REACTION TO LEGISLATION TIGHTENING THE U.S. EMBARGO OF CUBA
By:
Preston Brown
New York
Recent legislation intended to tighten the U.S. embargo of Cuba has provoked vigorous and critical reaction from America's trading partners. The law, known as the Helms-Burton Act (the "Act"), permits U.S. nationals with claims to property confiscated by the Cuban Government to sue persons who "traffic" (as such term is defined in the statute) in such property in federal court. It also requires the denial of visas for entry to, and the exclusion from the United States of, inter alia, any person the Secretary of State determines has trafficked in such confiscated property or who is an officer, principal or controlling shareholder of any entity involved in such trafficking.
In an April note to the U.S. Department of State, the European Union expressed its "deep concern for the enactment of legislation which contains unacceptable elements of extra-territoriality and other elements not compatible with the obligations undertaken by the U.S. in the World Trade Organization and with the mutually-agreed principles of free trade. The Helms-Burton Act has the potential to cause significant commercial disruption for companies from the EU and from other major trading partners." In a subsequent statement, the EU's Council of Foreign Ministers commented that in its view the legislation was in "conflict with international law." On May 3, 1996, the European Community and its member states requested consultations with the United States pursuant to the WTO dispute resolution procedures. Such consultations are the first step in those procedures and could ultimately lead to arbitration before a WTO panel. Similarly, Canada and Mexico have requested consultations with the United States under NAFTA and the first meeting has already taken place. Such consultations are also the first step in dispute resolution under NAFTA and could ultimately lead to arbitration before a NAFTA panel.
In any dispute arising under NAFTA or GATT, the United States will argue that Article 2102 of NAFTA, entitled National Security, and Article XXI of GATT, entitled Security Exceptions, permit the United States to enact legislation otherwise inconsistent with NAFTA or GATT rules if the United States is acting to protect its national security interests. If the national security exception is held not to apply, the Act would face possible challenges under a number of GATT and NAFTA provisions. As examples, the Act might be challenged under Chapter Eleven of NAFTA providing that each NAFTA country must treat the investments of a NAFTA investor in accordance with international law and under Chapter Sixteen of NAFTA providing for the grant by each NAFTA country of temporary entry for business persons from the other NAFTA countries. Under GATT, a WTO member could argue that the Act violates GATT's most favored nation rule.
In letters to the Speaker of the U.S. House of Representatives and the Majority Leader of the U.S. Senate dated May 3, 1996, the European Union noted that the initiation of consultations "does not prejudge any action by the Member States in relation to protection of their nationals, and in particular by those already possessing 'blocking' statutes." With regard to the last reference, it should be noted that Canada and the United Kingdom have already taken action aimed at "blocking" the extraterritorial application of certain measures taken by other countries. In October 1992, an order designed to block those provisions of the U.S. Cuban Democracy Act of 1992, which restricted trade between Cuba and U.S.-owned foreign subsidiaries, was issued under Canada's Foreign Extraterritorial Measures Act of 1984.
In anticipation of passage of the Helms-Burton Act, in January 1996 Canada amended and expanded that earlier order. The 1996 Canadian order applies to every Canadian corporation (as well as every director and officer thereof) and requires that those subject to it give notice to the Attorney General of Canada of any directive, intimation of policy or other communication relating to an extraterritorial measure of the United States in respect of any trade or commerce between Canada and Cuba received from a person in a position to direct or influence the policies of the Canadian corporation in Canada. The order also prohibits compliance with any such directive, intimation of policy or other communication. An extraterritorial measure of the U.S. is defined to mean the Cuban Assets Control Regulations or any law of the United States "to the extent they operate or are likely to operate so as to prevent, impede or reduce trade or commerce between Canada and Cuba."
Under the Canadian legislation, Canada's Attorney General may prohibit or restrict the production or identification of records which are in Canada (or are in the possession or control of a Canadian citizen) to or for a foreign tribunal when, in his opinion, that foreign tribunal is exercising (or is likely to exercise) jurisdiction or powers in a way likely (i) to affect adversely significant Canadian interests in relation to international trade or (ii) to infringe Canadian sovereignty.
The U.K.'s Protection of Trading Interests Act (1980) has a similar provision prohibiting participation in discovery proceedings under similar circumstances. By virtue of an implementing 1992 order, the U.K. legislation blocks compliance with certain portions of the U.S. Cuban Assets Regulations and the Cuban Democracy Act. However, since the U.K. legislation applies to "requirements, prohibitions and judgements" imposed by other countries, there is some debate in the U.K. as to whether it applies to actions brought under the Helms-Burton Act. In any case the U.K. Government has given strong indications that it will take some action in this regard.
