Union - U.S. Understanding Fails to Resolve Dispute Over Helms-Burton
is based on the conclusions of a conference on the E.U.-U.S. Understanding
organized by the Center for International Policy in Washington, D. C.
on October 7 and on panels at a conference in Brussels November 11-13,1998
organized by the European Parliament's Intergroup Against the Cuban
Embargo and by the Global Reflexion Foundation.
announcements to the contrary, the Understanding of May 18,1998 on expropriated
property does not end the conflict between the United States and Europe
over the extraterritorial provisions of the Helms-Burton Act (i.e.,
provisions which would exert U.S. jurisdiction over the citizens and
companies of third countries; most egregiously, efforts to bring foreign
companies into U.S. federal courts over property issues arising in third
countries -in this case, Cuba). Though European Union negotiators were
criticized in many European capitals for conceding too much, they did
not concede nearly enough to win Senator Jesse Helms's support for the
understanding in its present form - neither his support nor that of
the majority in the Congress. Rather than granting President Clinton
the authority to waive Title IV (see below), a European precondition
for the understanding to become operative, Congress has demanded the
exact opposite - that the administration report periodically on its
stringent implementation. At the same time, Congress put forward new
legislation which strips Pernod-Ricard, a French company, of treaty
rights in protection of a trademark. This goes directly against the
U.S. commitment under the E.U.-U.S. Understanding to resist further
extraterritorial legislation. Indeed, it would seem that in trying to
accommodate U.S. demands, and, in effect, to allow the United States
to hold itself above the law, European negotiators have only encouraged
the same elements in Congress who gave us Helms-Burton to now come forward
with new unilateral measures against European companies, reassured that
European reaction will always be soft and ineffective.
Understanding of May 18, 1998 on Expropriated Property was aimed principally
at resolving the dispute over the Helms-Burton Act of 1996 and, as first
announced, it seemed a sensible compromise. For their part, the European
governments were to warn their companies and citizens that they should
not in the future invest in properties in Cuba - or elsewhere for that
matter - that had been illegally expropriated. Further, the governments
would deny any kind of assistance for such transactions, including loans,
subsidies, guarantees, and political- risk insurance.
States, in turn, was to commit itself not to implement sanctions against
European companies or citizens under Titles III and IV of the Helms-Burton
Act - the first of which opens the way to suits in U.S. federal courts
against foreign entities accused of "traffcking" in illegally
expropriated properties; the second provides for denial of visas to
the executives of those entities. President Clinton already has authority
to waive implementation of Title III; he was to ask Congress for similar
waiver authority for Title IV Crucially, or so it seemed, the understanding
was not to become operative unless and until the president had obtained
that waiver authority from Congress. Further, there was a commitment
from President Clinton (or at least so the Europeans understood) to
resist any future legislation along the lines of Helms-Burton, i.e.,
no more extraterritorial legislation.
was also said to strengthen the protection of property rights on a global
basis and included such new innovations as a registry of illegally expropriated
properties. It also spoke of special provisions to be instituted against
countries "that have an established record of repeated expropriation
in contravention of international law."
As a number
of U.S. business representatives summed it up when the understanding
was first announced: "Perhaps this offers a reasonable way to manage
the conflict resulting from Helms-Burton." And who could not applaud
a commitment to resist future legislation of the same ilk?
Against the E.U.-U.S. Understanding
however, a closer examination of the understanding reveals it to be
misleading, so self contradictory as to be unacceptable to all sides,
and in the final analysis harmful to U.S.- European relations. What
it represents, more than anything else, is an effort to reconcile mutually
exclusive positions with smoke and mirrors. Consider, for example, the
1 ) Secretary
of State Albright on May 18,1998: "This Understanding advances
in a most significant way the goals of the supporters of the Helms-Burton
Act, such as the co-sponsors Senator Helms and Congressman Burton, along
with Senator Torricelli, Members of Congress Gilman, Menendez, Ros-Lehtinen
and Diaz-Balart, as well as many others."
in a letter to Senator Helms dated August 3,1998, Secretary Albright
described the understanding as "an important complement to the
Libertad Act" [i.e., Helms-Burton]. It was, she said further, "an
extraordinary vindication of the principles underlying the Libertad
Act" and offered "a unique historic opportunity to advance
[its) goals." "Castro," Albright concluded, "sees
this, rightly, as an internationalization of the Libertad Act."
