Since President Trump’s May announcement that the United States will pull out of the 2015 nuclear deal between Iran and world powers, Europe has been stuck in the middle of the diplomatic dispute between Washington and Tehran, with European firms facing U.S. sanctions if they maintain business links with Iran.
Now, a Trump administration policy shift over a 1996 U.S. law on Cuba threatens to put European business interests at the heart of another geopolitical dispute.
A section of the Cuban Liberty and Democratic Solidarity (Libertad) Act allows Cuban Americans and other U.S. citizens to sue entities that use property confiscated by the Cuban government after the 1959 Cuban revolution.
Every president since the law’s passage has suspended that section — Title III — in large part because it could have international repercussions. Continuing to suspend Title III helped “minimize diplomatic friction with Europe in particular,” said Peter Harrell, adjunct senior fellow at the Center for a New American Security.
What would it mean if U.S. law allowed American citizens to take European companies to court? We may be about to find out.
On Tuesday, the administration decided it would only partially suspend Title III. Effective March 19, U.S. citizens and companies that lay claim to Cuban property will be allowed to sue Cuban entities. The administration will continue to block lawsuits against foreign firms for now. But that decision, it said, will be reevaluated after 30 days.
The Trump administration’s handling of the matter suggests that there is a “pretty decent likelihood that they’re going to allow lawsuits against foreign firms,” or at least those foreign firms partnering with Cuban entities in Cuba, eventually, Harrell said.
An example, he said, could be a European hotel company partnering with a Cuban one, or “a European port operator that was involved in a cruise terminal in Cuba where the terminal was on expropriated property.”
These moves could have a big effect on business in Cuba. “If the Trump administration opened up lawsuits on foreign companies doing business with the Cuba restricted list, [it’s] hard to see the European companies kind of wanting to continue that business,” said Harrell, who was deputy assistant secretary of state for counter threat finance and sanctions in the Obama administration.
The Trump administration’s decision to break with precedent is “largely a function of who has access to the president,” said Michael Dobson, of counsel in Morrison & Foerster’s National Security practice group. That includes, in particular, national security adviser John Bolton.
“If it causes non-U.S. companies to second-guess their activities or add an additional risk premium to existing ventures or upcoming ventures — that seems part of a general pressure campaign aimed at what Ambassador Bolton called the ‘troika of tyranny,’ ” said Dobson, a reference to Cuba, Nicaragua and Venezuela.
But Europeans — many of whom joined the United States in recognizing opposition leader Juan Guaidó as interim president of Venezuela after he declared himself the rightful head of the crisis-hit country in late January — may not appreciate that, yet again, the United States has decided to tell other countries where they can do business.
Part of the reason that Title III was suspended was that “the threat of these lawsuits has historically been extremely unpopular in Europe,” Harrell said. “Much like the Trump administration is doing with secondary sanctions with Iran today — Europeans saw this as an affront to their sovereignty.”
“It’s a pretty on-the-rocks relationship between the U.S. and Europe,” Harrell said. If the Trump administration goes forward with this, Harrell added, “it’s going to be another irritant.”