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The Cuban government will fight Exxon over an expropriation case in a US courtroom

Exxon (Mike Mozart/Flickr)

In an unusual move, the Cuban government will defend itself in a U.S. federal court to fight a lawsuit filed by Exxon Mobil seeking compensation for a refinery confiscated by the Fidel Castro government in 1960.

“It’s a new departure. Based on historical records, most people assumed they would not defend themselves in a U.S. court,” said lawyer Robert Muse, an expert on U.S. laws regarding Cuba. “This is genuinely interesting.”

On Friday lawyers Michael Krinsky and Lindsey Frank, from the New York firm Rabinowitz, Boudin, Standard, Krinsky & Lieberman, notified the District of Columbia federal court that they would be representing CIMEX S.A. and Cuba Petroleum Union, known as CUPET, two Cuban state companies that are being sued by Exxon Mobil Corporation.

Exxon, formerly known as Standard Oil, argues in the lawsuit filed in May that the Cuban companies have been profiting from a refinery in the port of Havana, facilities and gas stations that belonged to sub-subsidiaries of the U.S. company, with an original value of almost $72 million.

The refinery, currently known as Ñico López, was nationalized in 1960 and Exxon claims that it received no compensation from the Cuban government. The Department of Justice has already certified Exxon’s property claim.

Exxon’s legal case is based on the Helms-Burton Act. Signed in 1996, it allows Americans and Cubans whose commercial properties were seized by the Communist government to seek recourse in federal courts. But the right to sue was only recently authorized by President Donald Trump this May.

Exxon’s lawsuit is the latest of at least nine against Cuban, American and European companies accused of profiting from property seized by the Cuban government. Among the defendants in other cases are the Miami-based Carnival cruise company; the French bank Société Générale; Trivago, a German subsidiary of Expedia; and Cuban hotel companies such as Gaviota SA, Cubanacán and Hotel Group Gran Caribe.

Until now, the Cuban government had not hinted that it would respond to these demands.

“The Cuban government has had the general policy of not appearing in the United States courts because it is a sovereign state, but government companies have sometimes appeared,” said Pedro Freyre, a lawyer at the Miami-based firm Ackerman LLP. Freyre is representing Carnival in a lawsuit filed by the American company Havana Docks for the use of the port of Havana.

After Castro came to power, state companies such as the National Bank of Cuba litigated some cases in U.S. courts in the early ‘60s. But the government never defended itself in criminal cases such as the wrongful-death lawsuit filed by the relatives of the pilots of the Cuban exile organization Brothers to the Rescue, who died when Cuban military planes shot them down in 1996.

Family members won the case and obtained a default sentence of about $100 million.

“My law firm has represented Cuban enterprises and entities in the courts of the United States since 1960, including multiple appellate cases and four cases in the United States Supreme Court,” Krinsky said in an email. Most recently, in 2014, Cuban companies “successfully defeated an effort to seize Cuban-owned trademarks and patents that are registered in the U.S.”

Krinsky said his clients would “vigorously defend” against the Exxon lawsuit.

Exxon’s lawyers did not immediately answer questions sent by the Miami Herald.

But the pressure of foreign investors and the real danger of several multimillion-dollar judgments against the Cuban government or its entities seem to have changed the minds of Cuban leaders at the last minute. They had not responded to the Exxon lawsuit since it was filed in May.

“If the Cuban government does not defend itself, it would be sending the message to thousands of potential claimants that they can file a lawsuit and obtain a ruling and that the government would not defend itself,” said Muse.

Responding to Exxon’s lawsuit also sends the message to foreign investors that Cuba will fight against the Helms-Burton Act to protect their interests, as stated in the Cuban foreign investment law, he said.

“Not in Cuba’s interest to have a global entity like Exxon Mobil Corporation having a United States federal court default judgment it can use [to go after funds] from every country in the world,” said John Kavulich, longtime Cuba observer and president of the U.S.-Cuba Trade and Economic Council. “Defending and losing is far better than not defending and losing. Of course, they might prevail.”

The Cuban government could also be protecting the lucrative business of remittances to Cuba, which could be affected if Exxon wins the case. CIMEX, which is part of the GAESA military conglomerate and is currently under U.S. sanctions, manages remittance payments within Cuba through an agreement with Western Union. Exxon could go after the fees that Western Union pays to CIMEX to collect on a default sentence.

Muse said the change in course also indicates that the government believes it can win the case.

“Any good lawyer would tell you that the Cuban government has a good chance of winning this,” he said. Although the Helms-Burton law grants the federal courts jurisdiction over such cases, Muse believes that a legal argument could be made based on the due process clause in the U.S. Constitution.

“The clause states that it would be unfair to drag a company to a court unless you can prove that it has real contact with the United States,” he said.

If it wins the case, Muse said, the Cuban government would have achieved “a strong precedent that could persuade other claimants not to file more lawsuits.”


© 2019 Miami Herald