CUBA Trends and Developments Contributed by: Martin Domb, Pedro A Freyre, Augusto E Maxwell and Christopher Carver, Akerman LLP
of Helms-Burton waives sovereign immunity, as the Supreme Court has held with respect to essentially identical text in statutes that were found to waive sovereign immunity of the US government or one of its states. The Act’s text on which the dissenting judge relied states that “any person”, defined to include “any agency or instrumentality of a foreign state”, that traffics in confiscated property “shall be liable” to US nationals with claims to that property. Exxon will seek review of this ruling by the US Supreme Court. It obtained an extension of the time to file its petition for such review until 27 December 2024. On the second issue, the court first rejected CIMEX’s threshold argument that, because the suit arose from Cuba’s expropriation of Exxon’s properties, the court must consider only the FSIA’s expropriation exception, but not the com- mercial activity exception. The court explained that the various exceptions to immunity in the FSIA “are framed as alternatives, separated by the word ‘or’” and noted that it had “rejected the idea that an activity must fall under ‘either the expropriation exception or the commercial- activity exception, but not both.’” Therefore, it found, Exxon can properly rely on the com- mercial activity exception even though the case involves an expropriation. As to whether the expropriation exception applied, the court upheld the trial court’s rul- ing against Exxon, but under different reason- ing. The appeals court explained the exception has two requirements: (i) the claim must involve “rights in property taken in violation of interna- tional law” and (ii) there must be an adequate connection between the defendant and both the expropriated property and some commer- cial activity in the USA. The court held that Exx-
on cannot meet the first requirement, because Exxon did not own the properties directly but rather through a Cuban entity (Essosa), of which Exxon was a shareholder and parent company. Relying heavily on decisions of the International Court of Justice on this point, the court held that “international law generally does not rec- ognize a shareholder’s right in property owned by the corporation”. Although the court recog- nised that there is an exception to that principle – if the expropriation completely destroys the corporation’s productive value, thereby “leav- ing the shareholder with shares that have been rendered useless” – the court credited the trial court’s factual findings that Essosa continued its operations, including operating fuel stations, for decades following the expropriation of Exxon’s shares, which meant that the exception could not apply. The appeals court then turned to the third issue – ie, whether the commercial activity exception applied. That exception abrogates sovereign immunity where: “...the action is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commer- cial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activ- ity of the foreign state elsewhere and that act causes a direct effect in the United States”. At issue was only the third clause, which, as the court pointed out, itself has three requirements: (i) there must be an act outside the USA (ii) in connection with commercial activity by the for- eign state elsewhere, and (iii) the act must cause a direct effect in the USA.
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