U.S. and Cuba come to table to talk mutual compensation

Almost a year after U.S. President Obama and Cuban counterpart Raul Castro announced a trajectory toward restoration of diplomatic relations, the two sides have begun talks on mutual compensation for losses incurred in the conflict’s many decades. The stakes are high; State Department spokesperson John Kirby regards “resolution of outstanding claims” as a top priority for normalization.

On Dec. 8, State Department Lawyer Mary McLeod and Cuban Deputy Foreign Minister Abelardo Moreno met in Havana to share information. At issue are two sets of losses: those suffered by U. S. companies and U. S. citizens when properties in Cuba were nationalized and, secondly, Cuban claims as to damages caused by the U.S. economic blockade. The U.S. government wants almost $9 billion, an amount far above the original estimate of $1.9 billion, thanks to inflation. Half the claim is on behalf of 10 corporations.

Cuba alleges $121 billion in damages from the U.S. blockade and $181 billion more in “human damages.” Taking inflation into account, the reckoning approaches $833.8 billion.

The initial discussion lasted only one day. Negotiations will resume within three or four months, according to an observer who predicts talks will continue for several years. The talks will no doubt expose lingering contradictions.

For example, Mauricio Tamargo, a former chairperson of the Justice Department’s Foreign Claims Settlement Commission, claimed that, “The Cubans have up till now never recognized these claims as legitimate,” and in the 1990s, the U.S. government was arguing that expropriation Cuba was “an illegal act and contrary to international law.” The latter quotation derives from a detailed review presented at the time by Alejandro Aguilar. His study is the source of much information appearing below.

A U. S. government communication with Cuba in 1959, however, expressed “recognition that, according to international law, a state has the authority to expropriate inside its jurisdiction for public purposes [providing there is] prompt, adequate, effective compensation.” The U.S. Supreme Court in 1964 refused to rule that expropriation violates international law. In that instance, the U. S. Congress quickly nullified the Court’s decision.

Cuba’s revolutionary government did nationalize large foreign land holdings in May 1959, many of them lying idle. It expropriated U.S.  owned businesses and other properties in July 1960. The enabling law in the first instance recognized a constitutional mandate to offer compensation; bonds were issued providing for payments over 20 years at 4.5 percent annual interest.  Compensation for properties nationalized a year later would be paid over the course of 30 years, along with two percent annual interest.  

Dispossessed former owners in France, Spain, Great Britain, Switzerland, and Canada accepted the terms, negotiated, and received compensation. Those in the United States refused the Cuban offer.

The question remains as to how a financially distressed Cuba might have paid. Yet the revolutionary government did have a plan. Its nationalization law in 1960 stipulated that compensation would be paid out of a special fund; 25 percent of income from sugar exports to the United States would go into the fund. 

The scheme immediately came to naught: on the day the law was promulgated the Eisenhower administration abolished Cuba’s advantageous sugar import quota. Sugar sales ended.  Aguilar claims that, if they had continued, $1.5 billion would have been available for compensation purposes.

The United States has contributed to Cuba’s monetary shortfall in other ways. Corrupt officials of the U.S.-supported Batista dictatorship fled and were welcomed in the United States. They were carrying $460 million in international monetary reserves belonging to the Cuban state.  They left behind a public debt of $1.3 billion.

The U.S. government froze Cuba’s public and private assets in the United States.  Recently, assets frozen in 1963 were valued at $148 million. In 2014 alone $270.3 million in Cuban funds were sequestered.  U.S.-associated foreign banks handling funds headed for Cuba had waylaid those monies.

U. S. claims against Cuba are pleasing to Cuban journalist Néstor García Iturbe in one respect; the only people who might expect compensation would be those who were U.S. citizens when their properties were nationalized. “Someone mentioned Cuban names like Perez, Fernández, Rodríguez, and others,” he observed. “It looks like they are not leaving on this bus. Good, if you’re not on the list, sorry for you.” (The last three words he expresses in English.)

Thus, Cubans who whose properties were nationalized by the revolutionary government and then moved to the United States and became U.S. citizens would have no case for claiming compensation.

The aforementioned Mr. Tamargo, whose family’s large farm in Cuba was nationalized, suggests resolution of the compensation dispute has much to do with ending the U.S. blockade. “This [first] meeting is an enormously big deal,” he observed, “[because] if American properties are compensated, then the embargo should be lifted.” He sees “a window of opportunity for Cubans that will be gone in about a year.” Additionally, Tamargo regards Obama as a better “negotiating partner” than presidents likely to succeed him. 

In effect, Tamargo predicts that failure to arrive soon at an arrangement for compensation may cause the blockade to be prolonged for additional years.

Photo: Presidents Obama and Castro meet at the Summit of the Americas.   |   wemu.org