How can the President make changes without Congressional approval?
U.S. sanctions on Cuba arise under several laws, including the Helms-Burton Act, the Trading with the Enemy Act, and other statutes. Some of these laws give the president greater discretion, while others require congressional action before certain restrictions can be lifted. President Obama will likely argue that any changes proposed fall within his discretion, while it is virtually certain that some members of Congress may challenge some or all of these measures as exceeding the limits of what can be changed under the Helms-Burton Act. One thing is clear: no dealings with Cuba should occur without first determining that such actions are allowed under the current restrictions, which to date largely remain in place. U.S. and multinational companies should consult with qualified attorneys to assess the state of the law and determine whether contemplated transactions are authorized.
How will the President make these changes?
Presidential action will proceed on three fronts:
When will these changes go into effect?
Based on statements from the White House and media reports, we currently expect new regulations and licenses to be published on an ongoing basis, beginning in January 2015. Because the administration’s proposals will involve updating Treasury and Commerce Department regulations, issuing new general licenses, and perhaps negotiating with congressional leaders, the timetable for implementation is unknown, but will likely occur on a rolling basis with the least controversial measures, such as expanded access to Internet and communications equipment, occurring first.
What industries will be affected?
We anticipate changes in five key sectors: banking and financial services, travel and tourism, agriculture, construction services, and telecommunications.
We stress that these planned changes to licensing have not yet taken effect. No reliance should be made on the anticipated issuance of these likely easings until they are formally issued. The current regulations remain in full effect at this time.
What are the implications for companies outside the United States?
According to White House sources, foreign affiliates of U.S.-based multinational corporations will be allowed to engage in approved transactions with Cuba and certain Cuban nationals. The Obama administration also is considering measures that would ease similar restrictions on Latin American and European corporations with U.S.-based affiliates. It is not clear how far these measures will go; however, as repealing certain extraterritorial sanctions imposed under the 1996 Helms-Burton Act would require congressional approval.
What are the long-term investment opportunities in Cuba?
Although the Obama administration’s announcement raised new hopes for trade and investment in Cuba, the initial changes are likely to be limited to the sectors identified above. Long-term opportunities will depend on congressional support, the state of U.S.-Cuban negotiations, and a host of other factors. Even so, the shift in U.S. policy may make it easier for U.S. companies to obtain “special licenses” for Cuba-related transactions that are not covered under the new regulations.
Will my family or company be able to reclaim lost property in Cuba?
The Obama administration’s proposals address future transactions, rather than past claims. The U.S. Foreign Claims Settlement Commission has not opened any new inquiries into past expropriations by the Castro regime. Addressing the $1.9 billion in unsettled claims by U.S. nationals against the Cuban government will depend on the ongoing negotiations between Washington, D.C. and Havana.
What can my company do to prepare for these changes?
With the new regulations expected in January, companies should consult with qualified attorneys and determine whether the proposed changes would benefit their business. Companies also should identify any restrictions that remain after the new rules are in place and evaluate the associated risks. Even the negotiation of future transactions that are conditional upon the lifting of the embargo can violate the CACR (unless in areas that open up under current or future general licenses). Finally, companies subject to U.S. jurisdiction should work with qualified lawyers to implement compliance policies, internal controls and procedures, training programs, and other measures to ensure compliance with all applicable sanctions regulations, export control, and other laws.
Can my company start doing business with Cuba now?
Although we anticipate changes in the next few weeks, companies should not enter into new transactions, contracts, or agreements involving Cuba unless they are already authorized under U.S. law. Companies also should avoid entering into any contingent agreements with Cuba or Cuban persons in anticipation of changes in the law. The Cuba sanctions explicitly prohibit such activities. Entering into agreements before they are authorized would expose companies to civil and criminal penalties.
How do I start doing business in Cuba?
Conducting business with Cuba and other sanctioned countries (such as Iran, North Korea, Sudan, and Syria) requires a thorough understanding of complex laws and regulations and an awareness of how OFAC and other regulators enforce them. Implementing policies and procedures to ensure compliance is also essential, particularly given the fluid state of these laws. Consulting with a qualified attorney to help your organization assess its risk exposure and to determine the best form of regulatory risk management is the best way to determine how to cope with these constantly changing regulations.
This Legal News is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this alert or would like to discuss the topic further, please contact your Foley attorney or the following:
Francisco J. Cerezo
Chair, Latin America Practice
Chair, Export Controls & National Security Practice
Christopher M. Swift
Export Controls & National Security Practice