For those who think settlement of claims will be a stumbling block

[Ryan]

I've seen a lot written about how the outstanding claims against the Castro regime by US business will hold back future business relations. I know there are billions of dollars of outstanding claims but..

Here's an interesting article discussing, among other things, the takeover of the management of the Hotel Inglaterra by Starwood.

http://www.caribbeannewsdigital.com/en/noticia/obama%E2%80%99s-visit-comes-american-businesses-rush-back-cuba

Way down the article is a little, almost throwaway line,

"Only Congress can fully lift the embargo, but deals such as the one Starwood has reached, which is believed to include the settlement of a $51 million claim against the Castro government held by the company, open big cracks in its foundations."

So, outstanding claims, not an issue.

[wabashcr]

Interesting article. I would guess many claims will be settled in such a manner, with corporate claim holders using claims to leverage future investment negotiations. Also seems to me the best way for individuals to get paid is to sell their claims to firms looking to invest in Cuba. OFAC would have to approve this, but it has to be more expedient than OFAC trying to negotiate directly with the Cuban government.

Of course there will be holdouts, individually and politically. The anti-Castro sentiment still runs very strongly in South Florida, and it's still a very critical voting bloc in one of the most important electoral swing states. Obama's incremental yet deliberate approach to opening ties with Cuba seems to be keeping that sentiment from derailing things, like the old "boiling a frog" experiment. If the claims are approached in a similar manner, I see no reason why they would be much more than a bump in the road.

[Nino]

Good read Andy, thanks !

My view is that while the claims settlement is a mayor issue to resolve, there are other mayor obstacles to International business in Cuba ... and they come mostly from the Cuban government.

Interesting reading here :

https://news.vice.com/article/business-in-cuba-united-states-thaw-in-relations

[Jeremy Festa]

Good read Andy, thanks !

My view is that while the claims settlement is a mayor issue to resolve, there are other mayor obstacles to International business in Cuba ... and they come mostly from the Cuban government.

Interesting reading here :

https://news.vice.com/article/business-in-cuba-united-states-thaw-in-relations

The best thing I take away from this... I just love that Nino reads Vice news.

All is right with the world.

[stogieluver]

Way down the article is a little, almost throwaway line,

"Only Congress can fully lift the embargo, but deals such as the one Starwood has reached, which is believed to include the settlement of a $51 million claim against the Castro government held by the company, open big cracks in its foundations."

So, outstanding claims, not an issue.

Pennies, compared to potential, maybe? This may be correct, but I wonder if claims can be amended when the claimants realize this? Any lawyers out there that can answer?

[aes8]

The way I read this is that Starwoods ate the $51 million dollar claim, not a small issue at all.

Looks fully paid to me unless I interpreted that incorrectly.

I've seen a lot written about how the outstanding claims against the Castro regime by US business will hold back future business relations. I know there are billions of dollars of outstanding claims but..

Here's an interesting article discussing, among other things, the takeover of the management of the Hotel Inglaterra by Starwood.

http://www.caribbeannewsdigital.com/en/noticia/obama%E2%80%99s-visit-comes-american-businesses-rush-back-cuba

Way down the article is a little, almost throwaway line,

"Only Congress can fully lift the embargo, but deals such as the one Starwood has reached, which is believed to include the settlement of a $51 million claim against the Castro government held by the company, open big cracks in its foundations."

So, outstanding claims, not an issue.

[perkinke]

I would think just untangling which US companies have legitimate claims would be difficult on this side, considering how many companies have been purchased, renamed, consolidated, broken up or gone under. And then assessing whether they were owned by legitimate interests or mafia interests subject to past RICO prosecutions.... I'd say it would be best for American companies to wash their hands of it and let bygones be bygones.

[Ken Gargett]

I would think just untangling which US companies have legitimate claims would be difficult on this side, considering how many companies have been purchased, renamed, consolidated, broken up or gone under. And then assessing whether they were owned by legitimate interests or mafia interests subject to past RICO prosecutions.... I'd say it would be best for American companies to wash their hands of it and let bygones be bygones.

i think this makes sense.

the original article i find a bit confusing - whether just poorly written or poorly researched, i'm not sure.

"Prior to his trip, Obama also lifted restrictions on Cuba’s ability to use the U.S. dollar in international financial transactions."

i see that the Cuban govt has removed the 10% tax on using US $'s. not the US. and obama is removing the restriction on Cuban entities using the dollar in transactions in the US but Cuba has always been able to use the US dollar in international transactions which do not involve the States. the US has no authority to place any restrictions on that. they could encourage other countries to follow their restrictions but they can't prevent it. or is something happening out there of which i am not aware?

