Cuba’s in the Air: The Legal Challenges to Loaning Art from Cuba due to Judgments under the State Sponsored Terrorism Exception

By Mandy Estinville*

Cuba and the United States are closer now than they have been for 50 years. In 2015, the United States officially removed Cuba from its list of State Sponsors of Terrorism. Moreover, the Obama Administration amended the Office of Foreign Assets Control (OFAC) regulations to allow for greater freedom in travel and remittances, and to permit U.S. telecommunications, media, construction, and agricultural companies to establish a physical presence in Cuba. Most recently, the United States loosened certain sanctions on Cuba, including lifting the $100 limit on bringing Cuban rum and cigars into the United States. Although future of the normalization process between the two countries is uncertain under the Trump administration, a continuation of diplomatic relations with Cuba will promote cultural exchanges, such as selling and loaning art to museums and galleries. In fact, The Art Newspaper reports that the “market for Cuban art is booming; 20th-century Modernists such as Wifredo Lam, Amelia Pelaez, and Rene Portocarrero are particularly popular.” 

Despite improved relations between the two countries, there remain many unresolved issues that may affect Cuba’s willingness to export art to the U.S. In particular, Cuba owes about $7 billion dollars in property claims to American citizens and corporations whose property in Cuba was seized by the Cuban government during the Fidel Castro administration. In addition to those claims, Cuba is responsible for default judgments totaling over $3 billion dollars for purported acts of terrorism against U.S. citizens. Until paid, judgment holders of terrorist-related claims may attempt to seize any Cuban governmental owned art that enters the U.S. for a museum exhibition.

The State Sponsor Terrorism Exception

The Foreign Sovereign Immunities Act (“FSIA”) provides that  foreign states are immune from the jurisdiction of state and federal courts. However, Congress has created certain terrorism-related exceptions to the general immunity that foreign sovereigns enjoy within the U.S. Namely, the State Sponsor Terrorism exception (“SST”) allows courts to exercise jurisdiction over claims against foreign state sponsors of terrorism that cause personal injury or death to the U.S. citizens.

Cuba was originally placed on the State Sponsors of Terrorism list in 1982 for reportedly sponsoring communist groups in other countries. After Congress enacted the State Sponsor Terrorism exception to the FSIA, many plaintiffs filed human rights lawsuits against Cuba. Consequently, in many cases, courts found Cuba liable for acts of terrorism against U.S. citizens. These cases were ex parte proceedings, which resulted in default judgments since Cuba failed to appear. In Alejandre v. Republic of Cuba, the Florida Southern District court found jurisdiction under the SST exception and held Cuba liable for the Cuban Air Force’s shoot-down of two U.S. registered civilian planes in 1996, killing four people, three of them U.S. citizens. Each plaintiff, in that case, was awarded between $16 and $17.5 million dollars in compensatory damages as well as $137.7 million dollars in punitive damages.  The Florida Circuit court  also found jurisdiction under SST exception in Hausler v. Republic of Cuba and held Cuba liable for the execution of Bobby Fuller in 1960. Mr. Fuller’s family was awarded $65 million dollars in economic losses, $35 million dollars for non-economic compensatory damages, and—notably—$300 million in punitive damages. Lastly, the court in Villoldo v. Ruz found jurisdiction under the SST exception and held Cuba liable for its role in the imprisonment and torture of Gustavo Villoldo following the Cuban Revolution. As a result, the court awarded the plaintiffs a $2.79 billion dollars judgment against the Republic of Cuba and other Cuban parties.

Enforcing Judgments Against Cuba

Although the plaintiffs in Villoldo, Hausler and other cases won sizable judgments against Cuba, the Cuban government failed to make any payments. Challenges to obtaining payment for these judgments remain since Cuba has no attachable property in the United States. Consequently, the plaintiff’s only current viable option is to go after the estimated $243.2 million dollars worth of assets previously blocked by the Kennedy administration following the Cuban Missile Crisis. These assets were originally blocked, or “frozen,” in order to prevent Cuba from using the United States banking system to transfer money to other Latin countries for use by local communist groups.

