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Cuba: Civil Procedure May Thwart Political Will

International Law Quarterly

Fall 2016

While journalists and pundits tend to fixate on the Castro dynasty’s and the Obama administration’s diplomatic overtures, there is another critical but often ignored component in this political narrative: private judgments against Cuba. Despite the recent change in political climate, the existence of these judgments poses a significant hurdle to the full normalization of relations with Cuba, further complicating any rapprochement efforts.

The King Can Do No Wrong

Historically and up to present day, a sovereign usually cannot be sued. This concept is reduced to the Latin phrase rex non potest peccare, which means “the king can do no wrong.” The doctrine of sovereign immunity recognizes this principle by holding that a foreign sovereign cannot be sued, without its consent, in another sovereign’s courts. It operates as a mutual understanding among nations that they will not be subject to each other’s judicial systems.

The 1976 Foreign Sovereign Immunities Act1 (FSIA) codified this principle and expressly immunized foreign states from suit in U.S. courts, unless certain enumerated exceptions apply.2 The FSIA’s exceptions are the only bases for obtaining subject-matter jurisdiction over a foreign state in a U.S. court. One of these exceptions is the terrorism exception.3

In 1996, Cuban fighter jets shot down two small civilian planes operated by Brothers to the Rescue, a Miami- based Cuban-exile group, during a humanitarian mission over the Straits of Florida. That same year, President Bill Clinton signed into law an amendment to the FSIA allowing civil suits by U.S. victims of terrorism against certain countries performing terrorist acts or supporting terrorism. The terrorism exception under Section 1605A of the FSIA “abrogates immunity for those foreign States officially designated as State sponsors of terrorism
by the Department of State where the foreign State commits a terrorist act or provides material support for the commission of a terrorist act and the act results in the death or personal injury of a United States citizen.”4 Being listed as a state sponsor of terrorism subjects a country to U.S. restrictions on foreign aid and defense sales, and adds a stigma that often impairs the country’s accessibility to international financial sources.

The terrorism exception requires that: (1) the foreign state be designated a state sponsor of terrorism at the time the act occurred, or later so designated as a consequence of the act in question; (2) either the claimant or the victim of the act of terrorism be a U.S. national; and (3) the defendant state be given a prior opportunity to arbitrate the claim if the act on which the claim is based occurred in the territory of the defendant state.

As originally conceived, the terrorism exception did not create a private right of action. The case of Aliza Flatow, a nineteen-year-old American exchange student killed in a 1995 Gaza bus bombing by Iranian-backed militants, changed that. In response to her murder, Congress passed the Flatow Amendment, which expressly creates a private right of action against a foreign state designated as a state sponsor of terrorism.5 The Flatow Amendment allows any party injured or killed by a terrorist act covered by the terrorism exception to sue an official, employee or agent of a foreign state designated as a state sponsor of terrorism who commits the terrorist act while acting within the scope of his or her office, employment or agency if a U.S. government official would be liable for similar actions.

Cuba as a Civil Defendant

Turning back to Cuba, on 1 March 1982, the United States designated Cuba a state sponsor of terrorism. Cuba’s placement on the list resulted largely from its training and arming of communist rebels in Latin America, which the United States viewed as supporting terrorist activities in that region.

During Cuba’s 33 years on the terror list, U.S. courts awarded an estimated US$4 billion in civil judgments against Cuba to U.S. citizens. Cuba chose not to appear in these suits or to defend itself in U.S. courts, so these judgments resulted from defaults. The plaintiffs include the families of the downed Brothers to the Rescue pilots. They also include Gustavo Villoldo, who claimed he was the victim of torture and that his father was forced to commit suicide by the Castro regime. Villoldo’s claims of approximately US$3.2 billion including interest represent the lion’s share of the private judgments against Cuba. These claims are separate and distinct from the approximately US$8 billion certified claims against Cuba by those whose lands, homes and businesses the Cuban government nationalized following Castro’s revolution.

On 29 May 2015, as part of the Obama administration’s efforts to normalize relations with Cuba, the United States removed Cuba from its list of state sponsors of terrorism. By removing Cuba from this list, the United States has once again cloaked Cuba with immunity from future suits. Despite Cuba’s removal from the list, however, plaintiffs holding existing judgments against Cuba can continue to pursue attachments to satisfy their judgments. This means that any Cuban assets that touch U.S. soil can be seized to satisfy these judgments.

For example, because Cuban airlines are state-owned, any Cuban airplane that lands in the United States can be seized to satisfy private money judgments. This is precisely what occurred in 2003 when a Cuban airplane was hijacked and flown to Key West. Despite Cuba’s protestations, the plane was sold at auction to satisfy a private litigant’s claims. Therefore, as long as these private judgments remain unpaid, regular commerce between the two nations cannot take place because no Cuban plane can land on U.S. soil, no Cuban vessel can dock at a U.S. port and no Cuban good can enter U.S. commerce without risking confiscation.

