We don’t see any chance that we can be sued,” Cooper adds.

In any event, U.S. companies or individuals who do file lawsuits will face several hurdles. According to

Stephen Marcus, a Canadian now

practising international law in Washington, they will have to prove that their former properties are now being used by the foreign company they are suing. More important, they will have to convince the courts that the United States has jurisdiction over the defendant companies. “I think many judges will be uncomfortable with this legislation,” said Marcus. “It’s very unusual for judges to become instruments of U.S. foreign policy, and that’s what they are being asked to do here.” Nevertheless, he has some advice for Canadian companies that might be sued: start planning a defence now.