Only Congress can fully lift the embargo, but deals such as the one Starwood has reached, which is believed to include the settlement of a $51 million claim against the Castro government held by the company, open big cracks in its foundations."

we are never told who originally (or at least at the time of nationalisation) owned the place (or did i miss it?). so which company holds the claim? how did they come up with $51 mill?

these claims have the potential to cause chaos. should one side of politics decide that removal of the embargo depends on claims being met, it will turn this into a total quagmire.

who are they to be paid to?

how much?

how to be calculated?

what about individuals? most or at least many of those originally dispossessed would have passed away so do their beneficiaries still have a claim? where will the money come from?

presumably there will need to be some form of overseeing authority with jurisdiction. it will consist of? does anyone really see Cuba allowing a US court the authority to make these decisions? does anyone see US companies and individuals being happy if under Cuban jurisdiction?

and so on.

and will Cuba agree? what if they refuse? is the genie out of the bottle and can it be put back if the States insist on compensation and Cuba refuses?

and what of Cuban claims against the States for damage done by the embargo? if you were acting for the Cuban govt, you'd be slinging this around as fast and as far as possible.

i can imagine the situation where it is considered all too hard and left alone. that will upset a lot of people but presumably they are already upset by the possible lifting of the embargo.

long way to go.

[Ryan]

Good read Andy, thanks !

My view is that while the claims settlement is a mayor issue to resolve, there are other mayor obstacles to International business in Cuba ... and they come mostly from the Cuban government.

Interesting reading here :

https://news.vice.com/article/business-in-cuba-united-states-thaw-in-relations

Thanks for that Vice article Nino, I had heard of Yacoubian but interesting to see the details. I have a feeling that as more investment comes in, Cubans will have to ease up a little on the espionage charges etc. Starwood,

Google or other billion dollar companies are different animals to a little $17m mining services company or auto import operation. In that, you only get to lose Google once. Or I should say "once per regime", and I'm sure that is something Raul and his mates are considering.

i think this makes sense.

the original article i find a bit confusing - whether just poorly written or poorly researched, i'm not sure.

"Prior to his trip, Obama also lifted restrictions on Cuba’s ability to use the U.S. dollar in international financial transactions."

i see that the Cuban govt has removed the 10% tax on using US $'s. not the US. and obama is removing the restriction on Cuban entities using the dollar in transactions in the US but Cuba has always been able to use the US dollar in international transactions which do not involve the States. the US has no authority to place any restrictions on that. they could encourage other countries to follow their restrictions but they can't prevent it. or is something happening out there of which i am not aware?

Well the article was incorrect there, I've been charged in US dollars to my euro credit card for years on Cuban transactions. What Obama has changed though is allow US banks to handle Cuban transactions. Also, importantly, foreign banks with US interests can now do business with Cuba.

I still cannot buy travel insurance to Cuba through my Irish bank (Allied Irish Banks) as their SEPA payments are cleared through a US bank. My bank can now change that policy, though they haven't yet.

I can remember reading about Lloyds bank (UK) receiving a fine of $1 million per day until they stopped business with Cuba. Swiss bank UBS had to pay a fine of $100 million. Cuba being released from the US sanction list of State Sponsored Terrorism has helped this.

http://www.reuters.com/article/us-cuba-usa-banking-analysis-idUSBRE9AS0QE20131129

Only Congress can fully lift the embargo, but deals such as the one Starwood has reached, which is believed to include the settlement of a $51 million claim against the Castro government held by the company, open big cracks in its foundations."

we are never told who originally (or at least at the time of nationalisation) owned the place (or did i miss it?). so which company holds the claim? how did they come up with $51 mill?

In my, admittedly limited, experience, "settlement" rarely means "payment in full". Anyway the Cuban partner, i.e. the State basically, will make that back in no time. After Starwood spend $100m getting rid of the mold and putting in new marble, that'll be Cuba's mold-free carpets and new marble. Not Starwood's.

these claims have the potential to cause chaos. should one side of politics decide that removal of the embargo depends on claims being met, it will turn this into a total quagmire.

who are they to be paid to?

how much?

how to be calculated?

what about individuals? most or at least many of those originally dispossessed would have passed away so do their beneficiaries still have a claim? where will the money come from?

presumably there will need to be some form of overseeing authority with jurisdiction. it will consist of? does anyone really see Cuba allowing a US court the authority to make these decisions? does anyone see US companies and individuals being happy if under Cuban jurisdiction?

and so on.

and will Cuba agree? what if they refuse? is the genie out of the bottle and can it be put back if the States insist on compensation and Cuba refuses?

and what of Cuban claims against the States for damage done by the embargo? if you were acting for the Cuban govt, you'd be slinging this around as fast and as far as possible.

i can imagine the situation where it is considered all too hard and left alone. that will upset a lot of people but presumably they are already upset by the possible lifting of the embargo.

long way to go.

Yes, absolutely, these claims do have the potential to cause chaos. But with the amount of money that US (and other) investors are willing to bring into the country and the potential that Cuba and the investors see from it, I have a strong feeling that all those claims will end up being very little more than footnotes.

[wabashcr]

I would think just untangling which US companies have legitimate claims would be difficult on this side, considering how many companies have been purchased, renamed, consolidated, broken up or gone under. And then assessing whether they were owned by legitimate interests or mafia interests subject to past RICO prosecutions.... I'd say it would be best for American companies to wash their hands of it and let bygones be bygones.

