Spanish lawyer Hermenegildo Altozano is a leading world expert on matters involving foreign investment with Cuba. Since 2011, Mr. Altozano is a partner at Bird & Bird law firm in Madrid. Mr. Altozano is the head of the Energy and Infrastructures practice.
He advises leading global market players in the energy, natural resources, aviation, agribusiness, tourism, food, and infrastructure sectors.
Mr. Altozano is co-director of the Energy and Regulation Forum of the Fundación para la Investigación sobre el Derecho y la Empresa (FIDE), former Director of the Energy law programme at Instituto de Empresa and former Associate Professor of Private International Law at Universidad Francisco de Vitoria. He regularly takes part in La Tertulia Capital on Capital Radio (Madrid, Spain); 105.7 FM .
He has given lectures at some of the most important investment conferences on the Island.
I have had the pleasure of listening to him and meeting him at two of these conferences in Havana. Most recently, Mr. Altozano gave a presentation at the CUPET Oil and Gas conference in November 2019, where he spoke to a captive audience on legal matters for investors on the subject of the Helms-Burton Act.
This interview with Mr. Altozano took place in the context of the COVID-19 pandemic and covers several current issues surrounding Cuba. He spoke to me on matters surrounding the recent banking reforms in Cuba (Resolution 73/2020), Helms-Burton, the complexity of issues in the due diligence process, and the impact of COVID-19 on foreign investment.
Cuba Business Report: Good morning. First, I’d like to start off this interview with a personal question. At what point in your career did you decide to work on cases related to Cuba and Latin America? I’m trying to understand how you ended up as one of the most known legal experts for foreign investment on matters related to Cuba. Did you choose Cuba or did Cuba choose you? In other words, did you find Cuba or did Cuba find you?
Hermenegildo Altozano:
My first trip to Cuba was the result of the invitation of Luis Callejón, a Spanish hotel entrepreneur and outstanding character who had an extensive relationship with the Cuban tourism industry. He invited me to give a lecture on timesharing, which was then a fashionable new industry. Cuba was looking for new alternatives to develop the tourism industry and Luis Callejón organized a series of lectures that were held at the Palacio de Convenciones. I had the opportunity to give a lecture on how timesharing was helping to develop the tourism industry in some areas of Spain, particularly the Canary Islands, which had some similarities with Cuba. And then, you know, it’s like falling in love: I felt that Cuba was a land of opportunity. I thought that there were a tremendous number of opportunities to be pursued.
Luis Callejón invited me for a second trip and I had the opportunity to travel through the Island. We went to Camagüey where I also had the opportunity to give a lecture. We met a number of government officials in the tourism industry and then I started to develop a number of relationships in Cuba. In 1996 one of our clients was invited to participate in a joint venture to develop the first office building in Havana (La Lonja del Comercop). The client asked the law firm where I was working at the time to assist in the negotiations.
That was the first significant Cuban deal I was really involved with. From there this is like a “cherry situation” where one deal brings another deal and you start building a consistent practice and reputation.
Cuba Business Report: So, Cuba found you.
Mr Altozano:
Well, I would not say that. It could have been a mutual discovery but I can say that I found Cuba.
Cuba Business Report: Can you discuss the impact of COVID-19 on foreign investment with Cuba?
Mr. Altozano:
As you can imagine there are a number of legal issues involving COVID-19 and particularly there is sort of a “resurrection” of hardship clauses, force majeure clauses, change of law clauses impacting different contracts in various industries. It’s impacting the flow of foreign investments because many countries are adopting protective measures to control the flow of foreign investments. And that’s making everything much more difficult.
In addition, the access to financing is becoming also difficult due to the uncertainties created in some industries as a result of the pandemia. The increasing difficulties in securing financing may adversely impact the capacity to invest although it has to be taken into account that the end of the pandemia will revive the appetite for foreign investments.
In these days of COVID-19 one of our clients (Panterra Gold) has been able to complete a joint venture with the Cuban entity Geominera S.A. in the mining sector. We are currently also assisting another client in completing an important deal in the food industry. So there’s a continuous flow of investment and of interest in Cuba.
Obviously the world tourism industry is severely impacted by COVID-19 as you can imagine, and their contracts with the main tour-operators and hotel operators have been or are in the process of renegotiation.
In this same context Cuba has already announced, and it is not a surprise, its will to restructure its existing debt obligations.
Financial institutions are eager to consider the restructuring of the existing financial agreements due to the fact that everyone is aware that this is an extraordinary situation and if you are driven by common sense, you will have to find a way through in order not to harm both parties – the debtor and the creditor – in the equation.
Cuba Business Report: We’ve seen a number of cases filed under the Helms-Burton Title III legislation, which have resulted in dismissal. My question is, are these plaintiffs receiving poor legal advice, or do you believe there’s an attention-seeking strategy behind these cases? Are they show trials?
