Article United States: Court Rules That Cruise Lines Operating in Cuba Were Not Engaged in Lawful Travel

On March 22, 2022, the U.S. District Court for the Southern District of Florida ruled that several cruise lines were in violation of the Cuban Liberty and Democratic Solidarity Act of 1996, 22 U.S.C. §§ 6021,  et seq. (LIBERTAD Act). Specifically, Carnival Cruise Line, MSC Cruises, Royal Caribbean Cruises, and Norwegian Cruise unlawfully used a cruise terminal confiscated by the Cuban government from an American company, Havana Docks. (Havana Docks v. Carnival Corporation, MSC Cruises, SA, Royal Caribbean Cruises, Ltd., and Norwegian Cruise Line Holdings, Ltd., 19-cv-21724 (Case).) Havana Docks initially filed suit against the four cruise lines because of their use of the confiscated cruise terminal in Havana from 1996–2019, though the more significant arguments focus on use from 2016–2019. (Case at 18.) The defendants in the action claimed an exemption under 22 U.S.C. § 6023(B)(iii) for “lawful travel.” The court, however, disagreed with their argument.

Relevant Laws and Regulations

Although the court cited multiple other laws, including the International Claims Settlement Act (22 U.S.C. §§ 1621, et seq.), which provides statutory damages for claims against the Cuban government; the Cuban Democracy Act (22 U.S.C. §§ 6001, et seq.), which provided sanctions against the Cuban government; and the Trade Sanctions and Export Enhancement Act (22 U.S.C. §§ 7201, et seq.), which loosened certain sanctions, the LIBERTAD Act had the most significant bearing on the case.

The LIBERTAD Act was passed in 1996. The congressional findings section of the act discusses the repression of the Cuban people under the Castro regime, and further describes the United States’ commitment to the advancement of human rights in Cuba. (22 U.S.C. § 6021.) Of particular importance to the case is the act’s provision of remedies for United States nationals who had property confiscated by the Castro government. (Case at 8; 22 U.S.C. § 6022(6).) Other important parts of the law regarding this case are the cause of action it created, whereby a party can recover economic damages from the confiscation of their property if that property was then used by another party while under the control of the Cuban government. (22 U.S.C. § 6082(a)(1)(A).) Built into the law is an exception allowing the president of the United States to suspend the ability to bring the cause of action. (Case at 9–10.)

Along with these laws, the Cuban Asset Control Regulations (31 C.F.R. § 515.101) issued by the U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC) were important to the court’s analysis. These regulations and their amendments provide guidance on exceptions for travel to Cuba. OFAC has made clear that tourist activities are not an exception to the regulations; however, it provided exceptions for certain activities deemed educational or cultural.

In 2019, the Trump Administration directed OFAC to rescind many of the exceptions, including exceptions related to educational travel. (Case at 16.)

Facts of the Case

The case stems from a dispute over the use of a cruise ship terminal that is owned and operated by Havana Docks and was confiscated by the Cuban government in 1960, shortly after Fidel Castro came to power. (Case at 17.) Havana Docks submitted a claim under the International Claims Settlement Act describing the property that was confiscated by the Cuban government. (Case at 31–32.) The four cruise ship companies operated in and out of the terminals to facilitate shore excursions for their clients. Carnival allegedly made over $112 million in revenue from its use of the terminals. (Case at 69–70.) Carnival disputes that that amount represents revenues earned directly from their use of the cruise terminal. (Case at 70.) MSC admitted to earning over 247 million euros (about $268 million) during 2015–2019 but denies that it actually profited from these ventures. (Case at 70.) Royal Caribbean earned over $430 million in revenue, but disputes the accounting as it relates to cruises that used the terminals, arguing that Royal Caribbean does not track revenues for individual cruises. (Case at 71.) Finally, Norwegian earned around $300 million in revenue. (Case at 71.)

The aspects of the case that relate to the violation of the LIBERTAD Act are based on the “trafficking” element of the law and the lawful travel exception. (Case at 19–20.) OFAC regulations require that there be a full-time schedule of specified types of people-to-people onshore activities in order to satisfy the license requirements for disembarkations in Cuba. (Case at 14–16.) For example, Carnival submitted license paperwork to OFAC in May 2015 outlining its projected onshore activities. (Case at 36–37.) Norwegian also submitted license paperwork to OFAC in July 2015, receiving approval from OFAC in August of the same year. (Case at 42.)