3) In a
letter of his own, however, dated July 20,1998 and addressed to Mr.
Peter Crampton, a member of the European Parliament, Sir Leon Brittan,
the E.U. trade commissioner who had negotiated the understanding, stated
flatly, "The deal on investment disciplines is not (emphasis added)
a multi-lateraliza- tion of Helms-Burton." Quite the contrary,
he insisted, "at no point did the Community acknowledge the legitimacy
of these Acts" [i.e., Helms-Burton and the Iran-Libya Sanctions
letter, this one dated September 2 and addressed to Mr. Stan Newens,
another member of the European Parliament, Brittan insisted that the
European Union had "reiterated our opposition to these laws in
no uncertain terms" and said there could be "no question of
the E.U. `conniving' to U.S. extra-territorial legislation."
Albright says the understanding represents the "internationalization"
of Helms-Burton while Brittan says that it most certainly does not,
and adds that Helms-Burton itself is illegitimate. To be sure, both
are describing the understanding in terms they believe will appeal to
their domestic audiences. As Hermengildo Altozano, a Madrid lawyer,
put it at the C.I.P conference on October 7: "The U.S. wants to
portray the Understanding as strengthening Helms- Burton, while the
Europeans want to see it as dismantling that same Act."
is that it cannot do both, no matter how disingenuous the language in
Registry of Illegally Expropriated Properties
in point has to do with the registry of properties. Press reports have
tended to the view that the E.U.-U.S. Understanding would only affect
future investments in a small number of properties that were taken from
American owners - that is, from those who were U.S. citizens or entities
at the time the property was taken. There are some 5,911 of these claims
registered with the Federal Claims Commission, but only about half are
properties in which there might be some form of investment. The E.U.-U.S.
understanding, however, has relevance far beyond those particular properties.
For one thing, it calls for the establishment of a registry of illegally
expropriated properties - a registry which potential investors in a
given country, say Cuba, would be invited to analyze before investing
their money. Obviously, the purpose is to discourage investment, and
the longer the list of properties on the registry, the more likely that
investors will indeed be dissuaded. One would of course assume that
there is some means of determining that a given property has been expropriated
in contravention of international law before it is placed on the registry.
But that is by no means the case. As Undersecretary of State Stuart
Eizenstat testified to Congress on June 3,1998: "A Registry of
Claims will be established to warn investors. It will be open to any
claimant who alleges that his property was expropriated in contravention
of international law. If basic information is provided by the claimant,
the claim will be included. There will be no screening out of claims."
screening, anyone could come up with a long list of supposedly illegally
confiscated properties - not fewer than five thousand, but perhaps as
many as one hundred thousand. The purpose of the U.S. negotiators in
structuring this phony registry is clear and understandable: to discourage
foreign investment in Cuba. That is U.S. policy. It is more difficult
to understand the motive of E.U. negotiators in going along with it.
After all, most European governments have bilateral-investment-guarantee
agreements with Cuba. While they might be willing to avoid investments
in U.S. properties that were in fact illegally confiscated, it is not
their policy to discourage investments generally, and certainly not
on the basis of a registry of unproved claims! Why then did the European
negotiators go along with so obvious a sham?
they thought that by giving the Americans something in form which they
could not in fact agree to in substance, they might finesse the issue
and come out with an agreement. Not likely. Senator Helms quickly made
it clear that unless the E.U.-U.S. Understanding recognizes all American
properties as having been illegally expropriated and extends protection
to the Cuban-American properties as well, he will not support it. More
on those issues below.
of Cuban-American Claims
long been a well-established principle of international law that a government
cannot espouse or put forward the claims of those who were not its citizens
at the time they sustained property or financial losses in a third country.
