U.S. allows lawsuits against foreign companies in Cuba, imperilling Canada
OTTAWA -- Canada and the European Union vowed on Wednesday to protect their businesses from the Trump administration's new policy to allow lawsuits against foreign companies connected to properties seized from American firms during the Cuban revolution.
The defiant response was tempered by warnings that the landmark tightening of the U.S. trade embargo on Cuba's communist government would only generate uncertainty and chaos in North American boardrooms and courtrooms.
The Trump administration followed through Wednesday on a lingering threat to allow legal action -- a move that places Canadian resource, tourism and financial services companies at risk in American courts.
About one million Canadians annually vacation in Cuba and Toronto-based resource company Sherritt International is long established there, while countries such as Britain, France and Spain have companies active in rum, cigars and tourism.
Foreign Affairs Minister Chrystia Freeland said Canada is "deeply disappointed" and reviewing options with the EU.
"The EU and Canada consider the extraterritorial application of unilateral Cuba-related measures contrary to international law," Freeland, her European Union counterpart Federica Mogherini and EU Trade Commissioner Cecilia Malmstrom said in a joint statement.
"Our respective laws allow any U.S. claims to be followed by counter-claims in European and Canadian courts, so the U.S. decision to allow suits against foreign companies can only lead to an unnecessary spiral of legal actions."
Freeland said the government has regularly met with U.S. officials since January when the issue first surfaced. That included a recent trip to Washington, when she pressed U.S. Secretary of State Mike Pompeo not to resurrect Title III of the Helms-Burton Act, which allows Americans to sue foreign companies linked to Cuban properties confiscated after the 1959 revolution.
The U.S. Justice Department has certified about 6,000 claims with an estimated value of $8 billion as having merit for legal action, and believes there could be as many as 200,000 uncertified claims worth tens of billions of dollars, said Kimberly Breier, the head of State Department's Americas branch.
"Any person or company doing business in Cuba should heed this announcement," Pompeo said Wednesday.
The Canadian company with the highest Cuban profile essentially shrugged in response.
"Implementation of Title III is not expected to have any material impact on Sherritt or our operations in Cuba," Joe Racanelli, Sherritt's director of investor relations said in an emailed statement. He said it was "business as usual" for its drilling and exploration projects.
The company's most recent annual information form also played down the potential risk "because Sherritt's minimal contacts with the United States would likely deprive any U.S. court of personal jurisdiction over Sherritt."
But other observers warned of more dire consequences.
"A massive Pandora's Box has been opened up with this," said Mark Agnew, director of international policy for the Canadian Chamber of Commerce.
Many Canadian firms with links in Cuba are privately expressing fears about being targeted by a policy they haven't had to deal with for a generation, he said.
Canada's Foreign Extraterritorial Measures Act was amended in January 1997 to provide that any judgment under the Helms-Burton Act will not be recognized or enforceable in any manner in Canada. Other countries implemented similar "blocking statutes" at the time.
Cyndee Todgham Cherniak, a Toronto-based international trade lawyer, urged the government to look at updating the law for the digital age, to allow Canadian companies to collect additional damages from eager American litigants who might bring unfounded claims.
"Your reputation can be damaged by online allegations of inappropriate expropriation of property," she said. "We want to discourage U.S. persons from pursuing claims against Canadians."
When the U.S. law went into force in 1996, then-president Bill Clinton postponed the implementation of Title III after lobbying by Canada, the EU and Mexico. Subsequent presidents followed suit and renewed the exemption every six months.
President Donald Trump changed that practice. Last month, the U.S. State Department extended the Title III exemption by only 30 days.
The rules allowing lawsuits take effect May 2.
"The U.S. Department of Justice may not be pleased with the prospect of a potential wave of lawsuits with dubious claims clogging up the already overburdened federal court system," said Mark Entwistle, a business consultant in Cuba who served as Canadian envoy to Havana in the 1990s.
On Wednesday, Pompeo said the new action is rooted in Cuba's ongoing support of Nicolas Maduro's socialist government in Venezuela.
"Cuba's behaviour in the Western Hemisphere undermines security and stability of countries throughout the region, which directly threatens United States national security interests," he said.
Canada, its Lima Group allies and the U.S. have called for Maduro's ouster and recognize opposition leader Juan Guaido as the interim leader of the beleaguered South American country, which has been engulfed in economic and political turmoil, sparking a refugee crisis.
Wednesday's announcement coincided with the 58th anniversary of the failed U.S.-backed invasion at Cuba's Bay of Pigs. The epic Cold War clash saw Fidel Castro's forces repel about 1,500 Cuban exiles who had been trained and armed by the Central Intelligence Agency with the aim of overthrowing the communist government that had taken over a country just 135 kilometres off Florida's southern tip two years earlier.
Josefina Vidal, Cuba's ambassador to Canada, invoked the Bay of Pigs in a message on Twitter aimed at the Trump administration: "You were defeated 58 years ago. You have been defeated many times afterwards. You will be defeated again this time."