Royal Caribbean and MSC never formally submitted license paperwork to OFAC; however, Royal Caribbean was audited by OFAC in 2018. (Case at 39–41.) OFAC issued a “cautionary letter” to Royal Caribbean advising the cruise line of potential issues with the CACRs. (Case at 41.) Regardless, the court relied on testimony from both companies concerning onshore activities in relation to the trafficking aspect of the LIBERTAD Act. (Case at 55–62.)

Decision

The court’s decision hinged on whether the “lawful travel exception” to “trafficking” (under the LIBERTAD Act) was satisfied by each of the defendants, and whether the defendants knowingly engaged in these acts. (Case at 90–91 and 97–98.) Specifically, the court  relied on the “knowingly and intentionally” aspect of Title III of the LIBERTAD Act at 22 U.S.C. § 6023(A) and the “incident to lawful travel” exception at 22 U.S.C. § 6023(B)(iii). (Case at 80–81.) The trafficking element of the LIBERTAD Act requires that the person (or entity) engage in commercial activity with the property confiscated from a U.S. national. The relevant portion of the lawful travel exception provides that the conduct or transaction be incident to travel, or necessary for travel.

The court determined that the use of the cruise terminal piers to facilitate the shore excursions constituted trafficking under the LIBERTAD Act. The court pointed to the contracts made with Cuban businesses and, more importantly, the revenues brought in through the transactions as proof of commercial activity. (Case at 87–88.) Further, the court explained that not only did the cruise companies bring in revenue, they made a profit, which solidified the satisfaction of the trafficking requirement. (Case at 90.) The court also determined that the cruise companies met the “knowingly” aspect of the statute, explaining that the cruise companies were on notice of a certified claim with respect to the terminal held by the plaintiff under the International Claims Settlement Act, which provided the basis for the cause of action under the LIBERTAD Act. (Case at 92–93.) The certified claim provides proof of property interest for the plaintiff and a measure of damages under the LIBERTAD Act. (Case at 7–8.)

Along with the court’s application of the LIBERTAD Act, the defendants made numerous affirmative defenses, which the court dealt with in turn. Of note were affirmative defenses made under the “lawful travel” exception to the act. The defendants took a position that their transactions in Cuba were incident to lawful travel. The court, however, pointed out that there is no precedent on or definition of “lawful travel.” The defendants argued that their communications with U.S. government agencies affirm that their activities were lawful travel. However, the court disagreed, explaining that the scope of the LIBERTAD Act depends on the statutory analysis of the court, not that of agencies. (Case at 114.) The court further explained that OFAC’s Cuban Asset Control Regulations had to be interpreted in light of the strict ban on tourism-related activities. (Case at 116.) The court found generally that none of the shore excursions offered by the cruise companies satisfied the OFAC regulations.

Related to the “lawful travel” definition, the court also dealt with the defendants’ arguments that the use of the terminal in travel was “necessary.” (Case at 145.) The court explained that, within the context of the LIBERTAD Act, “necessary” was synonymous with “essential,” or having no other option. (Case at 148.) The defendants then argued that they had no choice but to dock at the terminal because that was where Cuban authorities directed them to dock, but the court determined that they had other options to perform lawful travel to Cuba that did not include using the cruise terminal. (Case at 150.)

Conclusion

The court also dealt with other affirmative defenses not discussed in this article. However, its overall conclusion and decision were to deny the motions by the defendants and to allow the case to move to jury trial on the damages. The trial is currently scheduled for May 2022.

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United States: Court Rules That Cruise Lines Operating in Cuba Were Not Engaged in Lawful Travel
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United States: Court Rules That Cruise Lines Operating in Cuba Were Not Engaged in Lawful Travel. 2022. Web Page. https://www.loc.gov/item/global-legal-monitor/2022-04-21/united-states-court-rules-that-cruise-lines-operating-in-cuba-were-not-engaged-in-lawful-travel/.

APA citation style:

(2022) United States: Court Rules That Cruise Lines Operating in Cuba Were Not Engaged in Lawful Travel. [Web Page] Retrieved from the Library of Congress, https://www.loc.gov/item/global-legal-monitor/2022-04-21/united-states-court-rules-that-cruise-lines-operating-in-cuba-were-not-engaged-in-lawful-travel/.

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United States: Court Rules That Cruise Lines Operating in Cuba Were Not Engaged in Lawful Travel. 2022. Web Page. Retrieved from the Library of Congress, <www.loc.gov/item/global-legal-monitor/2022-04-21/united-states-court-rules-that-cruise-lines-operating-in-cuba-were-not-engaged-in-lawful-travel/>.

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