Some plaintiffs have been successful in attaching their judgment to Cuban blocked assets under section 201(A) of Terrorism Risk Insurance Act. This Act allows for the liquidation of blocked or frozen assets of a foreign state designated as a state sponsor of terrorism, or its agency or instrumentality, to satisfy a judgment against the foreign state for a claim based on SST. In fact, plaintiffs in Weininger v. Castro collected over $90 million dollars on their terrorist-related judgments against Cuba by liquidating frozen bank accounts owned by Cuban telecommunications companies. Because Cuban assets in the United States  are sparse, plaintiffs are forced to be creative in enforcing their judgments. For instance, a plaintiff unsuccessfully sought to have a $63.6 million judgment paid out of BNP’s forfeiture of funds for its criminal conduct of processing and transferring billions of U.S. dollars to and from entities in Sudan, Iran, and Cuba.

Judgments against Cuba under the State Sponsored Terrorism Act may attach to Art loaned from Cuba

A potential unintended consequence of the normalization between Cuba and the U.S. is that it may provide plaintiffs with another viable option to collect on their judgments against Cuba. Section 1610 (a) of FSIA provides limited exceptions to immunity by allowing claimants to attach their judgments to foreign state’s property in the U.S. under certain circumstances.21 Under § 1610 (a) (7), claimants with judgments related to the State Sponsor Terrorism exception can attach that judgment to any Cuban governmental property. This attachment can occur regardless of whether the property is or was involved with the claim so long as the property is in the U.S. in connection to a commercial activity.

Typically, museums can apply to protect internationally loaned artworks from seizure under the Immunity from Seizure Act (“IFSA”). This protection is not automatic, once a museum submits its application to the State Department, the President or his designee must determine whether the object is of cultural significance and whether the temporary exhibition is in the national interest.  While IFSA may protect Cuban loaned art from attachment for judgments relating to SST claims, it is unclear if the State Department will grant this immunity for Cuban loaned art under the Trump administration since the future of the normalization process between the U.S. and Cuba is uncertain. Without an approved IFSA application, it is likely that the risk of possible attachment for judgments obtained against Cuba will curtail the chances of Cuba exporting its art to the U.S. for temporary exhibits. Relatedly, Cuba recently failed to loan art to the Bronx Museum for the “Wild Noise” exhibit despite a ruling from the Obama administration granting the pieces protection from seizure. Instead, the museum exhibited pieces from private collectors and galleries. Cuba’s reluctance to loan art to museums in the U.S. may be attributed to the diplomatic uncertainties under the Trump administration.

In December 2016, Congress enacted the Foreign Cultural Exchange Jurisdictional Immunity Clarification Act ( the “Immunity Clarification Act””), which amended the Foreign Sovereign Immunity Act in response to the Malewicz v. City of Amsterdam finding that temporary art loans for exhibits are deemed a commercial activity. This new law clarifies that the act of exporting art that has been granted immunity from seizure under IFSA for a temporary exhibit in the U.S. is not considered a commercial activity and is, therefore, immune from U.S litigation. Despite the potential for this new amendment to increase international art exchanges, Cuba may still be vulnerable to expropriation claims if it exports art that was confiscated during Fidel Castro regime. One of the exceptions carved out in the Immunity Clarification Act disallows immunity for works “taken in connection with the acts of a foreign government as part of a systematic campaign of coercive confiscation or misappropriation of works from members of a targeted and vulnerable group.” Cuba may fall under that exception since it had systematically seized all Cuban property including property belonging to American individuals and corporations without compensation after the 1959 revolution led by Castro.

The ongoing disputes and outstanding claims and judgments between Cuba and the United States are not going to disappear. It has been reported that in addition to the  claims the U.S. has against Cuba, Cuba asserts that the United States also owes Cuba billions in reparations and for the economic damage caused by the embargo as well as damages resulting from events such as the Bay of Pigs invasion. Due to the precarious nature of Cuba’s relationship with the U.S, it is imperative that Cuba resolves its outstanding judgments in the U.S. before it risks loaning any of its art to a U.S museum.

From the Editors:

Cuba CollageOn March 22, 2017, Cardozo Law School’s Art Law Society and the Fashion, Arts, Media, and Entertainment Law Center (FAME) hosted a symposium, about Cuban art and the art market called “Not Their Art! Demystifying the Cuban Plunder and Nationalization of Art, Hoping for Restitution, and Predicting the Future of the Embargo and Its Sanctions.” Abigail McEwen, a specialist in Cuban and Porto Rican art of the twenty-century, moderated the event. There were three speakers at the event: Monica Dugot, the current International Director of Restitution at Christie’s, Carmen Melian, the former Director and Senior Specialist in Latin American Art at Sotheby’s New York for 15 years, and Carl Micarelli, a New York lawyer that advises clients on compliance with with regulations from the U.S. Department of Treasury’s Office of Foreign Assets Control.

