WASHINGTON (CN) — A D.C. Circuit panel temporarily stalled oil giant Exxon Mobil’s effort to demand compensation from Cuba for nationalizing a refinery and over a hundred service stations in 1960 following the Cuban Revolution.
The three-judge panel, made up of Chief U.S. Circuit Judge Sri Srinivasan, U.S. Circuit Judge Cornelia Pillard and Senior U.S. Circuit Judge Raymond Randolph — two Barack Obama appointees and a George H.W. Bush appointee, respectively — ruled 2-1 with Randolph dissenting.
Exxon Mobil sued three state-owned defendants, Corporacíon CIMEX S.A. of Cuba and Panama and Uníon Cuba-Petroleo, under the 1996 Cuban Liberty and Democratic Solidarity Act, which created a cause of action against those who traffic in property confiscated by the Cuban government.
In response, the defendants unsuccessfully tried to dismiss the complaint, claiming foreign sovereign immunity under the Foreign Sovereign Immunities Act, or FSIA, which blocks American courts from exercising jurisdiction over foreign entities like the defendants.
The lower court held that the 1996 law did not clear a foreign sovereign’s general immunity from suit, and that jurisdiction in the case depended on whether an FSIA exception could apply. It found that of two possible exceptions, the “expropriation exception” and the “commercial-activity exception,” only the latter could apply in the case.
Srinivasan, writing the panel’s majority opinion, agreed that the 1996 statue did not grant a court jurisdiction and that the expropriation exception was inapplicable, but found that court needed additional analysis on the commercial-activity exception.
The panel thus vacated the lower court’s decision and remanded the case to further analyze the latter exception.
That exception, the “most significant of the FSIA’s exceptions” strips sovereign immunity due to the commercial activities of another nation that are either carried out in the U.S., performed in the U.S. in connection with activity elsewhere, or performed outside the U.S., are taken in connection with a commercial activity and caused a direct effect in the U.S.
The panel found that the third clause is the focus of the case, and determined CIMEX’s actions clearly fulfilled the first and second requirements of the clause, as the alleged trafficking occurs in Cuba and involves confiscated property that constitutes commercial activity.
The question for the lower court to determine is whether CIMEX’s actions caused a direct effect in the U.S.
After toppling the American-backed dictator Fulgencio Batista in 1959, Fidel Castro and the new Cuban government began expropriating the assets of several subsidies owned by Exxon Mobil, then known as Standard Oil, including Esso Standard Oil S.A., a refinery, multiple bulk-product terminals and over a hundred service stations.
In 1964, Congress created a method for U.S. nationals to submit expropriation claims to the U.S. Foreign Claims Settlement Commission, including claims for any rights or interests owned “wholly or partially, directly or indirectly.”
In 1969, the commission found that Standard Oil had lost $71,611,002 due to Cuba’s nationalization of Esso, but neither Standard Oil nor its successor Exxon received any payment from that claim.
Congress then passed the 1996 statue after Cuban fighter jets shot down two private planes connected to anti-Castro group Brothers to the Rescue which had been dropping propaganda leaflets over Cuba, killing four men. The law created an avenue for private individuals to sue any entity who traffics property confiscated by the Cuban government.
That avenue, Title III of the statute, could be suspended by the president for up to six months at a time, which it had been between its passage in 1996 until 2019, when former President Donald Trump announced it would no longer suspend the right to bring Title III actions.
Srinivasan found Exxon’s argument that FSIA is not the exclusive mechanism to secure jurisdiction over civil suits against foreign sovereigns because Title III action grant courts jurisdiction was unconvincing.
He explained that while Title III creates a cause of action for certain suits against another nation, it does not explicitly say any such action automatically lies within a federal court’s jurisdiction. Rather, it “harmoniously coexists” with the FSIA to allow actions when an exception applies.
Further, Congress was well aware of the FSIA when crafting the 1996 statute and said nothing about allowing a Title III action to supersede a state’s immunity without a FSIA exemption.
In his dissent, Randolph disagreed with that determination, finding the Supreme Court precedents the majority based its decision on did not mention Title III, partly because it either did not yet exist, was not in effect due to presidential suspension or the claims in the cases were unrelated to Cuba.
Therefore, Title III should be considered an “exclusive and independent remedy” that does not rely on the FSIA. He highlighted Congress’ findings and stated purpose when crafting the 1996 statute.
“Congress expressly determined that Cuba’s wrongful takings required a remedy beyond what was then available,” Randolph wrote. “That remedy is Title III, unencumbered by the FSIA.”