Until Helms-Burton, the United States had usually honored that principle.*
Helms-Burton violates it - one of at least eight ways in which it infringes
on international law - by adding the Cuban-American claims to the previously
registered claims of those who were U. S. citizens or entities when
they lost their property in Cuba.
Union has not agreed that it is proper to add the Cuban-American claims.
In fact, various European observers have acknowledged that if the matter
were ever brought to court, the Cuban-American claims would be thrown
out. But what the European Union has done is to allow Cuban-American
claims to be included in the registry of properties. Since proof of
nationality must be presented at registration, one would have assumed
that they would be screened out. But there is no screening. And so,
even though it is not a violation of international law for a government
to seize the properties of its own citizens, whether or not compensation
is paid, and thus in most cases the Cuban-American properties were by
definition not taken in contravention of international law, they can
all be included in the registry anyway. Some argue that this inclusion
in itself represents an infringement of international law, and that
by agreeing to it, the European Union has placed itself in the position
of being an accessory to an illegal act. Whatever the merits of that
argument, European agreement to inclusion of Cuban-American properties
in the registry of illegally expropriated properties does give some
degree of credence to the charge that the European Union was indeed
conniving in a U.S. violation of international law.
of Illegally Expropriated Properties?
provides for special measures to protect property in the cases of countries
that have "an established record of repeated expropriations in
contravention of international law." The United States considers
Cuba to be such a case. And in her letter to Senator Helms dated August
3,1998, Secretary of State Albright suggests that the Europeans agree
with us. "For the first time...," she says, "the E.U.
has officially recognized the illegality of [Castro's) expropriation
of U.S. property." Well, not quite, to any of the above. First
of all, where is the pattern of illegal expropriations in the Cuban
case? One may deplore Cuba's expropriation of its own citizens' properties,
but, as explained above, that was not done in contravention of international
law. As for the property of foreign nationals other than U.S. citizens,
Cuba worked out compensation agreements with all other nations having
claims against it. Thus, its nationalization of those properties was
not illegal either and the European governments do not argue that it
the case of the United States is there some question. However, from
the beginning, Cuba recognized its obligation to compensate U.S. owners.
took the properties in 1959 and 1960, it put forward a compensation
scheme - which was rejected by the United States as insufficient. But
beginning in 1977, when direct communications between the two governments
were resumed, Cuba has periodically reiterated its willingness to sit
down with the U.S. government to negotiate a compensation agreement.
The United States, however, has never responded positively (probably
because it feared that would be interpreted as a move toward normalization).
Even so, the fact that Cuba was prepared to compensate U.S. owners -
and that the United States never explored the possibility of negotiations
- undercuts the argument that even the U.S. properties were taken illegally.
Compensation must still be paid, but this is not a case of robbery.
a representative of the Cuban Interests Section in Washington confirmed
at the October 7 conference that from 1977 until passage of the Helms-Burton
Act in 1996, the Cuban government had indeed been prepared to sit down
at the negotiating table with the United States to work out a compensation
agreement - as it had already done with the other governments that had
claims. It had made that offer on a number of occasions. The representative
noted, however, that Helms-Burton raised questions about the continued
feasibility of such negotiations. The author agreed, pointing out that
Helms-Burton, and most specifcally the conditions imposed by Title II,
would appear to rule out such negotiations for the time being. "Thus,"
he noted, "far from advancing an agreement on compensation, Helms-Burton
now stands as a barrier to such an agreement.
contention that the Europeans "have recognized the illegality of
[Castro's) expropriation of U.S. property" is of course an exaggeration.
What the European negotiators did was to examine several of the 5,911
claims certifed by the Federal Claims Settlement Commission. And then
in a side letter (Annex D to the Understanding) they concluded that
there were a number of cases "where having regard to the discriminatory
provisions of Cuban Law 851, it appears that the expropriations were
contrary to international law.
only wonder what modalities the E.U. representatives were applying.
To say that the expropriations were "discriminatory" is ironic
in the extreme. Virtually all property on the island was nationalized.