Presentations at Cardozo centered around how artworks that were confiscated (or nationalized) by the Cuban government following the Cuban Revolution and the complicated relationship between Cuba and the United States have caused long-term problems still affecting the art market. For example, Dugot spoke about how Christie’s strives to make restitution of artwork for families that have had artwork confiscated an easy process for any valid claim that arises and is supported by sufficient documentation. Melian provided many examples of how artwork has come to market outside Cuba, including one involving a Cuban priest who sold artworks that were left with the church in an effort to provide funds for the parish, other examples centered around how many artist such as Wilfredo Lam who fled Cuba left many works behind, and how many forgeries permeate the art market as artworks are being copied from photographs with Cuban art in the background. Questions of authenticity and title have presented significant problems for provenance research and have complicated even the basic determination of whether artworks were privately or state-owned property. Micarelli informed the audience about the various U.S. laws and embargos  imposed vis-a-vis Cuba that affect the art market; he warned the audience about the uncertainty of U.S. policy in relation to Cuba.

The market for Cuban artwork is said to be growing, but the sentiment of the panel was to be cautious when a buyer is going to purchase artwork that is from Cuba because of so much uncertainty surrounds ownership of the artwork that comes from Cuba.

Select Sources and Suggested Reading

  1. Julie Hirshchfield Davis, U.S. Removes Cuba From State-Sponsored Terrorism List, New York Times (May 29, 2015) https://www.nytimes.com/2015/05/30/us/us-removes-cuba-from-state-terrorism-list.html.
  2. Frequently Asked Questions Related to Cuba https://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba_faqs_ne.w.pdf
  3. Julie Hirshchfield Davis, Obama, Cementing New Ties With Cuba, Lifts Limits on Cigars and Rum, New York Times (October 14, 2016)  http://www.nytimes.com/2016/10/15/world/americas/obama-cuba-trade-embargo.html?_r=0.
  4. David D’Arcy, Cuba refuses to return seized art despite thaw in relations with US, The Art Newspaper (Feb. 23, 2015) http://old.theartnewspaper.com/articles/Cuba-refuses-to-return-seized-art-despite-thaw-in-relations-with-US/36940
  5. Mari-Claudia Jimenez, “RESTITUTING LOOTED CUBAN ART,” ASCA Cuba in Transition (2009), available at http://www.ascecuba.org/c/wp-content/uploads/2014/09/v19-jimenez.pdf
  6. 28 U.S.C. § 1605
  7. 28 U.S.C. § 1605A
  8. CRS Report for Congress: Cuba and the State Sponsors of Terrorism List https://www.fas.org/sgp/crs/row/RL32251.pdf
  9. 996 F. Supp. 1239 (S.D. Fla. 1997).
  10. Hausler v. Republic of Cuba, No. 02-12475, 2007 WL 6870681 (Fla. Cir. Ct.
    Jan. 19, 2007).
  11. Villoldo v. Ruz, No. 08-14505 CA-25, 2009 WL 1832603, at *2 (Fla. Cir. Ct. May
    29, 2009).
  12. Can Creditors enforce Terrorism Judgment against Cuba? https://www.fas.org/sgp/crs/terror/creditors.pdf
  13. Terrorist Assets Report for Calendar Year 2015 https://www.treasury.gov/resource-center/sanctions/Programs/Documents/tar2015.pdf
  14. Cuban Assets in U.S Frozen by Treasury, Chicago Tribune (July 9, 1963) http://archives.chicagotribune.com/1963/07/09/page/1/article/cuban-assets-in-u-s-frozen-by-treasury
  15. Terrorism Risk Insurance Act of 2002, Pub. L. No. 107-297, § 201, 116 Stat. 2322.
  16. 462 F. Supp.2d 457, 98-503 (S.D.N.Y. 2006)
  17. United States v. BNP Paribas S.A., 14 Cr. 460 (LGS) (S.D.N.Y. Apr. 30, 2015)
  18. 28 U.S.C. § 1610(a)
  19. Immunity from Seizure Act: 22 U.S.C § 2459 https://www.gpo.gov/fdsys/pkg/USCODE-2011-title22/html/USCODE-2011-title22-chap33-sec2459.htm
  20. Randy Kennedy, Bronx Museum Won’t Get Loan of Art From Cuba, New York Times (Jan. 23, 2017) https://www.nytimes.com/2017/01/23/arts/design/bronx-museum-of-the-arts-cuba-declines-to-send-art.html
  21. Malewicz v. City of Amsterdam, 517 F. Supp. 2d 322; H.R. 6477
  22. Foreign Cultural Exchange Jurisdictional Immunity Clarification Act: H.R. 6477 https://www.congress.gov/bill/114th-congress/house-bill/6477
  23.  Frances Robles, Cuba Seizures Now Present Opportunities, New York Times (Dec. 21, 2014) https://www.nytimes.com/2014/12/22/world/cuba-seizures-now-present-opportunities.html.
  24. Senior State Department Official on Cuba Claims Discussions https://2009-2017.state.gov/r/pa/prs/ps/2016/07/260666.htm