There's an outfit within the justice department called the Foreign Claims Settlement Commission that handles and tracks all of these claims. Any American corporation or individual with a claim against Cuba had to file with this commission (this was in the late 60s, then they had another round about 10 years ago). The commission evaluated the claim, and if valid, certified it for a specific amount. Once certified, the claim is essentially an asset. The commission and OFAC have to approve any transfer of the claim. So most of the work on the American side is already done. It then becomes a matter of negotiation with the Cubans.

Just dropping the claims is out of the question for two reasons. First it would be letting the Cuban government off the hook. If everyone agreed to let bygones be bygones, what would stop Cuba from doing it again? Second, and most importantly, the claims are significant bargaining chips for companies wanting to invest in Cuba. Cuba obviously isn't going to pay anyone anything close to what these claims are worth. They probably won't pay anyone anything at all. But they can satisfy the claims by offering tax breaks or other investment incentives to the claim holders. I'd bet a good sum that's what happened with Starwood.

Then you have private citizens with claims based on property that was seized. They're never going to see a dime from the Cuban government. They aren't getting their property back in most cases, either. Their best bet would be to sell their claims to a company like Starwood, who can get some utility out of it. There's actually a cottage industry of people and businesses trying to buy claims from the original holders for pennies on the dollar. Their hope is to amass enough claims to force a favorable settlement or otherwise monetize the claims via economic development incentives.

[Fugu]

There's an outfit within the justice department called the Foreign Claims Settlement Commission that handles and tracks all of these claims. Any American corporation or individual with a claim against Cuba had to file with this commission (this was in the late 60s, then they had another round about 10 years ago). The commission evaluated the claim, and if valid, certified it for a specific amount. Once certified, the claim is essentially an asset. The commission and OFAC have to approve any transfer of the claim. So most of the work on the American side is already done. It then becomes a matter of negotiation with the Cubans.

Thanks for this insight, wabashcr, as I was just about to ask: I am not clear about how at all the property claims would come with any, legal so to say, link to (a lift of) the embargo? My question might appear heretical, but in all seriousness? That would appear as if American corporations/companies and former private owners had suspended on settlement of seizures because of the embargo for the time being.... which they didn't. The embargo had been a response to seizures, but has not at all been a hindrance to legal claims for restitution or compensation. So why putting it on the table now?

Appears to me that a future lifting of the embargo and settlement of claims is only linked politically as a leverage, but certainly not in any way legally.

[wabashcr]

Thanks for this insight, wabashcr, as I was just about to ask: I am not clear about how at all the property claims would come with any, legal so to say, link to (a lift of) the embargo? My question might appear heretical, but in all seriousness? That would appear as if American corporations/companies and former private owners had suspended on settlement of seizures because of the embargo for the time being.... which they didn't. The embargo had been a response to seizures, but has not at all been a hindrance to legal claims for restitution or compensation. So why putting it on the table now?

Appears to me that a future lifting of the embargo and settlement of claims is only linked politically as a leverage, but certainly not in any way legally.

The embargo doesn't prevent anyone from negotiating to settle a claim with Cuba, if that's what you're asking. I think most realistically gave up hope of reaching a settlement until relations between the two countries warmed a bit.

The Helms-Burton act has a provision that essentially says the embargo remains in place until the Cuban government makes good on the claims against seized assets. Interestingly, that also now extends to claims by Cuban refugees who became American citizens later in life. So under current law, yes, claims must be settled before the embargo can be lifted. Of course congress could repeal the Helms-Burton act, but that's not politically expedient, at least not yet. Also, the claims settlement commission has the authority to negotiate any outstanding claims on behalf of the claim holder. So the US government could come to an agreement with Cuba to make the claims go away. That's not likely considering Cuba's stance that they won't pay the claim holders. It seems the likeliest resolution is for corporations to redeem the claims for other economic considerations for future investment.

[Fugu]

OK, that clarifies my question fully and perfectly! Wasn't aware that that is expressly stated in the Helms-Burton act as being a prerequisite. Making sense. Many thanks!

[El Presidente]

The embargo doesn't prevent anyone from negotiating to settle a claim with Cuba, if that's what you're asking. I think most realistically gave up hope of reaching a settlement until relations between the two countries warmed a bit.

The Helms-Burton act has a provision that essentially says the embargo remains in place until the Cuban government makes good on the claims against seized assets. Interestingly, that also now extends to claims by Cuban refugees who became American citizens later in life. So under current law, yes, claims must be settled before the embargo can be lifted. Of course congress could repeal the Helms-Burton act, but that's not politically expedient, at least not yet. Also, the claims settlement commission has the authority to negotiate any outstanding claims on behalf of the claim holder. So the US government could come to an agreement with Cuba to make the claims go away. That's not likely considering Cuba's stance that they won't pay the claim holders. It seems the likeliest resolution is for corporations to redeem the claims for other economic considerations for future investment.

Cheers for that