U.S. Supreme Court Holds Helms-Burton Act Abrogates Sovereign Immunity for Cuban State-Owned Entities

Background

As a general matter, the Helms-Burton Act provides that "any person that," on or after November 1, 1996, "traffics in property which was confiscated by the Cuban Government shall be liable to any United States national who owns the claim to such property." 22 U.S.C. § 6082(a)(1)(A). The Act defines "person" expansively to include "any agency or instrumentality of a foreign state." Id. § 6023(11). The Helms-Burton Act therefore authorizes claims against both private parties and foreign governments.

Under the FSIA, however, foreign governments—including their agencies and instrumentalities—are presumptively immune from suit in U.S. courts. To overcome that immunity, a plaintiff suing a foreign government must ordinarily satisfy one of the FSIA's enumerated exceptions. Two of those exceptions are arguably relevant in the Helms-Burton context. First, the "commercial activity" exception permits suit where an act "in connection with a commercial activity" of the foreign state "causes a direct effect in the United States." 28 U.S.C. § 1605(a)(2). Second, the expropriation exception permits suit where property "taken in violation of international law" is at issue, the property is "owned or operated by" a state instrumentality, and that instrumentality "is engaged in a commercial activity in the United States." Id. § 1605(a)(3).

Both exceptions require some commercial activity or direct effect "in the United States." But because the Helms-Burton Act creates a cause of action for trafficking in property that was confiscated by Cuba, and because that property is ordinarily located in Cuba, these exceptions will rarely be satisfied in Helms-Burton claims against Cuban state-owned entities.

The facts of Exxon illustrate the problem. In 1959, the Castro regime confiscated Exxon's refinery, terminals, plants, and service stations in Cuba, and then operated those assets through government-owned corporations. In 2019, Exxon sued those corporations under the Helms-Burton Act, alleging unlawful trafficking in confiscated property. The district court dismissed, concluding that Exxon's claims fell outside the FSIA's enumerated exceptions. The D.C. Circuit agreed that Exxon's claims depended on satisfying an FSIA exception and remanded for limited factfinding, thereby placing the burden on Exxon to show either a "direct effect in the United States" or that the defendants were "engaged in a commercial activity in the United States." The Supreme Court granted review "[i]n light of the importance of the issue to the Nation's foreign policy interests."

The Decision

In an opinion by Justice Kavanaugh for six Justices, the Supreme Court reversed, holding that the Helms-Burton Act abrogates the foreign sovereign immunity of Cuban agencies and instrumentalities. In that respect, the Act does not require plaintiffs to satisfy one of the FSIA's exceptions. The Court reached this conclusion for four principal reasons:

First, Congress abrogates sovereign immunity when it creates a cause of action that expressly applies to government agencies or instrumentalities. The Helms-Burton Act did just that by defining "person" to include "any agency or instrumentality of a foreign state." 22 U.S.C. § 6023(11).

Second, requiring satisfaction of the FSIA's exceptions would "largely negate the [Helms-Burton Act's] cause of action," because plaintiffs suing Cuban state-owned entities could "almost never meet [those] exceptions."

Third, the Helms-Burton Act's jurisdictional provision refers to general federal-question jurisdiction, 28 U.S.C. § 1331, rather than the FSIA's jurisdictional provision, id. § 1330, which suggests that Congress did not intend the FSIA's sovereign-immunity framework to control.

Finally, the Helms-Burton Act authorizes the president to suspend its cause of action for foreign policy reasons. The Court interpreted this as reflecting traditional, pre-FSIA conceptions of sovereign immunity—under which the executive decided immunity on a case-by-case basis—rather than the FSIA's more rigid, rules-based approach.

For those reasons, the Court vacated the dismissal of Exxon's complaint, thereby allowing Exxon's claims to proceed in the district court in the first instance.

The Court did not resolve any other issues concerning the viability of Helms-Burton claims against the Cuban government. In particular, the Court did not address whether the FSIA's execution-immunity provision, which shields foreign states' property in the United States from "attachment, arrest, and execution" absent satisfaction of statutory exceptions, would prevent plaintiffs from collecting any judgment against the Cuban government. 28 U.S.C. § 1609. There is a viable argument that 22 U.S.C. § 6082(d) of the Helms-Burton Act waives the execution immunity of Cuban state-owned entities, on the ground that it prevents the enforcement of judgments against "a transition government in Cuba or a democratically elected government in Cuba," and thereby contemplates the enforcement of judgments against Cuba's communist regime. But because the Supreme Court did not resolve that argument, it remains uncertain whether plaintiffs who obtain favorable judgments against Cuba-owned entities will ultimately be able to recover monetary damages.

Justice Kagan, joined by Justices Sotomayor and Jackson, dissented from the Court's decision. In their view, the Helms-Burton Act did not abrogate the sovereign immunity of Cuban agencies and instrumentalities. Even if the FSIA barred most plaintiffs from suing Cuban state-owned entities, the dissenters thought the Helms-Burton Act's cause of action would have "plenty of work to do," on the premise that the Act "primarily targeted private" entities that traffic in confiscated property.

Implications

The primary effect of Exxon is to increase plaintiffs' ability to sue and obtain favorable judgments against the Cuban government, including Cuba-owned corporations. Those entities are no longer able to raise a sovereign-immunity defense at the outset of Helms-Burton litigation, which increases the likelihood that they will need to litigate plaintiffs' trafficking claims on the merits. Additional claims against Cuban state-owned entities may therefore be filed in the wake of this decision.

Exxon is unlikely to have an immediate effect on the many Helms-Burton claims that have been brought against private, non-sovereign parties that were never able to raise foreign sovereign immunity as a threshold defense. That said, one aspect of the majority's reasoning may prove useful to private defendants. As discussed above, the Court reasoned that foreclosing Helms-Burton claims against Cuban agencies and instrumentalities would "largely negate the Act's cause of action." The premise of that argument is that Congress enacted the Helms-Burton Act primarily to authorize lawsuits against Cuban agencies and instrumentalities—as opposed to American companies that happen to do business in Cuba. Indeed, the majority and the dissent appeared to have starkly different views of the Act's primary targets: while the dissent thought the Act "can well achieve its primary goal when plaintiffs sue private parties," the majority emphasized that "Cuban agencies and instrumentalities were the Helms-Burton Act's 'main culprits.'"

Going forward, private defendants may invoke the majority's reasoning on this issue to argue against expanding the Act's reach to private-party conduct at the margins, including conduct arguably covered by the Act's lawful-travel exception. In particular, defendants may argue that such expansions would be inconsistent with the Act's focus on claims against "Cuban agencies and instrumentalities."