Expect Focus International, March 2017

Post-Election Update on Cuba

International   |   International: Cuba   |   March 8, 2017
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Federal Policy

New Administration’s Cuba Policy Plans

Prior to President Trump’s inauguration, and in an effort to continue normalizing U.S.-Cuba relations, President Obama ended the "wet-foot, dry-foot" policy which since 1995 has granted Cubans who touch American soil the right to stay and get on a faster track to U.S. citizenship. It is unclear what effect this policy change will have on commercial opportunities in Cuba. However, in the short run we expect little impact.

Although the Trump administration has not yet acted with respect to federal law on Cuba sanctions, action appears imminent. Secretary of State Rex Tillerson said all of President Obama’s executive orders on Cuba will be reviewed. On February 3, 2017, the status of U.S. relations with Cuba was drawn into question due to Cuba’s increased commercial relationship with Iran and its support of Iran’s nuclear development program. Indeed, White House Press Secretary Sean Spicer recently indicated that the Trump administration was conducting a full review of all U.S. policies toward Cuba, with a focus on human rights policies.

If President Trump were to reverse the easing of sanctions, he could do so easily and quickly, as President Obama’s steps were all taken through executive action and could be undone in the same fashion. However, numerous U.S. companies have begun legally operating on the island, including major U.S. hotel chains and airlines. Thus, President Trump would risk a likely business backlash with minimal political gain if all of President Obama’s policies were undone. Nevertheless, eased economic restrictions and sanctions will not likely occur as rapidly under this administration.

The U.S. Department of the Treasury’s Office of Foreign Assets Control Continues Enforcing Violations of U.S. Sanctions Against Cuba

Recently, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced a $516,000 settlement with a Canadian bank for several violations of U.S. sanctions against Iran and Cuba. These included the maintenance of bank accounts in Canada for Cuban nationals.

On November 14, 2016, OFAC also announced it had reached a settlement with National Oilwell Varco, Inc., a U.S.-based oil and gas company, and two of its Canadian subsidiaries, Dreco Energy Services, Ltd. and NOV Elmar (collectively, "NOV") for, among other things, alleged violations of the Cuban Assets Control Regulations. Almost all the sales to Cuba and other countries subject to U.S. sanctions and regulations occurred outside the United States. Nonetheless, NOV faced an enforcement action in part because the company’s Canadian subsidiaries exported non-U.S.-origin goods to Cuba.

These resolutions are reminders that OFAC’s enforcement reaches violations of varying proportions – even those beyond the U.S. border. Moreover, the penalties imposed by OFAC demonstrate that entities must comply with U.S. sanctions regulations when transacting with, or in, the United States.

Provision of Legal Services Regarding Cuba

After receiving recent inquiries from foreign companies, OFAC released a memorandum of "interpretive guidance" as to whether U.S. persons, including U.S. attorneys and compliance personnel, may provide certain services to covered persons regarding the requirements of U.S. sanctions laws. In the memorandum, OFAC clarified that U.S. attorneys and compliance personnel may provide information or guidance regarding the requirements of U.S. sanctions laws administered by OFAC, including statutes, regulations, and executive orders; and opine on the legality of specific transactions under U.S. sanctions laws regardless of whether it would be prohibited for a U.S. person to engage in those transactions.

International businesses, especially those based in the United States, have relied on attorneys to counsel and negotiate enforceable contracts in Cuba to an extreme degree. Simply put, and notwithstanding contrary representations by certain U.S. lawyers, foreign counsel cannot practice in Cuba, and finding a disinterested attorney who can represent non-Cuban interests is a challenge. Moreover, U.S. attorneys are generally restricted in facilitating transactions in Cuba due to OFAC’s general prohibition against doing business there.

We have found the two following alternatives available, though neither is highly desirable or particularly efficient

  1. directly engaging a "bufete," i.e., law office, in Cuba. Privately-owned law firms are not permitted in Cuba. These "bufetes" are subsidiaries or affiliates of government-owned and operated entities. For example, we have previously contacted Bufete Internacional, a subsidiary of a Cuban tourism-related company. It is very difficult to communicate directly with these "bufetes" and to obtain any useful information from them on a timely basis.

  2. engaging a foreign (non-U.S.) law firm or lawyer with experience and contacts in Cuba. Based on our discussions with several foreign lawyers with experience in Cuba, this seems the most viable alternative. These lawyers are familiar with and have worked with "bufetes" in Cuba. Based on the project’s subject matter, they engage the most suitable local counsel (i.e., one of the "bufetes") and serve as the liaison between the U.S. client and Cuban counsel. Based on the information we have gathered, using this type of "liaison" seems to be the customary way of doing business with local Cuban lawyers.

General Information Regarding Doing Business in Cuba

The most important business developments have been limited to the areas of telecom and internet access. Internet service is now being provided in Cuba, albeit on a limited basis, with approximately 240 Wi-Fi hot spots set up by the government throughout the island. Also, a limited home internet pilot program has been instituted. Even so, it is important to note that Cuba’s level of internet connectivity is among the world’s lowest. More than half of those who access the internet in Cuba do so from hotels and tourist centers because internet access is prohibitively expensive for most citizens and connections can be patchy and slow.

