When U.S. Law Extends Beyond its Borders: The LIBERTAD Act and Extraterritoriality
On April 17th, 2019, U.S. Secretary of State Mike Pompeo expanded the implementation of the Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996. "For the first time," he announced, "claimants will be able to bring lawsuits against persons trafficking in property confiscated by the Cuban regime." [1] The Trump Administration activated Title III of the LIBERTAD Act, a statute that had been suspended by every presidential administration since the Act's creation. Title III secures the right of U.S. nationals to claim property that had been confiscated by the Cuban government on or after January 1st, 1959 from any individual using, selling, or benefiting from it. [2] Extraterritorial jurisdiction, which, in this case, refers to the application of law beyond U.S. territory, is baked into the foundation of Title III. By undercutting norms of state sovereignty and international comity, Title III of the LIBERTAD Act oversteps the proper jurisdictional boundaries of U.S. law.
In the past 50 years, American law has increasingly been enforced beyond U.S. borders. [3] United States v. Davis, the Foreign Corrupt Practices Act, Filartiga v. Pena-Irala, and the proliferation of U.S. sanctions are all notable examples of this marked shift towards the usage of extraterritorial jurisdiction. [4] [5] [6] [7] This, however, is in tension with the Supreme Court's "presumption against extraterritoriality," a judicial preference established in 1909 which limits the legal applicability of U.S. federal statutes to the nation's territory. [8]
By providing U.S. citizens the right to sue any foreign individual trafficking in property expropriated by Cuba, Title III of the LIBERTAD Act passes judgement on expropriation, overturning the ruling in the 1964 U.S. Supreme Court case Banco Nacional de Cuba v. Sabbatino. In this case, Cuba's state-owned bank sued Sabbatino, a U.S.-based representative of the Cuban company Compania Azucarera Vertientes-Camaguey de Cuba (C.A.V.). This company, originally owned by American stockholders, had been expropriated by the Cuban government in 1960. Cuba's national bank brought suit in the United States to recover the proceeds from the sale of sugar to an American commodity broker, Farr, Whitlock & Co., which had paid Sabbatino instead of the Cuban government. The District Court and the Court of Appeals ruled in favor of Sabbatino, claiming that Cuba's expropriation of C.A.V. violated international law. [9] However, the Supreme Court reversed this, emphasizing earlier decisions surrounding the Act of State Doctrine, which resolves that "the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory." [10] The LIBERTAD Act explicitly makes the Act of State Doctrine inapplicable; it assumes that the expropriation of private property within Cuba is invalid.
Given all this, the LIBERTAD Act is clearly a direct attempt to circumvent international comity, the principle of respecting other nations’ sovereign domains. Title III encroaches not only on the Cuban government's sovereign right to expropriate property within its own jurisdiction, but on the sovereign rights of all foreign nations that use or conduct commerce with Cuban property.
Since the Trump administration's activation of Title III in May 2019, claims filed under the LIBERTAD Act have skyrocketed. As of October 2020, there are fourteen countries impacted by Title III lawsuits. Twenty seven of the fifty eight defendants are non-U.S. nationals. [11] To counteract LIBERTAD Act lawsuits, the European Union, Canada, and Mexico have already had blocking statutes in place since 1996. [12] [13] [14] Blocking statutes are foreign countermeasures that can shield a country's individuals and companies from the extraterritorial application of another country's laws. For instance, the EU's blocking statute, Council Regulation (EC) No 2271/96, explicitly prohibits EU operators from complying with the LIBERTAD Act. These statutes, however, are unlikely to effectively combat Title III lawsuits. Blocking statute defenses have almost always failed in U.S. courts. [15] [16]
Immediately after the Trump administration's activation of Title III, the European Union released a statement pledging not to comply with the LIBERTAD Act. Despite such gestural opposition, however, countries have not taken substantial action against the new Title III activation. [17] It thus remains unclear how countries can successfully prevent U.S. extraterritoriality. Nevertheless, there may be several ways for defendants to challenge claims filed under the LIBERTAD Act, such as by arguing that U.S. courts do not have personal jurisdiction over foreign individuals or companies. [18]
A particularly notable Title III case that is still in the litigation process is Banco Nuñez v. Société Générale S.A. The plaintiffs, heirs of a Cuban expropriated bank that was absorbed into the state-owned Banco Nacional de Cuba in 1960, filed suit against the French bank Société Générale (SocGen) and claimed that SocGen owed damages to the family for continuing to do business with Cuba. This case is unique in that the plaintiffs' arguments rely on an expansive interpretation of "trafficking". SocGen processed payments through Banco Nacional, but there is no evidence that those payments pertained to the plaintiff's specific property. In other words, the lawsuit implies downstream liability; according to Nuñez' argument, those who do business with traffickers, such as Cuban state-owned banks or companies, should be considered as traffickers themselves. [19] If Nuñez wins the lawsuit, the scope of Title III could be substantially widened; the LIBERTAD Act could potentially dissuade foreigners from pursuing any business transactions with the Cuban government. And, although France is part of the European Union, SocGen is not using the blocking statute in its defense; perhaps this is as a result of the failures of previous defenses based on blocking statutes in similar cases.