How then discriminatory? If of course one examines only Law 851, which
deals exclusively with U.S. property, one might - erroneously - draw
that conclusion. But when one looks at the whole picture, one sees things
quite differently. There were massive expropriations, yes, but except
in a few exceptional cases, they were carried out within the bounds
of international law. The case of the U.S. properties remains in a gray
area. It might, however, have been resolved years ago had the United
States wished to resolve it. As a diplomat in Washington put it recently,
"If the U.S. wanted compensation, it should have done what everyone
else did: negotiate for it.
and despite the questionable modalities and the conclusions they produced
in the side letter, the Europeans did not, as Albright would suggest,
recognize the illegality of all U.S. expropriations. They simply said
that some appear to have been illegally taken and that it is reasonable
to assume that others were as well. Even that stretches the truth, but
it does not go nearly far enough for Senator Helms. As indicated above,
he has made it clear that they must recognize the illegality of all
U.S. expropriations or he will not accept the understanding.
Title IV Waiver
of the Europeans had been that the understanding would remove the threat
of Helms-Burton sanctions against their companies and citizens. Thus,
they called on the Clinton administration to try to obtain permanent
waiver authority for Title III (rather than the authority to waive for
only six months at a time that the president enjoys now), and similar
waiver authority for Title IV. The first was only a wish and one it
is now clear will not be granted. Congress will not expand Title III
however, was a hard and fast condition. The understanding was not to
become operative until the president had the Title IV waiver in hand.
But it is now clear that Congress is unlikely to grant that authority.
On the contrary, in an amendment inserted in the October 21,1998 spending
bill, Congress insisted that Title IV be implemented and put forward
the requirement that the administration how this is being done. Only
if the Europeans were willing to accept the U.S. position to a far greater
extent than they have done so far might Congress give consideration
to a Title IV waiver authority. But even if the Europeans threw dignity
and integrity entirely aside and accepted the positions demanded by
Senator Helms, the most that might win them would be a "reviewable"
Title IV waiver authority, one which would be periodically reviewed
and would remain in effect only so long as Congress deemed the individual
European states to be in full compliance with the terms of the understanding.
How precisely the understanding is to be interpreted would be a matter
solely for Congress to determine in deciding whether to extend or rescind
a previously granted waiver. As Robert Muse, a lawyer who participated
in the October 7 conference, put it: "This would leave the European
governments on their knees awaiting the decision of the U.S. Congress
as to whether or not to continue to grant them dispensation." It
is unthinkable that this would be acceptable to the European governments.
also the matter of the U.S. commitment to resist further extraterntorial
legislation as part of the understanding. That was blown apart by the
so-called Mack amendment that was also attached to the October 21 U.S.
spending bill (the four-thousand-page document of which Senator Robert
Byrd said, "Only God knows what's in this monstrosity.").
In blatant violation of the 1931 Inter-American Trademarks Convention,
this amendment prohibits U.S. courts from recognizing the rights of
a "designated national" regarding a registered trademark (a
"designated national" being a company with substantial Cuban
shareholding). Even further, courts are told they cannot "recognize,
enforce or otherwise validate any assertion of treaty rights by a designated
Mack amendment? Because a French company, Pernod-Ricard, which is involved
in a joint venture with Cuba Rum, had the rights to the Havana Club
trademark in the United States. The Bacardi company, however, had begun
using that trademark and Pernod-Ricard had sued. The case was to have
been heard in January and Pernod-Ricard almost certainly would have
won. And thus the Mack amendment to simply strip away Pernod-Ricard's
rights in a U.S. court.
to say, a number of other foreign companies will have their trademark
rights stripped away as well. So much for any U.S. commitment to resist
further extraterritorial legislation!