Collecting From Cuba

While the certified claims against Cuba can be negotiated directly between the U.S. and Cuban governments, the U.S. government cannot negotiate or settle the private civil judgments against Cuba. These judgments were obtained by and belong to private citizens―these are their claims. Any attempt by the U.S. government to settle these claims would present major constitutional challenges. Thus, the question remains how to resolve these claims.

So far, the judgments represent only symbolic victories.
To date, very few plaintiffs have received any money at all. Cuba will never recognize the judgments, and it is difficult to track down and seize assets that Cuba has stashed around the world. Again and again, despite judgments in their favor, plaintiffs have been frustrated by the difficulty in finding the funds to pay for them. Congress, however, may have found an unintended solution to this problem.

On 18 December 2015, President Obama signed into law a massive tax and spending bill that avoided a year-end showdown with Congress over the budget.Buried deep within this robust piece of legislation are provisions intended mainly to provide compensation for victims of terrorist attacks like the bombings of American embassies in East Africa in 1998 and the bombing of the American Embassy and Marine Corps barracks in Lebanon in the early 1980’s. The provisions also are intended to compensate the Americans taken hostage at the United States Embassy in Tehran in 1979. The legislation is not limited to compensating only such victims, but also provides a mechanism to compensate victims who have won judgments against state sponsors of terrorism.

The law creates a new United States Victims of State Sponsors of Terrorism Fund (the Fund) of US $1 billion, which will be funded by penalties BNP Paribas paid for violating sanctions against Iran, Sudan and Cuba. The legislation also appropriates US $1.025 billion in U.S. taxpayer funds in the Treasury. The Fund will pay up to US $20 million to victims of international terrorism (and up to US $35 million to them and their family members) who have received final court judgments against Iran, Cuba and other state sponsors of terrorism. The Congressional Budget Office projects an additional US $1.5 billion will go into the Fund over the next decade from criminal and civil fines from pending cases regarding Iran sanctions violations.

The law is not without its critics. Politicians from both sides of the aisle have widely criticized the use of American taxpayer dollars to satisfy other countries’ (particularly countries associated with terrorism)civil judgments. Other critics have observed that the payments to civilians far exceed the amounts the United States pays members of the armed services (and their families) who have been killed, wounded or held as prisoners of war in armed conflict. Also, even though the law caps compensation of attorneys’ fees at 25%, which is less than the typical contingency fee, it still has been criticized by some as a windfall for plaintiffs’ attorneys.

Yet, in the case of Cuba, the law likely will be viewed as extremely helpful by proponents of normalization efforts who argue that engaging with Cuba will make it easier to lobby for human rights on the island.

The law requires the U.S. attorney general to appoint a special master to receive claims and make payments to holders of eligible claims, which include claims for “compensatory damages awarded to a U.S. person in a final judgment . . . issued by a United States district court under State or Federal law against a State sponsor of terrorism” under the state sponsor exception to the FSIA.

In March 2016, the attorney general appointed Kenneth Feinberg as the special master to administer this Fund. Feinberg is perhaps best known for having administered the 9/11 Victim Compensation Fund and having handled thousands of claims related to the BP oil spill in the Gulf of Mexico. As special master of the Fund, Feinberg will exercise un-reviewable authority to issue awards to terrorism victims. He will make pro-rata payments within 90 days of publication of procedures that have yet to be issued.

It is unclear how many individuals hold unsatisfied court judgments against state sponsors of terrorism, or how large these judgments may be. Since Congress added the terrorism exception to the FSIA in 1996, litigants have filed and won dozens of lawsuits by default against state sponsors of terrorism. U.S. litigants have amassed more than US$10 billion in judgments against Iran alone.

Clearly, the Fund is not going to be able to satisfy every litigant’s judgment in full. Still, the Fund is presently the only immediate option for resolving claims that represent an important roadblock in U.S.-Cuba normalization efforts. In a climate of rapprochement, judgment creditors who may never reasonably have expected to collect a single dollar of their judgment may be willing to accept a sizeable, multimillion-dollar payout in full satisfaction of their claims. This method of recovery may be the only way to reconcile current political objectives with judicial rulings.


José M. Ferrer of Bilzin Sumberg Baena Price & Axelrod LLP is a partner in the firm’s Litigation Group and co-chair of the International Group. He is a commercial litigation and trial attorney with extensive experience in international disputes. He heads the firm’s litigation team in matters abroad. His practice has a strong Latin American focus, and he has extensive experience representing multinational clients in cross-border and international disputes before U.S. courts and international arbitration tribunals.

Yasmin Fernandez-Acuña is an associate in Bilzin Sumberg’s Litigation Group, where she focuses her practice on complex commercial litigation and international disputes. Her practice has a strong Latin American focus, and she has experience representing multinational clients in cross-border and international disputes.

About Bilzin Sumberg 
Bilzin Sumberg is a commercial law firm based in Florida. The Firm’s core practices include Business Finance & Restructuring, Corporate, Environmental, International, Land Development & Government Relations, Litigation, Real Estate, and Tax. For more information, please visit

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José M. Ferrer

José M. Ferrer

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