In major breakthrough, Cuba and U.S. discuss $1.9 billion in property claims

December 10, 2015

U.S. and Cuban officials met in Havana on Tuesday to begin negotiating a possible settlement for $1.9 billion worth of American assets seized by Fidel Castro’s government in the early 1960s, as well as other claims built up over years of strained relations.

The talks were a breakthrough and would have been hard to imagine before President Obama and Cuban President Raúl Castro announced plans last December to normalize relations.

A settlement would be especially significant because it would address the chain of events that led to the U.S. trade embargo, which by law cannot be lifted until the claims are resolved.

A U.S. State Department official told reporters that reaching a settlement was “a top priority” for the United States. The official said Tuesday’s talks were “fruitful” and would continue in 2016.

Cuba experts said the most important thing was that the negotiations occurred at all.

“Merely for the two nations to sit down and talk in an orderly, professional manner about claims, after so many decades, is a major achievement,” said Richard Feinberg, a Cuba expert at the Brookings Institution who published a report this month proposing possible solutions for the two sides.

“Settlement of U.S. claims would be a huge step forward toward fully normalizing U.S.-
Cuban economic relations and would give live ammunition to those who favor lifting the economic embargo,” Feinberg said.

The State Department official said the U.S. side also provided information on the additional $2 billion or so in judgments awarded to plaintiffs who have sued the Cuban government in U.S. courts, proceedings that ­Havana does not recognize. The official spoke on the condition of anonymity under State Department ground rules.

U.S. and Cuban diplomats have held numerous meetings this year on their normalization agenda. But Tuesday’s session was the first time the two governments made a formal attempt to talk about the past and one of its most complicated chapters, in which Castro’s nationalization policy devoured U.S. factories, farms and sugar mills in the early years of his Marxist revolution.

At 6 percent annual interest, the claims would be worth about $8 billion today.

Preliminary discussions for compensation to U.S. companies broke off in 1960 after President Dwight D. Eisenhower suspended Cuba’s sugar export quota to the United States. The Cuban government’s property grab accelerated after that, and Cuba would eventually seize virtually all private businesses, down to shoeshine stands and the ice cream carts of street vendors.

Tuesday’s talks did not address the issue of property taken from Cuban citizens. Cuba settled claims with Canada, Spain and other governments decades ago, but those amounts were dwarfed by the American claims.

While recognizing that U.S. plaintiffs were never compensated, Cuba has presented counter-claims totaling more than $1 trillion, citing damages from a ­half-century of U.S. trade sanctions and the loss of life and property stemming from attacks by U.S.-backed militants, such as in the failed Bay of Pigs invasion in April 1961.

Trade experts and lawyers say the Cuban government will have a difficult time recovering damages from sanctions. It may have a better argument citing the attacks, they say — part of what may be the government’s broader strategy of having the competing claims cancel each other.

“There is no international court to take a look at this, so it’s a bilateral negotiation, and the Cubans are very tough, very clever,” said Pedro Freyre, a Cuba expert at the Akerman LLP law firm in Miami.

Freyre said it was a positive sign that the sides were even talking about the issue. “It’s the first time the two countries are going back to look at this history and try to sort out a system for fixing it.”

“You don’t have this conversation if you haven’t built some mutual trust and respect,” he said.

The 50 largest U.S. claims against Cuba account for more than three-quarters of the $1.9 billion, and most are corporate — not individual — grievances. The largest, at $267 million, belongs to the Cuban Electric Company, Havana’s major power utility at the time it was taken. After changing hands through corporate mergers and sales, the majority of its shares today are owned by Office Depot. Other U.S. companies that have claims include Texaco, Coca-Cola and ­Colgate-Palmolive. Half of the top 10 largest claimants are sugar companies that lost their mills and railways. Several of the companies no longer exist, and the claims have been passed down to heirs.

Feinberg and others say the fact that most of the money is owed to U.S. companies could make the negotiations easier, if some of the firms are willing to accept tax breaks or other concessions from the Cuban government to ease their potential return to the island.The other nearly 5,000 individual claims against Cuba amount only to about $200 million, a relatively modest amount, Feinberg said, even for the cash-strapped communist government.


In major breakthrough, Cuba and U.S. discuss $1.9 billion in property claims