Last week, news broke that Cuba had released more than 50 political prisoners a few days before it was set to hold historic talks with the United States that are designed to help end more than a half century of hostility. While that move is another tangible step toward the full normalization of relations, it also highlights a bigger question: How much can President Barack Obama do without congressional approval?
As the U.S. and Cuban governments continue their delicate political maneuvering, important decisions remain, including how they will handle an issue that is critical to the business community: What to do with the existence of more than $1.8 billion in adjudicated, but unpaid claims made by U.S. citizens against Cuba for loss and damage caused by the Castro regime after it came into power in 1959? With interest, these claims exceed $7 billion that are owed to a range of Fortune 500 companies and private citizens for factories, oil refineries, land and other assets that were nationalized after the revolution.
This is obviously not an insignificant number and for the business community, settling the claims is likely to be an important factor in commercial re-engagement and how it views the larger normalization process. While Cuba may want to “cherry pick” claims to settle to entice certain investments, there is a competing interest on both sides to wipe the slate clean. To that end, a comprehensive and meaningful settlement is of paramount importance. And after having participated in the Foreign Claims Settlement Commission’s process, that experience leads me to believe that the claimant community deserves a role in determining the proper compromise.
In the hours after the countries announced they would seek to normalize relations, Assistant Secretary of State Roberta Jacobson noted during a press briefing that resolving “registered claims against the Cuban Government” would be part of the “conversation.” And the good news for businesses is that there is a well-traveled path for securing those claims.
It is generally agreed that the president has constitutional authority to settle the claims of U.S. citizens against foreign governments as part of his foreign affairs powers. Since World War II, the executive has settled claims for property expropriation and other injuries on behalf of U.S. citizens against a number of countries seeking to normalize relations, including the former Soviet Union, the former Czechoslovakia, China, Germany, Vietnam, Libya and Iraq. In most of these cases the executive did not seek congressional approval.
But Cuba may be different. Given the web of legislation surrounding Cuba sanctions, including the embargo, it is likely that some congressional action will be required to fully normalize relations. Whether the $7 billion in outstanding claims presents a roadblock to that goal depends on the government’s ability to gauge, as early as possible, the amount of compensation that will be sufficient to satisfy the demands of U.S. claimants.
Previously, when Congress has needed to support an agreement it has not served as a rubber stamp. When the State Department came to Congress in 1974 to ask for approval of a $20 million settlement with Czechoslovakia, the low figure and potential granting of a “most-favored nation” status led legislators to reject the deal. At the time, this was extraordinary. It took the State Department seven more years to negotiate a new agreement, with Czechoslovakia eventually having to pay about $80 million to settle claims against it.
More recently, there is the 2010 settlement with Libya, where leaders in the Libyan government were only granted immunity from prosecution once the State Department certified the country had actually paid more than $1.8 billion to the U.S. Critically, the claimant community made it clear to Congress and the State Department the amount of compensation it would require to satisfy the claims. There were no surprises with Libya, unlike Czechoslovakia.
While Libya had the funds to pay the required compensation, there is a significant question about Cuba’s ability to do so. By definition, the word “settlement” suggests a compromise; and the question as ever is what kind of compromise — short of 100 cents on the dollar for every certified claim — will satisfy the U.S. claimants and at the same time be agreeable to Cuba.
Timothy J. Feighery is a partner at the Washington D.C. law firm Arent Fox LLP and was chairman of the Foreign Claims Settlement Commission from 2011 to 2013.