Understanding's Underlying Objective
although Senator Jesse Helms has rejected the understanding as now formulated
because it does not go far enough to meet his demands, in at least one
important context, the administration, the E.U. negotiators, Helms and
other ultra-conservatives in the U.S. Congress had common purpose: the
advancement of the concepts behind the Multilateral Agreement on Investments
(M.A.I.). Indeed, Dan Fisk, former assistant to Senator Helms, reveals
that the negotiations leading to the E.U.-U.S. Understanding grew out
of an idea put forward by Helms and Senator Paul Coverdell (R-GA) to
resolve the European Union's protest against Helms-Burton in the World
Trade Organization (W T.O.) by using the M.A.I. "as a forum for
the globalization of the Libertad Act's property protections."1
accepted by the Administration and apparently by Sir Leon Brittan as
well. Thus, in April of 1997, the two sides reached an interim agreement
under which the European Union would postpone its call for the W.T.O.
to act on its protest, and the United States promised not to impose
sanctions against any European companies or citizens for a period of
six months. During that time they were to try to negotiate a comprehensive
agreement on confiscated properties which they would then take to the
October talks on an M.A.I. It took a year rather than six months to
hammer out the E.U.-U.S. Understanding. True to the interim agreement,
however, it states that as well as applying the disciplines agreed upon
to protect property as a matter of policy, the two sides will also make
a joint proposal in the M.A.I., "which, upon entry into force,
will be an agreement binding under international law."
this is part of the broad and ongoing effort to turn the holding of
private property into a basic right guaranteed under international law.
As Scott Armstrong, an independent American journalist put it at the
October 7 conference, "The disciplines in the Understanding anticipate
a mechanism of registration and enforcement that puts property rights
as preeminent among the human rights recognized by the E.U. and the
U.S." Meanwhile, however, the fact is that the M.A.I. has become
virtually a dead letter. Various governments - including the French
and Canadian - have already said they will not accept it and many others
have expressed grave reservations. And no wonder. It would remove from
national governments final decisions regarding the disposition of property
in the public good. As Xavier de Clerq, of Oxfam Belgium, pointed out
at the C.I.P conference on October 7, an M.A.I. would militate against
agrarian or urban reforms, would help perpetuate the inequality between
the developed world and the underdeveloped, and could deal a serious
blow to efforts to protect the environment.
M.A.I. likely "to enter into force" any time soon, the E.U.-U.S.
Understanding should be seen not as a preparatory step, but as an effort
to advance the goals of an M.A.I. through other means - goals against
which a number of governments have already taken a strong position.
As Gareth Jenkins of Cuba Business put it at hearings on extra-territorial
sanctions held in the European Parliament this past June: "Helms
was himself the progenitor of the Understanding and aims to negotiate
a rewriting of international law under which the principles developed
in the Helms-Burton Act for application to Cuba are made universal."2
We Stand Now?
understanding of May 18, 1998 is in fact never likely to become operative.
There are too many mutually-exclusive positions which cannot be bridged
with smoke and mirrors. The effort to do so, however, may have in itself
been harmful. As has been pointed out over and over again, the Helms-Burton
Act violates international law on at least eight counts. No one wants
a conflict between the United States and the European Union. On the
other hand, the international system to which they both belong and in
which they both cooperate is one based on rule of law and respect for
the rules of conduct agreed to by all. If one member, in this case the
United States, is allowed to hold itself above the law, then the whole
system is weakened - indeed, would eventually be rendered meaningless.
What the European Union should be doing is to demand that the Helms-Burton
act be repealed. To attempt to live with it and even to connive in some
of its more blatantly illegal provisions is simply to encourage those
elements in the U.S. Congress and elsewhere in the U.S. body politic
who believe that as the only remaining superpower, the United States
should ignore international law and do as it deems fit. These same elements
scoffed all along at the idea that the international community, and
especially the European Union, would react strongly to Helms-Burton
and other extraterritorial legislation. They predicted that Europe's
reaction would be "toothless." So far, they have been right.
* In Nicaragua
during the 1980s a similarly politicized situation led Senator Helms
to offer legislation that treated Nicaraguans who had had their properties
expropriated in 1979 and later gained U.S. citizenship as if they had
been American citizens at the time of the expropriations.
1 Dan Fisk,
"The E.U.-U.S. Agreement and Protection of American Property Rights
in Cuba," Institute for U.S.-Cuba Relations, Occasional Paper Series,
Vol.2, No. 2, July 23,1998, pp. 5-6.
by Gareth Jenkins, "The Effects of Extra-Territorial Laws: Their
Impact on External Investment in the Case of Cuba," at hearings
of the Committee on External Relations of the European Parliament, 24