COMMENTARY — The Helms-Burton Act, Part 2

The U.S. Congress recently enacted the Cuban Liberty and Democratic Solidarity (Libertad) Act, also known as “Helms-Burton,” after its sponsors Senator Jesse Helms and Congressman Dan Burton. The Act creates litigation risks in the U.S. for Canadian companies that have exploration and mining activities in Cuba. This, the second article in a 2-part series, explains litigation strategies for Canadian mining companies that are at serious risk of being sued under Helms-Burton.

If the President of the U.S. does not suspend Title III (which allows treble damage actions to be brought against foreign companies that invest in confiscated property subject to a claim by a U.S. national), it is likely that lawsuits will be filed on, or soon after, Nov. 1, 1996. Reports from Washington, D.C., and Miami indicate that law firms are gearing up to file lawsuits.

There are several steps that Canadian mining companies may wish to take if they expect to be sued.

* Develop a documentary record before suit is filed — It is a good idea to begin to assemble a documentary record now, showing, if possible, that there is no basis for a claim under the Act. Once the documents are assembled, translated and reviewed, it will be possible to assess whether there is a basis for a claim under the Act and to devise a strategy if a lawsuit is filed. Such a strategy could take many forms.

* Seek early dismissal — If a suit is filed, and it lacks merit, one strategy to consider is to seek a meeting with the plaintiff’s counsel and, using the documentary record, attempt to persuade counsel that the case should be withdrawn. If the plaintiff’s counsel refuses to withdraw the suit, you might consider advising counsel that you intend to seek legal fees if you prevail. While obtaining sanctions is difficult, notifying counsel that you intend to do so may dampen his enthusiasm for litigation in cases filed with little thought given to whether the suit has merit.

* Personal jurisdiction — To initiate litigation against a foreign company in a U.S. court, a plaintiff must establish personal jurisdiction over the defendant. Personal jurisdiction may be an important defence available to Canadian companies sued under Helms-Burton. In all likelihood, in order for a U.S. court to assert personal jurisdiction against a Canadian company under Helms-Burton, the company must have “systemic and continual” contracts in the U.S. Operating a manufacturing or retail facility would probably be a basis for establishing personal jurisdiction. If such contacts do not exist, the Canadian company should be able to have the suit dismissed at an early stage of the litigation, regardless of whether it is “trafficking” in confiscated property.

* Develop a legal theory that avoids liability — Congress deliberately drafted Helms-Burton in a vague and ambiguous manner in order to deter foreign investment in Cuba. U.S. federal courts, which historically have been reluctant to adjudicate issues relating to foreign policy, and which interpret statutes (to the extent possible) in a manner consistent with international law, may be inclined to interpret Helms-Burton in a narrow fashion. U.S. courts may be willing to embrace legal theories that dilute the impact of the Act. For example, U.S. courts may dismiss a suit against a U.S.

subsidiary of a Canadian company if the subsidiary is not involved in Cuban operations.

* Settlements — Helms-Burton allows Title III suits to be settled. Some plaintiffs may be interested in reaching settlements with foreign companies that are doing business in Cuba. Settlements could be an important avenue for Canadian companies for eliminating litigation, particularly if the prospect of prevailing on the merits is weak.

* Enforcement of judgments — There may be some cases that will likely result in an adverse judgment against a Canadian company. In such cases, consideration might be given to whether the Canadian company has assets in the U.S. to satisfy the judgment. If no assets are available, the company may wish to consider not defending the suit and letting the plaintiff obtain a default judgment. It is highly unlikely a judgment obtained under Helms-Burton would be enforceable in Canada. A Canadian court would likely rule that such a judgment is contrary to Canadian public policy or is barred by the Canadian blocking statute.

By taking carefully considered and appropriate measures, Canadian mining companies can reduce the risk of litigation under Helms-Burton. If litigation is initiated, a careful strategy will reduce the risk of protracted litigation and an adverse result.

— The author is a lawyer with Washington, D.C.-based Nussbaum & Wald.