Google recently struck a deal with the Cuban government to improve Cuba’s technology and internet access. However, many Cuban citizens and dissidents refer to this partnership as a "Trojan Horse" that will help the Cuban government monitor its citizens’ internet use, providing the regime with detailed reports of users’ searches and profiles.

This builds on prior telecommunications agreements between AT&T, Verizon, Sprint, T-Mobile, and the Cuban government to offer roaming services to U.S. travelers.

Overall, however, we see these limited efforts as further indication of Cuba’s lack of critical infrastructure, which limits potentially profitable business opportunities.

State of Florida Policy

On January 25, 2017, Florida Governor Rick Scott announced that he would ask state lawmakers to pass legislation restricting financial support for ports that "enter into any agreement with the Cuban dictatorship" citing "[s]erious security/human rights concerns." This came a day after the first legal cargo from Cuba in more than half a century arrived in Fort Lauderdale’s Port Everglades. Days later, Governor Scott added language to his proposed budget which states that no money will be "allocated to infrastructure projects that result in the expansion of trade with the Cuban dictatorship because of their continued human rights abuses." It is unclear whether this will have any effect on trade in services, such as cruises or ferry service to the island.

The port authorities previously indicated that these agreements could lead to joint marketing studies and training. Port Tampa Bay, on the other hand, indicated that it would not reach any agreements with the Cuban government citing "ambiguity" in Cuba policy right now.

An Overview

Going international is a complicated undertaking. Your specific situation and concerns will determine the steps required. The following outlines, very generally, some issues you must consider as you contemplate international operations.

Bilateral Investment Treaties

Whenever possible, choose projects in countries that have a bilateral investment treaty (BIT) with the United States. BITs protect you if you are discriminated against in procurement. They also provide an arbitration mechanism if you enter into a contract with a government entity or enterprise and have a dispute.


Transparency International (TI), a non-profit, non-governmental organization dedicated to fighting corruption, provides a corruption perceptions index that measures perceived corruption in countries around the world. The Securities and Exchange Commission uses TI’s index as one indicator that a country should be treated with extreme caution. You too should use the index to investigate the places in which you plan to do business — and approach each accordingly.

Anti-Bribery Compliance Programs

If you plan to bid on government contracts, develop an anti-bribery compliance program from the start. The United States has strict rules against corruption in the procurement or retention of business. The Foreign Corrupt Practices Act (FCPA) governs you and everyone who works for you, whether they are employees, agents, or partners. The FCPA prohibits giving anything of value to a governmental official or anyone else who might give something to government officials to influence them to award, or allow you to retain, business. You are also required to maintain accurate books and records under the FCPA, which also guards against improper expenditures. A proper compliance program requires training for everyone in your business plus regular compliance checks. If, in hindsight, you are deemed to have ignored warning signs, you can be guilty of violating the FCPA. Violations bring substantial fines as well as possible jail time.

Entity Structure

When creating an entity to carry out local projects, structure it with your protection in mind. If possible, your people should control the entity’s financial aspects. You must remain involved, vigilant, and aware of contracts with entities related to your local partner. Ensure you do not overpay for goods or services. If overpaid funds wind up in the pockets of government officials, you will face problems.

If possible, control the local entity from outside the foreign country. For example, have a U.S. entity that you control own the local entity, and have the local partner own a part of the U.S. entity. Placing control in the United States (or elsewhere with predictable law) may keep you out of foreign court if there’s a dispute over shareholder’s rights and prerogatives under the shareholder or operating agreement.


Structure the funding of your project in the foreign location. If there will be central bank requirements for registering your investment, ensure you comply. That way, you will be able to repatriate your invested funds. Unofficial investments can cause repatriation of capital problems.

Determine how your banks will fund your foreign operations. They may be unable to fund projects in countries they deem risky. If you need the financing, you may not be unable to proceed.

Check out U.S. government sources of loans for your project as well as U.S. government insurance protections. The Overseas Private Investment Corporation (OPIC), the Inter-American Investment Corporation, and the International Finance Corporation have lending capabilities. OPIC also provides insurance against expropriation and inconvertibility of currency.

Tax Considerations

Structure your operations efficiently from the start from a U.S. tax perspective. Withholding taxes on distributions can be as high as 30 percent unless you take advantage of reduced withholding under double tax treaty regimes. Moving money between locations takes planning.

Local Agents

If you plan to work with a local agent, you will need a written understanding with that person that addresses their compensation and the conditions under which it is received, requirements that they comply with the FCPA and other laws, and termination provisions. Agents often receive severance payments under local laws. That is a matter of the public policy of their place of operation, so choosing Florida law, for instance, will not avoid the obligation. You will also want to determine whether the agent can bind you to contracts.

Employment Law

Employment law generally protects employees, so be cautious when hiring. It may be costly to terminate underperforming employees.

Intellectual Property

Protect your intellectual property before you venture abroad by registering trademarks and logos. In many countries it does not matter who used a trademark or logo first, it matters who registered it first. Many big U.S. businesses have paid to liberate their trademarks from others who registered them first. Regarding trade secrets and know-how, you will need written protection effective under the law of the place in which you will operate.

Legal Assistance

Use U.S. lawyers familiar with conducting business internationally. It is important that they, in turn, use local counsel who have the required understanding of local law, language, and customs.

©2022 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

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