Wednesday, 27 Nov 2024

Can Canada protect firms from U.S. lawsuits over Cuba? Not really: experts

The Canadian government is not ruling out launching a challenge at the World Trade Organization, after the U.S. gave the green light to lawsuits that could see Americans claim billions of dollars worth of recompense over property confiscated during the Cuban Revolution.

There is, however, a possibility the move by the Americans may not have the desired effect, given how long the risk has hung over foreign companies in Cuba.

U.S. President Donald Trump’s administration broke with yet another diplomatic norm on Monday by refusing to suspend a key clause in the Helms-Burton Act, part of the U.S. trade embargo on Cuba, which allows Americans to sue companies operating or profiting from confiscated property.

Foreign Affairs Minister Chrystia Freeland said in a statement Canada is “deeply disappointed” with that decision, but experts say there is little she can do.

“The answer is actually not quite a lot, in terms of what the Canadian government could do in that specific instance,” said John Boscariol, a partner at the trade law firm McCarthy Tetrault and head of the firm’s international trade and investment law group.

“We’ve got the measure in place where the finding wouldn’t be enforced here in Canada. We’ve got what’s called a claw-back provision under our law here, where if that successful plaintiff in the U.S. who gets a judgement against a Canadian company, if they have assets in Canada, the Canadian company can sue them in Canada and get back the amount of the judgment.”

But Boscariol said “that doesn’t help” a Canadian company if a successful American plaintiff doesn’t actually have any assets in Canada.

While a joint statement from Canada and the European Union hinted they will work together “in the context of the WTO” on the matter, such challenges can take years and in the meantime, mining and hotel companies will likely have little recourse if they become the subject of such lawsuits.

“The U.S. doesn’t seem to have a lot of respect for the WTO so that might not be something that would result in something really practical for Canadian companies,” said Boscariol. “But it certainly would send a message and that’s something Canada could do to stand up for Canadian companies.”

Every six months, each president from Bill Clinton until now has suspended the clause in six-month increments, including Trump himself previously.

However, decision by the U.S. not to renew the suspension of Title III of the Helms-Burton Act comes as Trump and his administration try to increase pressure on Cuba over its support of Venezuela’s embattled president, Nicolas Maduro.

Canada, the U.S. and roughly 50 other countries consider him illegitimate after widely-condemned elections last year.

Maduro continues to hold onto power with support from Russia, China and Cuba flowing into the country, which is grappling with rampant inflation and severe shortages of everything from food to electricity and medical supplies.

While different provisions of the Helms-Burton Act have been in force before, the provision coming into force now allows Americans and Cubans who became Americans after fleeing the country to sue foreign companies deemed to be trafficking or profiting from property confiscated from Americans by Fidel Castro during the Cuban Revolution decades ago.

The U.S. Foreign Claims Settlement Commission has roughly 8,000 claims registered by Americans that will now be authorized to head to court.

There have been cases in the past where the potential for lawsuits has meant many Canadian and European companies operating in Cuba have likely conducted assessments to measure how exposed they may be to the provision. Its impact could, for example, extend not only to a mining company operating on property that was confiscated from Americans, but also to any company subcontracted to them in relation to that property.

Because of that risk, Canada amended its laws in the 1990s to allow any Canadian company successfully sued under the provision to counter-sue domestically if the plaintiff bringing a case against them holds assets in Canada.

Those amendments also allow Canadian courts to ignore orders made by American courts on the matter, which would normally be recognized here.

One Canadian official, speaking on background, said despite those measures the government worries the move may have a chilling effect and open the door to investment from more unsavory countries if Canadian and European business slows.

Mark Entwistle, former Canadian ambassador to Cuba, said he agrees the intent is likely to create a chilling effect and that there’s “not too much” the Canadian government can really do to protect businesses that could be hit with a lawsuit.

But he cautioned that the risk may not have as strong an impact as the Trump administration may be hoping.

“All major foreign corporations that operate in Cuba have been well aware of U.S. sanctions and the embargo and in general, have managed their operations in Cuba to account for that,” he said while noting there may be some hesitancy on the part of smaller or newer firms considering fresh investment.

Larger companies, he said, have long since factored in their exposure to provisions like Title III and as a result, have “kind of self-inoculated.”

“I think the major companies that are there now aren’t going anywhere and there’s a certain mood in the foreign business community sort of like, ‘bring it on.’”

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