There has also been another issue resulting from the LIBERTAD Act: many non-U.S. nationals sued under its provisions have found themselves in cases of “foreign sovereign compulsion”, which involve being caught between the laws of two sovereign states. The Restatement (Third) of the Foreign Relations Law of the United States affirms that when litigating over cases of foreign sovereign compulsion, a court should "give preference to the law of the nation in which the activity is to be done." [20] Sometimes, however, the activity that concerns a given case takes place in more than one nation. The LIBERTAD Act in particular deals with the trafficking of property, which is not necessarily located in the territory of the defendant's own nation. Furthermore, U.S. courts can counteract defenses of foreign sovereign compulsion using the "effects doctrine." Established in the antitrust case United States v. Aluminum Co. of America, the effects doctrine allows a state to extend its jurisdiction to conduct abroad as long as the conduct has certain effects within its own territory. [21] This rationale can be used to justify an extraterritorial national security measure like the LIBERTAD Act.
Though President-elect Joe Biden may reverse the Trump administration's activation of Title III after taking the oath of office this January, there is still much left to consider with respect to this issue. It is clear that the LIBERTAD Act exemplifies an expansion of the extraterritorial application of American law, and it remains to be seen how foreign courts can effectively counter the widening scope of American jurisdiction in the current framework of international law . Ultimately, the expansion of extraterritoriality conflicts with the principle of mutual respect for, and recognition of, other nations’ legal domains. U.S. courts must now clearly delineate where exactly U.S. jurisdiction ends.
Sources:
[1] Secretary Pompeo Remarks at State Department, CSPAN (2019), online at https://www.c-span.org/video/?459893-1/us-lawsuits-foreign-firms-cuba-secretary-pompeo (visited November 27, 2020).
[2] Cuban Liberty and Democratic Solidarity (LIBERTAD) Act of 1996. Public Law 104-114. U.S. Statutes at Large 110 (1995): 785-824. https://www.govinfo.gov/content/pkg/STATUTE-110/pdf/STATUTE-110-Pg785.pdf
[3] Anthony J. Colangelo, "What is Extraterritorial Jurisdiction," 99 Cornell Law Review 1303, 1312 (2014).
[4] United States v. Davis, 905 F2d 245 (9th Cir 1990).
[5] Filartiga v. Pena-Irala, 442 U.S. 901 (1979).
[6] U.S. Library of Congress, Congressional Research Service, Foreign Corrupt Practices Act (FCPA): Congressional Interest and Executive Enforcement, In Brief, by Michael V. Seitzinger, R41466 (2016), 2.
[7] Countering America's Adversaries Through Sanctions Act, H.R. 3364. Public Law 115-44. U.S. Statutes at Large (2017): 886-955.
[8] Franklin A. Gevurtz, "Determining Extraterritoriality," 56 William and Mary Law Review 341, 344 (2014).
[9] Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964).
[10] Underhill v. Hernandez, 168 U.S. 250 (1897).
[11] Updated Libertad Act Lawsuit Statistics, Economic Eye on Cuba (2020), online at https://www.cubatrade.org/blog/2020/10/7/updated-libertad-act-lawsuit-statistics-28-filings-59-law-firms-170-attorneys-9500-documents-us5-million-in-billable-hours (visited November 27, 2020).
[12] European Council, Council Regulation (EC) No 2271/96, November 22, 1996, online at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:01996R2271-20180807 (visited December 3, 2020).
[13] Government of Canada, Foreign Extraterritorial Measures Act, 1985, online at https://laws-lois.justice.gc.ca/eng/acts/f-29/FullText.html (visited December 3, 2020).
[14] Government of Mexico, Law of Protection of Commerce and Investments from Foreign Policies that Contravene International Law, online at http://www.diputados.gob.mx/LeyesBiblio/pdf/63.pdf (visited December 3, 2020).
[15] Jason Rotstein, "The Legacy of the Libertad Act: Defeating Title III Claims and Protecting International Comity," Harvard International Law Journal Online (2019), online at https://harvardilj.org/2019/11/the-legacy-of-the-libertad-act-defeating-title-iii-claims-and-protecting-international-comity/ (visited December 15, 2020).
[16] Societe Nationale v. District Court, 482 U.S. 522 (1987).
[17] Adam Kaznowski, Joint Statement by Federica Mogherini and Cecilia Malmstrom on the Decision of the United States to Further Activate Title III of the Helms Burton (Libertad) Act, European Union External Action (2019), online at https://eeas.europa.eu/headquarters/headquarters-homepage/61183/joint-statement-federica-mogherini-and-cecilia-malmstr%C3%B6m-decision-united-states-further_en (visited November 27, 2020).
[18] Contreras et al, "US Courts Open to Lawsuits For 'Trafficking' in Confiscated Cuban Property," JDSUPRA (2019), online at https://www.jdsupra.com/legalnews/us-courts-open-to-lawsuits-for-24658/ (visited January 8, 2020).
[19] Banco Nuñez v. Société Générale S.A., 2020, U.S. District Court for the Southern District of New York.
[20] Michael A. Jr. Warner, "Strangers in a Strange Land: Foreign Compulsion and the Extraterritorial Application of United States Employment Law," 11 Northwestern Journal of International Law and Business 371, 378 (1990).
[21] Pawel K. Chudzicki, "The European Union's Response to the Libertad Act and the Iran-Libya Act: Extraterritoriality without Boundaries," 28 Loyola University Chicago Law Journal 505, 512 (1997).