A lady walks past Cuban flag graffiti in Havana, May 31, 2022.
Yamil Lage | AFP | Getty’s paintings
Cuba is more likely to face more – and costlier – lawsuits over billions of dollars price of unpaid industrial debts from the Nineteen Eighties after a call by a UK High Court judge on Tuesday.
The judge ruled mostly in favor of CRF1, originally called the Cuba Reconstruction Fund. The fund filed a lawsuit in 2020 against Cuba and its former central bank, Banco Nacional de Cuba, for roughly $72 million in principal and outstanding interest on two loans it currently holds.
related investment news
The loans were made to Cuba by European industrial banks within the Nineteen Eighties when Fidel Castro ruled the Caribbean nation and were denominated in German Reichsmarks, a currency that now not exists.
Judge Sara Cockerill, who made Tuesday’s decision, oversaw the trial, which began in late January and lasted two weeks and was marred by intrigue and chaos outside Britain’s Supreme Court.
This lawsuit handled 4 issues: Can the CRF sue within the UK; whether the receivables have been properly transferred to the investment fund; whether the central bank will be sued; and whether the Cuban government was the guarantor of the debt and could even be sued.
The judge ruled in favor of the CRF on three of the 4 issues. She said the Supreme Court had jurisdiction, the debt was accurately assigned to the CRF and that the previous central bank was responsible.
Nonetheless, it ruled that Cuba itself just isn’t a guarantor of the debt, the victory of the communist nation.
David Charters, chairman of CRF1, described Cuba’s victory as temporary and technical. He said on Tuesday the fund re-applied to ICBC Standard Bank, the debt trustee, to appoint Cuba as guarantor. He said BNC has 28 days to reply and believes CRF will prevail.
“BNC was Cuba’s central bank and stays chargeable for managing outstanding Cuban debts,” he said. “Kuba won a technical point on this judgment, which we’ve got already fixed and we don’t expect this issue to affect the ultimate , which is a complete victory for the CRF.”
CRF’s lawyers said the fund may now enter a lawsuit to find out whether it could actually get well “a sovereign debt that it clearly owns.
What does judgment mean
This process was seen as a test case. CRF holds over $1 billion in face value of Cuba’s outstanding debts. If CRF won on this small chunk of Cuba’s total outstanding industrial debt, estimated at $7 billion, it could result in lawsuits from other CRF debt holders.
The judge said Cuba’s description of the CRF as a vulture fund “was not convincing” since the fund had repeatedly attempted to settle with the Cuban government.
The judge also went to great lengths within the written judgment to emphasise that Cuba had dropped the bribery charge against one CRF officer, Jeet Gordhandas. The judge said Gordhandas “was damaged” by the prosecution.
If Cuba is ever to re-enter international capital markets, it can need to repay many outstanding debts.
“Cuba owes money, plenty of money, CRF, governments, corporations and $1.9 billion in 5,913 certified claims” to U.S. entities whose assets were seized during Fidel Castro’s communist revolution, said John Kavulich, longtime head of the Department for Foreign Affairs. Trade and Economy. “Consecutive Cuban governments haven’t been released by court order.”
The judge’s ruling also revealed more in regards to the behind-the-scenes negotiations the fund had been conducting over time. In March 2021, the fund offered Cuba a zero-coupon facility, with no capital repayments for five years. In November 2017, the CRF proposed to exchange “the balance of business debt for licenses, concessions and/or permits for major investment projects, as prioritized in a portfolio of opportunities published by the Cuban government.”
Charters, the chairman of the CRF, said the fund would still prefer a negotiated solution to litigation.
“The CRF stays committed to finding an answer with Cuba that is not going to affect its budget for at the very least 5 years, recognizing the difficult economic situation the country is facing,” he said. “We consider that a mutually useful solution will be reached through constructive dialogue and cooperation.”
Cuban officials declined to comment despite repeated requests. The Cuban government did it publish an article in his state newspaper Granma with the headline: “Republic of Cuba wins London lawsuit: CRF just isn’t a creditor to the Cuban state.”
Nonetheless, the article further acknowledges that Banco Nacional de Cuba shall be subject to legal motion.