U.S., Cuba to meet on claims

In this Feb. 9, 2015 photo, Carolyn Chester holds stock certificates for the Cuban Telephone Company in her Omaha, Neb. home. “I always heard about Cuba,”she says, “and all this money that we lost and 'Maybe one day,' but I didn't understand it.” With claims talks scheduled in Havana that day may be closer for Americans whose property was confiscated by the Castro government.
In this Feb. 9, 2015 photo, Carolyn Chester holds stock certificates for the Cuban Telephone Company in her Omaha, Neb. home. “I always heard about Cuba,”she says, “and all this money that we lost and 'Maybe one day,' but I didn't understand it.” With claims talks scheduled in Havana that day may be closer for Americans whose property was confiscated by the Castro government. AP

What would have seemed impossible at this time last year — engagement with Cuba on claims for property of U.S. citizens and corporations that was confiscated after the 1959 Cuban Revolution — becomes a reality Tuesday when the United States and Cuba meet for talks on the issue in Havana.

To be negotiated are more than $1.9 billion in claims for utilities, sugar mills, ranches, corporate holdings and personal property that were certified, most decades ago, by the U.S. Foreign Claims Settlement Commission, a Justice Department agency that adjudicates claims against foreign governments. In today’s dollars those claims would be worth around $8 billion.

The Cuban government also has counter-claims. It is seeking reparations for the adverse effects on its economy caused by the U.S. embargo as well as for what it calls human damages, resulting from the Bay of Pigs Invasion (176 deaths and more than 300 Cubans wounded), the 1976 terrorist bombing of a Cubana de Aviación plane that killed all 73 aboard, including 57 Cubans, and deadly CIA incursions on the island.

Cuba currently estimates accumulated damages for a half-century of U.S. hostility at $833.75 billion.

“The meeting is the first step in what we expect to be a long and complex process, but the United States views the resolution of outstanding claims as a top priority for normalization,” the U.S. State Department said in a media note. “This initial meeting will allow the two sides to exchange information on a wide variety of claims.”

They include claims of U.S. nationals that were certified by the Foreign Claims Settlement Commission, claims related to unsatisfied U.S. court judgments against Cuba, claims of the U.S. government, and Cuban government claims related to the embargo, according to the State Department.

The U.S. delegation will be led by Mary McLeod, acting legal adviser for the Department of State.

Since the December 17 announcement by President Barack Obama and Cuban leader Raúl Castro that the two countries would work toward normalizing relations, the United States and Cuba have reestablished diplomatic ties, opened embassies and begun working through a number of thorny issues that separate them. But claims is the most difficult topic to date.

“The announcement by President Obama started the ball rolling and I knew addressing the claims would be the natural progression. It’s a great thing and long overdue,” said Mauricio Tamargo, chairman of the Foreign Claims Settlement Commission from 2002 until 2010 and now with the Washington-based Poblete Tamargo law firm.

“The counter claims are part of the process and they don’t surprise me. It’s something both teams will have to work out,” said Tamargo. “The Cubans aren’t going to be easy customers here. They are looking for any type of bargaining chip or advantage they can find. I expect these will be tough negotiations.

“Some of the counter claims are pie in the sky and they don’t hold up under international law,” he said. “Damages arising from an embargo are not recognized under international law. The United States is allowed to have any type of trade restrictions on any government it wants and to protect its own citizens.”

But in terms of the loss of life claims, Tamargo said, “depending on the facts surrounding each of those claims, they may have a better chance of validity.”

All told, there are 5,913 claims, and the top 100 claims represent 90 percent of the value of all claims.

Some claims are tiny, $25 worth of stock in a confiscated company, for example. But a dozen claimants have losses certified at more than $50 million each. There are 899 corporate claims worth $1.677 billion and 6,015 claims valued at $229.2 million.

The Cuban Electric Co. with a certified loss of $267.6 million, has by far the largest claim. Among the other large claimants are North American Sugar Industries, MOA Bay Mining Co., ITT, Exxon, Starwood Hotels & Resorts Worldwide, Texaco and The Coca-Cola Co.

Because many of the original personal claimants have died, their claims have passed to heirs. Some may not even be aware they have inherited claims and must be found, Tamargo said. He has suggested that the Foreign Claims Settlement Commission be reauthorized to recertify claims under the names of the new owners.

“I believe this should be done right now to save time once a settlement occurs,” he said.

Not included are claims by Cubans who became U.S. citizens after they lost their properties.

But the State Department note seemed to indicate that judgments stemming from civil suits, primarily filed by Floridians who claimed they suffered as a result of Cuba’s actions, would be discussed. Judgments in these cases now total billions of dollars.

“As a matter of principle, Cuba never defended itself in these cases. A good bit of them, or perhaps all of them, were settled by default judgments,” said George Harper, a Miami lawyer.

Harper argued three claims before the Foreign Claims Settlement Commission in 1972 stemming from his family’s loss of a cattle ranch, homes and other property. In today’s dollars, figuring 6 percent interest from the day of taking, those claims would be worth $6.7 million, he said.

“The commission was very meticulous in valuing the claims,” he said. Because his mother and maternal grandmother were Cuban and his father and grandfather American, Harper said, the commission cut those two claims in half because it was only adjudicating claims of U.S. citizens.

“We had a right to impose the embargo,” he said. “They did not have the right to take over our properties without compensation.”

During a news conference held in August on the day the United States raised the flag and formally opened its embassy, Cuban Foreign Minister Bruno Rodríguez said that “Cuban laws have foreseen the compensation to owners whose properties were nationalized in the 1960s.”

All owners were compensated, he noted, with the exception of American claimants. The possibility of paying them compensation, Rodríguez said, would “necessarily be part of a mutual process of negotiations — taking into account the compensation” that Cuba is seeking for economic and human damages.

Tamargo said he didn’t believe the settlement agreements with some European countries and Canada would be acceptable to American claimants. “They were pennies on the dollar,” he said.

Even though the Cuban economy is far from vibrant, Tamargo said Cuba does have enough money to pay the claims.

“Cuba does have the revenue stream now. In addition to that, it is most likely the embargo will be lifted as part of any settlement agreement. Lifting it would increase Cuba’s revenue stream tremendously. It would probably quadruple it,” he said.

Settling the claims also would eliminate the reason the United States phased in the embargo during the early 1960s.

Other remedies for settling the claims might include a drawn-out payment plan, bonds or investment vouchers. But he added, “Most of the claimants don’t have the ability to take advantage of such an investment opportunity.”

Tamargo said that whatever agreement is reached by the two sides, it would have to be a fair agreement because it will have to be ratified by Congress. It will be something of a chain reaction. “Congress won’t lift the embargo if they don’t see it [a claims settlement agreement] as a fair deal,” he said.

And if Cuba wants Americans to eventually invest in the island, there would need to be safeguards in the agreement to protect future U.S. investors, said Tamargo.

“That’s the first question clients interested in Cuba ask: ‘If I do invest, what’s to keep them from confiscating property the same as they did 50 years ago?’ It’s clearly an impediment to investment,” Harper said.