U.S./EU Agreement

Excerpts from remarks by David W. Wallace at the Institute for U.S. Cuba Relations Policy Forum, July 23, 1998, U.S. Capitol

The Joint Corporate Committee on Cuban Claims has always been ready to challenge any action that would unfairly diminish the rights of U.S. certified claimants with claims against the government of Cuba for property that was taken from them by force of arms and without payment of adequate compensation. I should point out that the U.S. courts already have ruled that such taking were in violation of international law for multiple reasons, and consequently were totally void.

And now, today, we face the May 18th "Understanding" between the United States and the European Union which, under the guise of "strengthening international protection of property rights," appears to do so at great and unfair cost to U.S. certified claim holders. We have several fundamental concerns and questions about the "Understanding" in terms of how it will work and how it will affect the property rights of U.S. certified claimants:

· It appears that a fundamental flaw in the agreement is that the principal deterrent provided - the denial of government commercial support for investment in unlawfully confiscated properties - is without teeth and will, as a practical matter, do little to "inhibit and deter" future foreign investment in these properties. First of all, in order for us to assess the efficacy of this measure as mild deterrent, it would be helpful if we had some information as to what governmental assistance, if any, has been provided to firms that currently are investing in Cuba. But irrespective of whatever form of governmental assistance may have been provided previously, if these companies are willing to take the entrepreneurial risk and "go it alone" without any governmental assistance, what is there in the "Understanding" to stop them beyond the mere exhortations of their governments? Isn't it the case that pursuant to the "Understanding", European companies could continue to operate unimpeded in Cuba so long as any new investments do not receive government funding?

· Apart from the withholding of various governmental benefits supporting investment in unlawfully confiscated property, what enforcement mechanisms, if any, are provided in the "Understanding" to restrict investment in these properties in Cuba?

· The unkindest cut of all is that the accord does not affect existing investments in unlawfully confiscated properties. Stolen property is to be legalized and blessed by the May 18th accord. This element of the "Understanding" is of profound concern to the certified claimants in that it appears to represent a marked retreat from the strongly worded cables issued by our State Department since 1991 underscoring the fact that transfer of these expropriated properties to third parties would seriously complicate any restitutionary remedies. If current foreign investments in expropriated properties are essentially held harmless by this "Understanding," restitutionary remedies that ultimately may prove critical in resolving many of these claims may be effectively precluded. How can this provision be said to be in the interest of the certified claimants?

· We also note that the purchase of goods or services produced on expropriated property is exempted from the definition of "covered transaction". The right to sell products or services produced with confiscated property is the most important attribute of ownership of property. Indeed, in many cases, the product is part of the property itself. So how is this provision in the interest of the certified claimants? Precisely how does this provision operate to deter foreign investment in these properties? Isn't this a major loophole that would permit significant foreign transactions in expropriated property? What is the rationale underlying this exemption?

· A USIA fact sheet notes that the "Understanding" contains "special measures to deal with countries that have 'an established record of repeated expropriation in contravention of international law,' of which Cuba is a notable example." Precisely what are these "special measures?" According to press reports, the U.S. sought to subject Cuba, and other countries with a record of expropriation, to a stricter and enforceable set of disciplines under the accord. Was the U.S. position ultimately adopted? Would it not be in our common foreign policy interest for the U.S. and EU to demonstrate their strong commitment to upholding important international law principles through the adoption of stricter disciplines for such countries?

· The "Understanding" also commits the U.S. and the EU to other measures, such as encouraging the resolution of claims. Specifically, how does the U.S intend to meet this objective, particularly in light of the concerns we note about the possible impact of this "Understanding" on restitutionary remedies?

· The "Understanding" creates a "registry of claims alleging expropriation in contravention of international law." How will these alleged claims be treated in comparison to a claim that has been analyzed, adjudicated and certified in accordance with the strict rules and precise standards of the Foreign Claims Settlement Commission? What documentation will be required or will be available after 38 years? Will U.S. certified claimants feel obliged to register to protect their claims? How can these claims possible be comparable in any way? Isn't giving even limited recognition of alleged Cuban-American claims via this registry contrary to well established international law principles? Won't establishment of this registry further complicate resolution of validated, certified claims?

In conclusion, I think the claimants' fundamental concerns with this "Understanding" can best be summarized as follows: we ultimately must depend upon our government to vigorously support and protect the rights of U.S. property claimants, and we expect our government to be consistent in upholding these rights in its statement and actions. But this "Understanding," in our view, seems to be inconsistent with and undermines the strong position our government has taken in the past in the cables it has issued on this subject. Contrary to those clear and forceful statements on behalf of the rights of certified claimants, this accord would seem to impair the important and well recognized remedy of restitution by, in effect, enfranchising existing "traffickers" in these expropriated properties. Moreover, while we appreciate our government's efforts in obtaining EU recognition of U.S. certified claims, we are concerned about the consequences of accepting an accord that, in effect, grandfathers existing investment and permits further investment in unlawfully confiscated property so long as no governmental assistance is provided.

I would hope that our government, by the May 18th accord, has not abdicated its responsibility to certified claimants by:

1. Agreeing to an accord that has no real teeth.

2. Agreeing to a grandfathering provision that gives existing traffickers a perpetual free ride with stolen U.S. properties.

3. Agreeing to the establishment of a claim registry run by foreign governments that undermines the careful certification process of the U.S. Foreign Claims Settlement Commission.

I would hope that our State Department would join our Committee in seeking to strengthen and protect international property rights since it is in the best interests of everyone to see this done. We believe that the May 18th accord is a retreat from this viewpoint.

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