- Cuba is struggling with an investment fund over millions of dollars of past due sovereign debt that dates back to when Fidel Castro ruled the communist island nation.
- It will likely take months for a British judge to decide on the case.
- The trial, which concluded last week, was characterized by chaotic protests and allegations of corruption.
Can the Cuban government be sued for unpaid debts from the early 1980s – debts so old that they are denominated in a currency that no longer exists?
This is a question before a UK High Court judge following a seven-day trial marked by chaotic protests, a bribery charge and remote testimony from an imprisoned Cuban banker.
The trial ended last week, but it could be months before Judge Sarah Cockerill rules in CRF v. Banco Nacional de Cuba & Cuba. Her decision is critical to whether Cuba can finally be forced to pay back billions of dollars of unpaid debts.
The court is perceived as a test. CRF1, formerly known as the Cuba Recovery Fund, owns over $1 billion in nominal value of European bank loans made to Cuba in the late 1970s and early 1980s, when Fidel Castro was still ruling the island. Cuba defaulted on its debt in 1986.
CRF1, which began accumulating positions in 2009, is suing Cuba and its former central bank for only two of their loans for more than 70 million US dollars. If CRF wins this small portion of Cuba’s total outstanding commercial debt, which is estimated at $7 billion, it could lead to further lawsuits from other debt holders, with claims on Cuba rising to billions.
While the most dramatic testimony focused on the bribery allegation, much of the trial focused on the mysteries of Cuban and English law.
Were the signatures of Cuban bank officials sufficient on the documents when the respective loans were “assigned” or transferred to CRF? Were the documents dry- or wet-stamped, and was the correct blue release paper used? At one point, CRF’s lawyer referred to a British fried fish shop lease case.
The question before the judge is whether the foundation has the right to sue Cuba. However, the experts said that it could issue a summary judgment in which it would rule not only on jurisdiction but also on the merits, bearing in mind not only whether CRF could sue, but whether should Cuba pay.
Throughout the trial, representatives of the foundation repeatedly said they did not want to sue Cuba, but only as a “last resort” after the government ignored their requests for negotiations for 10 years.
“Even at this late date, in the event that we expect to win, CRF is ready to settle the dispute,” David Charters, CRF chairman, said after the trial concluded.
During their testimony, CRF representatives said they had made more than one offer to the Cuban government that would not drain the island’s current cash flow and help improve its economy. They described offers of long-term zero-coupon bonds and debentures in exchange for shares, none of which would force Cuba to provide cash in the short or even long term, depending on the deal.
The Cubans claimed that CRF had always intended to sue and described them as a vulture fund taking advantage of a poor country.
No matter how the judge decides, the Cuban government still owes money. And they will not be able to borrow on the international capital markets until they have paid off all their past debts. Cuba has not been able to borrow in the markets since 1986, when the country defaulted. Since then, Cuba has survived on the generosity of other countries as in the former Soviet Union, and more recently Venezuela and China.
Cuba is not a member of the IMF or the World Bank, organizations that are usually involved in helping an impoverished country restructure its debts and get back into the international financial system.
The Cuban government did not respond to requests for comment.
Credit: www.cnbc.com /