About the Author: Mandy Estinville is an attorney based in New York, NY. She can be reached at mandyestinville@gmail.com.

Disclaimer: This article is for educational purposes only and is not meant to provide legal advice. Any views or opinions made in the linked article are the authors alone. Readers are not meant to act or rely on the information in this article without attorney consultation.

 

Russia is no Congo: Chabad Decisions and Moscow Convictions

Moscow Does not Believe in Tears, the movie, came out in 1980. According to Bulgakov, when Voland* visited Moscow in the 1930s, Moscow did not believe in God. Well, Moscow’s convictions regarding cultural artifacts are in the affirmative: when asked to return anything, it either ignores the request or gets even.

Following decades of efforts to recover books and manuscripts (the Collection) left in Europe before and after the Russian Revolution, in 2004, Chabad, a religious organization incorporated in New York as of 1940, brought legal action against the Russian Federation, the Russian Ministry of Culture and Mass Communication, the Russian State Library, and the Russian State Military Archive in U.S. Court. Initially Defendants in Agudas Chasidei Chabad of United States v. Russian Fed’n challenged jurisdictional grounds of the suit. However, in 2009, when the Court held that it had jurisdiction to review Chabad’s claim under one of the exceptions to the Foreign Sovereign Immunities Act, Defendants filed a Statement with Respect to Further Participation and informed the Court that they “decline[d] to participate further in this litigation” because they “believe[d] this Court has no authority to enter Orders with respect to the property owned by the Russian Federation and in its possession, and the Russian Federation will not consider any such Orders to be binding on it.” Opinions may vary on whether this decision was a dreadful mistake on the part of the Defendants’ counsel, Squire, Sanders & Dempsey, LLP (that incidentally filed a Motion to Withdraw Appearance as Counsel of Record) or whether it was proper as a cost cutting measure and a logical thing in light of the predictable outcome.

What followed left many incredulous…

First, in 2010, Chief United States District Judge Royce C. Lambeth entered a default judgement in favor of Chabad in Agudas Chasidei Chabad of United States v. Russian Fed’n, 729 F. Supp. 2d 141, 145 (D.D.C. 2010) ordering return of the Collection. The Court found that 1) Plaintiff sufficiently established its claim to the Library and Archive that “defendants unlawfully possess and refuse to relinquish;” 2) Defendants “expropriated both the Archive and Library from plaintiff in violation of international law;” 3) Plaintiff demonstrated that “the property at issue is owned or operated by agencies or instrumentalities of a foreign state, namely the Russian Federation;” and 4) Defendants were “engaged in a commercial activity in the United States.” The 2010 decision fell on deaf ears and not a single item from the Chabad Collection was sent from Moscow to New York.

