In 1996, the U.S. Congress passed the Cuban Liberty and Democratic Solidarity Act of 1996, known as the Helms-Burton Act. Title III of the Act allows U.S. companies and U.S. citizens whose property was confiscated by the Cuban government in 1959 or later to sue parties profiting from their confiscated property. By its own terms, Title III did not go into effect immediately. Rather, Congress left the discretion to activate Title III to the president. In May 2019, the president activated Title III for the first time since the Act’s enactment, and several lawsuits were filed against parties trafficking in confiscated property.
On July 30, 2024, the U.S. Court of Appeals for the D.C. Circuit decided one such case brought by Exxon Mobil against several Cuban state corporations. Exxon is now seeking review of the decision by the U.S. Supreme Court.
In 1960, Cuba’s revolutionary government confiscated Cuban assets of a subsidiary of Exxon (then known as Standard Oil). When a few years later the U.S. Congress established a mechanism to submit expropriation claims against Cuba, Exxon filed a claim with the U.S. Foreign Claims Settlement Commission, which determined Exxon suffered a loss of $72 million plus interest at 6 percent. Exxon’s lawsuit contended that the defendants currently traffic in confiscated property by participating in the oil industry and operating service stations using the property.
One of the defendants unsuccessfully moved to dismiss the complaint based on foreign sovereign immunity. The Foreign Sovereign Immunities Act (“FSIA”) generally bars U.S. courts from exercising jurisdiction over foreign sovereign entities such as the defendants in this case. As the appellate opinion described it, “The district court held that the [Helms-Burton Act] does not itself overcome a foreign sovereign’s general immunity from suit under the FSIA, and that jurisdiction in [the] case thus depend[ed] on the applicability of an FSIA exception.” The district court determined the FSIA’s commercial-activity exception applied to the action, and thus foreign sovereign immunity did not apply.
After the defendants appealed the denial of the motion to dismiss and Exxon cross-appealed the district court’s holdings, a panel of the D.C. Circuit Court of Appeals determined 2 to 1 that “plaintiffs bringing Title III actions against foreign states must satisfy one of the FSIA’s exceptions,” and that the FSIA’s expropriation exception did not apply in the circumstances but that the district court needed to further analyze whether the FSIA’s commercial-activity exception did. The senior judge dissented on all points from his two younger colleagues.
The Court of Appeals wrote that given the FSIA’s terms, the Supreme Court has “repeatedly explained” the FSIA provides the “sole basis” for obtaining jurisdiction over a foreign state in the courts of the United States. It therefore rejected Exxon’s argument that Title III of Helms-Burton independently confers jurisdiction over its action against Cuba, in agreement with the district court.
Exxon also argued its lawsuit satisfied two FSIA exceptions: the expropriation exception and the commercial-activity exception. The Court agreed with the district court the expropriation exception was inapplicable. With respect to the commercial-activity exception, the Court concluded the district court needed to undertake additional analysis before determining jurisdiction exists under the exception.
The district court had concluded that defendant CIMEX “causes a direct effect in the United States,” as required for the commercial-activity exception, “in two ways: first, by operating a remittances business that enables transfers of money from the United States to recipients in Cuba; and second, by selling goods imported from the United States at its convenience stores.”
The Court of Appeals agreed with Exxon and the district court that “the types of effects Exxon allege[d]—outflows of money from the United States and purchases of U.S. goods—can constitute direct effects in the United States.” Nevertheless, the Court vacated and remanded for the district court to further assess whether the defendant “causes” those effects and whether the effects are sufficiently “direct,” finding there were questions necessary to that determination that had not been examined by the district court. For example, regarding the remittances business, it stated, “[T]he the pertinent inquiry is whether CIMEX’s remittances operations at the four to ten stations located on former [Exxon subsidiary] property cause a direct effect in the United States—not whether CIMEX’s entire remittances business does so.”
The dissent stated, “It is true the Supreme Court and [the D.C. Circuit court] have repeatedly referred to the exclusive nature of the FSIA. But in each case [cited by the majority], Title III [of the Helms-Burton Act] did not apply for at least one of three reasons.” Either Helms-Burton did not exist at the time, it was not in effect because the president had suspended its cause of action, or “the plaintiffs’ claims did not arise out of or relate to Cuba’s confiscations.” Not one of the cases cited by the majority mentioned Title III of Helms-Burton. The dissent argued that those decisions thus could not control the issue in this case and that Title III “considered alone, deprives the Cuban defendants of immunity from suit.”
As to the expropriation exception, the majority concluded it did not apply “because, under international law, the property Cuba confiscated was owned not by Exxon but by its subsidiary.” But in Helms-Burton actions, the dissent argued, “‘the court shall accept’ claims certified by the Foreign Claims Settlement Commission ‘as conclusive proof’ of violated property rights.”
This case is at the intersection of Helms-Burton and sovereign immunity, which always presents many problems. Both of the amicus briefs filed in support of Exxon’s petition for a writ of certiorari so far have highlighted the potential for the D.C. Circuit’s decision to make it more difficult for businesses to access the remedy of Title III of the Helms-Burton Act. In the present case as well as future ones that are sure to come up in this area, such complications should be handled with great simplicity.