Mr. Altozano:
I think that there was a big expectation on the part of the potential claimants when the suspension of Title III was lifted. It is my belief that many of those potential claimants were thinking that the defendants were going to simply sit down and enter into a settlement agreement. So I think that most of them were on the advice of telling them “we will file a Title III lawsuit. This is going to be enough to bring them to the negotiation table. Sit down and we will settle. We’ll get your money.” And they have not taken into account the reaction of the defendants. I mean there’s just been a miscalculation by the plaintiffs.
First of all, the defendants are sophisticated people. Secondly, the defendants have taken this matter very seriously. They have hired some of the major U.S. law firms and they have created very capable legal teams across the world.
They have also minimized a very important element of Title III of Helms-Burton, which is that these lawsuits have to be filed before federal judges. A judge or a federal court is someone that is on top of the hierarchy. He or she is someone very sophisticated, with a serious legal background and practise. Serious persons that have been appointed because of their prestige as a legal professional with a long standing professional career behind them.
If you have a look at the Motions to dismiss, the cases that have been filed already by the defendants, you will see that there is serious legal work behind carried out by very serious lawyers. I will not say that the plaintiffs had poor legal advice. I think that those advisors were not anticipating properly what was going to be the reaction of the defendant.
Cuba Business Report: When the decisions taken, for example, Amazon and the Melia hotel case, they appear to have been very basic facts on which these cases were dismissed. For example, the person was not a U.S. resident in 1996. It is almost as if the plaintiff’s lawyer completely missed this very basic fact.
Mr. Altozano:
I think some of the plaintiffs have been lead to believe that Title III lawsuits would be a very straightforward exercise: “If you just send a little claim letter you will get the defendant to the table” and that was not the case. And they have not taken care of some basic elements such as evidence of the ownership of a claim or respond to the very basic question of “where is the title of your property?”.
If you go to a court you need to evidence a number of issues: your legitimacy to litigate (standi) which includes the evidence that you have a claim, etcetera. And in some of these cases they simply said “I was born in Cuba, I owned a property, or my father owned a property and the Communists stole the property”.
Cuba Business Report: What should an investor plan prior to a decision to investment in Cuba. And what’s the most important first step, for example, something such as due diligence.
Mr. Altozano:
That simple question claims a complex answer. The foreign investment process in Cuba is a complex process that involves a number of authorities. It’s a very regulated process. You cannot simply go to Cuba and invest. You need to go through an authorization process. And the counterparty normally has to be authorized to negotiate with the foreign investor, even though, as you know, the Cuban foreign investment legislation contemplates the possibility of a 100 percent foreign company.
The fact is that the foreign investment process takes some time and obviously, when you are investing in Cuba and you are a foreign investor in Cuba, you only have to take into account two sets of rules: the Cuban laws and the laws of your jurisdiction. Helms-Burton Act is an extraterritorial legislation which interferes with the investment process. You must take into account that if you are an European Union investor, a Canadian investor or a Mexican investor, you cannot comply with Helms-Burton Act without breaking your own regulations and you cannot also comply with the Helms-Burton Act without breaching Cuban regulations.
For instance, imagine that a non-European Union investor would like to invest in Cuba and he says, well, I would like to set up a company in Spain that will, in turn, invest in Cuba, because that way I will benefit from the protection of the European Union Regulation 2271/1996 (EU Blocking statute) and I will be able to show that I have a shield vis-a-vis any potential plaintiff under Helms-Burton.
Although there is a claim registry with the Foreign Claims Settlement Commission of the U.S. Department of Justice that shows 5,913 U.S. national claims as a result of the nationalizations process carried out by the Cuban Government from 1 January 1959, there is no such registry for Cuban American claimants: This fact makes it virtually impossible to carry out a due diligence to learn whether there is a claim in relation with any specific property.
Cuba Business Report: And one more question, my last for you. On the recent news of banking reform from the last couple of weeks, Resolution 73/2020. Do you think this will have positive benefits for investors?
Mr. Altozano:
My opinion is that Resolution 73/2020 is moving forward to the direction of resolving the double currency situation. I think that it’s a resolution which is driven obviously also to the purpose of not spending more than you have. So it brings a kind of a control over the flows of currency. I think it is going to have a positive impact in the medium and long term for foreign investment.
Cuba Business Report: And could you briefly describe the benefits for the long term?
Mr. Altozano:
Particularly the perception of stability in the currency flows and the ability to have a single currency.
Cuba Business Report: It was really nice to talk with you, someone who is actively involved with Cuba. Thank you so much.
Mr. Altozano:
Thanks so much to you for your time and for your kindness. I’m looking forward to the publication of the interview. A real pleasure.