Then, on July 26, 2011, the Court granted Chabad’s motion seeking permission to pursue execution of the 2010 judgment. In relevant parts, the conclusion reads “The Court is sympathetic to plaintiff, aware of the long road it has traveled and all-too familiar with the difficult trail that lies ahead in attempting to enforce a FSIA judgment. … … that the ability to attach and execute property not otherwise subject to immunity under FSIA or any other federal statute may aid plaintiff in its pursuit of the return of the lost Library and Archive containing the cultural heritage and history of the Chasidim movement, and that the show cause order may prompt Russia to rethink its decision to retain items of immense historical and religious significance, seized during times of great crisis and in violation of international law, in warehouses rather than return them to their rightful owners.” Agudas Chasidei Chabad of U.S. v. Russian Fed’n, 798 F. Supp. 2d 260, 274 (D.D.C. 2011). Again, Defendants ignored the holding and stopped loaning art works to the American cultural institutions.

Now, on January 16, 2013, Judge Lambeth imposed civil contempt sanctions against Defendants in the amount of $50,000/day until they comply with the 2010 and 2011 rulings and return the contested Collection to the Chabad corporation. The 2013 Lambeth decision finds that 1) The US Federal Court has authority to issue Sanctions against a foreign sovereign in the Foreign Sovereign Immunities Act (FSIA) context; 2) Sanctions are appropriate because Defendants have “steadily resisted all legal and diplomatic efforts to compel them to return the collection for at least two decades”; and 3) the size of the award is calibrated to “coerce compliance” and fitting Defendant’s size as one of the worlds’ largest economies.

It is worth noting that the United States government did submit a statement to the Court urging it “not to enter sanctions” (U.S. Statement, EDF no. 111) on legal and pragmatic grounds. After all, current United States -Russian relations are complicated enough (see Magnitsky Rule of Lawmoratorium on art loansObama/Putin relations; Registration of Foreign Agents in Russia; anti-Magnitsky Laws). Notwithstanding the United States government submission, the Court held that it may and ought to enter sanctions against this foreign government and its agencies. As precedent, the Court cited the 2011 decision in FG Hemisphere Associates, LLC v. Democratic Republic of Congo, 394 U.S. App. D.C. 439 (D.C. Cir. 2011aff’ing 637 F. 3d 373 (D.D.C. 2009), which affirmed lower court’s issuance of sanctions against a foreign state for refusing to comply with discovery orders. There the Court held that the FSIA “did not abrogate a court’s inherent power to impose contempt sanctions on a foreign sovereign.” It is unclear whether the Republic of Congo ever paid the amount assessed against it — $5,000 every week, doubling every four weeks until reaching a maximum of $80,000 per week.

What is crystal clear, even to the Court, is the difference between “entering” and “enforcing”sanctions. Enforcing of sanctions, monetary or otherwise is “carefully restricted by the FSIA.” Chabad, 2013 U.S. Dist. LEXIS 6244, 10. 

What’s next? At the time when the default judgment came down in 2010, Russia imposed a ban on art loans despite the fact that it had all assurances that its cultural treasures would be immune from attachment if on loan in the United States. “… with respect to any art or artifacts belonging to Russia and currently in the United States, the Court reaffirms what should have been obvious beforehand: absolutely nothing in today’s order has the effect of removing or altering any protection for cultural objects subject to immunity under 22 U.S.C. § 2459. The Court hopes that today’s opinion will help facilitate a return to business as usual in the sharing of artifacts and history between nations that is crucial to the promotion of cross-cultural understanding in a global world…” See Agudas Chasidei Chabad of U.S. v. Russian Fed’n, 798 F. Supp. 2d 260, 274 (D.D.C. 2011). One may wonder what constitutes “business as usual” with Russia. In any case, further enraged by the sanctions ordered, Moscow is threatening a lawsuit of its own, in a Moscow court, against none other than the United States Library of Congress for unreturned rare books loaned to the United States in 1994 from the Chabad Collection…

It has been reported that the Russian Foreign Ministry has “‘recommended’ that the Ministry for Culture and the Russian State Library prepare a counter suit against the US Library of Congress, which assisted Chabad-Lubavitch in appropriating some books from the Schneerson Library in 1990s. The Russian State Library’s actions are expected to be symmetrical to the actions of the American side….  If it finds the Library of Congress guilty of purloining the books and the financial claim is not settled, that will be a basis for Russia to demand the seizure of the non-immune American property abroad.” It appears that there were books given to the Library of Congress in 1994 and instead of returning the loan, the books were handed over to the Chabad community…

So what should we expect from Russia now? With Valentine’s day coming up? I don’t think its LOVE.

* Character in Master and Margaret, by Mikhail Bulgakov.

Sources: Case Law; RT.com; Newsru.com