By signing the Cuban Liberty & Democratic Solidarity Act on Mar. 12, President Clinton helped ensure his Nov. 5 electoral victory in Florida. The measure, known as the Helms-Burton act, pleased hard-line Cuban exiles by threatening lawsuits against non-U.S. companies that invest in the island.
As it turns out, the legislation hasn't stopped foreign investments in Cuba, though it has slowed them. Instead, it has stirred up a hornets' nest. It has already triggered retaliatory legislation by Canada and the European Union. Even the U.S. companies that had properties confiscated in Cuba are opposed to Helms-Burton, arguing that it does little to advance their cause. To avoid bruising confrontations with U.S. trading partners, Clinton may use the discretion he has to postpone for six-month periods the activation of the bill's key provision on lawsuits. To justify that, the Administration has been urging the EU and other partners to help nudge Cuba toward democracy. Even so, postponements would likely stir domestic political battles, much like the annual uproar over extending U.S. most-favored-nation trade treatment to China.
Helms-Burton's limitations as a deterrent to investment in Cuba were underscored on Nov. 12 by Canada's Sherritt International Inc., which produces nickel and oil on the island. Sherritt raised $506 million to finance prospective Cuban ventures from sugar-growing to telecommunications. Sherritt has little to fear from Helms-Burton because it has no assets in the U.S. that could be targeted by lawsuits.
Since the law's passage, 40 new foreign ventures have been set up in Cuba, according to Vice-President Carlos Lage, Cuba's top economic official. He denounced the law in a speech to the U.N. on Nov. 12. "We believe the damage from the law will be temporary," he told BUSINESS WEEK.
Helms-Burton's crucial section, called Title III, allows Americans with claims for property confiscated by the Cuban government to sue in U.S. courts to collect damages. Prospective targets of such suits are non-U.S. companies that profit from businesses in Cuba involving the seized property.
"This is an unacceptable intrusion into the trade and foreign policy of other countries," says Canadian Trade Minister Art Eggleton, calling it "an American bullying tactic." Canada recently enacted "clawback" legislation, allowing Canadian companies to counter-sue in that country's courts to require a U.S. company to repay any amount it wins in a U.S. court under Helms-Burton, plus legal costs. The EU adopted similar clawback legislation on Oct. 28. It gives Europeans "parity of arms" with the U.S., says Sir Leon Brittan, vice-president of the European Commission. On Nov. 20, the EU will also ask the World Trade Organization to set up a panel to rule on the EU's complaint that Helms-Burton's targeting of non-U.S. companies is illegal under the WTO.
BIG LOSERS. Clinton sidestepped such frictions last July by delaying activation of Title III for six months. He will have to decide again soon whether to defer lawsuits for another six months starting on Jan. 16. But even repeated deferrals would not end the tension with trading partners over the Helms-Burton "sword of Damocles," as Brittan calls it.
Surprisingly, among the big losers if Clinton lets Title III go into effect may be major American companies, from ITT and Exxon to Goodyear and Sears Roebuck, that had properties seized in Cuba. Their claims, certified by the U.S. government's Foreign Claims Settlement Commission, were expected to be settled eventually by negotiation with Cuba. But Helms-Burton would allow thousands of Cuban-Americans who were not U.S. citizens when their properties were seized to file individual suits in U.S. courts, starting in 1998. The result would be to dilute the certified claims with a flock of new ones.
Helms-Burton "is really a bill for wealthy Cubans," says David W. Wallace, CEO of cement producer Lone Star Industries Inc. and chairman of the Joint Corporate Committee on Cuban Claims, representing 5,911 claimants. "It's throwing people who weren't citizens at the time in the same pot as us." Risking the anger of Miami exiles, trading partners, and corporate claimants, Clinton will not easily avoid the conflicts stirred by the bill he signed.