Solution to Cuba claims issue proposed

Posted on Tuesday, 01.05.10

Solution to Cuba claims issue proposed
By JUAN O. TAMAYO
jtamayo@ElNuevoHerald.com

A group of foreign investors is seeking a U.S. government license to buy
claims against Cuba for American-owned properties seized in the 1960s,
and then swap them with Havana in a debt-for-equity exchange.

The settlement would resolve one of the oldest U.S.-Cuba disputes and
perhaps open the way for other improvements in bilateral relations,
according to the investors' company, Clarinbridge.

Clarinbridge requested the license in a July 17 filing with the Treasury
Department's Office of Foreign Assets Control, which enforces U.S.
sanctions against Havana.

OFAC has not yet replied, said Tim Ashby, a Miami lawyer who represents
Clarinbridge and other firms considering business opportunities in Cuba.

Clarinbridge investors also have presented the idea to Cuban officials
in Havana, Ashby told El Nuevo Herald. ``I understand the Cubans took it
seriously and took a wait-and-see attitude.''

Clarinbridge's request to OFAC, provided by Ashby, says the company
hopes to acquire ``600-700 of the U.S. claims . . . [that represent] 85
percent of the aggregate certified monetary value of all U.S. claims.''

The claims would then be transferred to a fund that would negotiate with
Havana to settle the claims in exchange for equity in Cuban properties,
bonds or other ways, Ashby said. U.S. law allows Cuba to make payments
to settle the claims.

``That's a good idea. If OFAC permits it, we would consider doing the
same thing,'' said Thomas Herzfeld, head of a Miami investment fund, the
Herzfeld Caribbean Basin Fund, created in anticipation of the day that
political changes would open Cuba to U.S. investments.

``It's a creative idea, but can you trust the Cuban government not to
confiscate these investments again?'' asked Jaime Suchlicki, director of
the University of Miami's Institute for Cuban and Cuban American Studies.

``You're dealing with an arbitrary government, in a country where
there's no legal system to protect investments.''

Clarinbridge is a wholly owned subsidiary of Siboney Limited, based in
the Isle of Man, a low-tax British dependency. Ashby identified some of
the main investors as Charles Guthrie, former chief of the British
defense staff; Canadian Peter Munk; Felipe and José Vicini of the
Dominican Republic; Israeli billionaire Beny Steinmetz, and Roberto
Servitje of Mexico's Grupo Altex.

The U.S. government officially recognizes some 5,900 claims for
American-owned properties seized by the Castro government in the 1960s.
They were initially valued at about $1.82 billion, but, with interest,
the claims now would be worth about $6 billion.

Cuba also alleges that U.S. sanctions caused the island $236 billion in
damages over the past half-century.

Cuba, which has settled the 1960s claims from all other countries,
recognizes it owes compensation for the U.S. properties and at times has
offered bonds to settle those cases, Ashby added.

None of the U.S. claims appear to have been settled, though a few have
changed hands.

In the late 1990s, ITT leased its claim for seized Cuban telephone
assets to Telecom Italia so the Italian firm could invest in Cuba and
avoid possible complications under the Helms-Burton law. ITT received
$25 million over 10 years, according to reports.

And in early 2008, Clarinbridge paid more than $1 million to the St.
Louis-based Siboney Corp. for its claim to oil exploration rights seized
by Cuba and valued at $2.4 million, Ashby said. Siboney Corp. is not
related to Clarinbridge's parent company.

But on July 31 2008, OFAC issued a regulation requiring licenses for all
such deals. Regulations are not law and can be changed by administrative
decision.

Ashby said Cuban officials have expressed interest in settling the U.S.
claims privately, without government-to-government negotiations, because
that would clear the way for other investments.

Some foreign firms have expressed concerns about possible disputes over
property rights in Cuba.

Clarinbridge's request to OFAC said its proposal could help clear the
way for improved U.S.-Cuba ties because U.S. laws require the American
claims be settled before full relations can be resumed.

The Clarinbridge proposal, it argued, would significantly reduce the
number of remaining U.S. claims that would need to be negotiated between
the two governments ``as a prerequisite for a new beginning with Cuba.''

It would also ``significantly support the emergence of a private
sector'' in Cuba, ``providing jobs to ordinary Cubans and facilitating
[the] de facto privatization of the economy,'' the document said.

Solution to Cuba claims issue proposed - Economy - MiamiHerald.com (5
January 2010)
http://www.miamiherald.com/business/economy/story/1409402.html