Proceedings of the Standing Senate Committee on
Foreign Affairs
Issue 11 - Evidence
OTTAWA, Tuesday, November 5, 1996
The Standing Senate Committee on Foreign Affairs, to which was referred Bill C-54 to amend the Foreign Extraterritorial Measures Act, met this day at 4:00 p.m. to give consideration to the bill.
Senator John B. Stewart (Chairman) in the Chair.
[English]
The Chairman: Our witnesses this afternoon, from the Department of Foreign Affairs and International Trade, are Mr. Robert G. Wright, Deputy Minister for International Trade; Ms Joanne Osendarp, Trade Remedies Division; Mr. Douglas Fosythe, Economic Law Division; and Mr. Ross Snyder, Deputy Director (Cuba), Caribbean and Central America, Relations Division. From the Department of Justice we have Mr. Gilles Lauzon, Q.C., who is General Counsel.
I assume, Mr. Wright, that you have an introductory statement. Please proceed with that.
Mr. Robert G. Wright, Deputy Minister for International Trade, Department of Foreign Affairs and International Trade: It is a great pleasure to be here today. All of the officers with me today had a hand in drafting this legislation.
I am here today to discuss Bill C-54, an act to amend the Foreign Extraterritorial Measures Act. I have a written statement which I should like to read. I will make the text available to the committee. We will then be happy to respond to your questions.
Bill C-54 is a direct response by Canada to the passage by the United States of the Cuban Liberty and Democratic Solidarity Act, or LIBERTAD of 1996, often referred to as the Helms-Burton Act. This bill will give Canadian companies the tools to defend themselves against Helms-Burton law suits initiated in the United States against them.
It is, as Mr. Eggleton describes it, antidote legislation. This bill amends existing legislation, the Foreign Extraterritorial Measures Act, which has been in force since 1984. The FEMA was passed to allow the government to respond to unacceptable claims of extraterritorial jurisdiction by foreign governments and courts. Bill C-54 expands the FEMA to cover the extraterritorial application of U.S. jurisdiction under the Helms-Burton Act.
Why is Canada opposed to Helms-Burton?
Canada and indeed all of the United States' major trading allies have condemned the Helms-Burton Act. That act seeks to expand, in a new way, the U.S. embargo of Cuba to third countries. In so doing, it applies U.S. trade policy extraterritorially and sets a dangerous precedent for international trade and investment.
Global trade and investment are governed to a large degree by international agreements such as the NAFTA, the World Trade Organization and the Multilateral Agreement on Investment which is currently being negotiated in Paris. The U.S. has traditionally been a strong believer and promoter of a rules-based regime to govern global trade. These international agreements and norms impose certain rules on the trade of goods, services and investment to ensure liberalized trade in these areas and a climate of certainty, predictability and security for the exporter and for the investor.
Helms-Burton strikes at the heart of what we are trying to achieve at a global level in terms of this liberalization, security and predictability.
Rather than ensuring that rules such as non-discrimination and fair and equitable treatment of investments are promoted and adhered to, the legislation is intended to deter all investment and most commerce with Cuba. It could also affect Canadian investments in the U.S. by subjecting investors to potential law suits for exorbitant amounts of money as a result of activity which is completely legal in both the investor's home country and the country in which they are investing.
The Helms-Burton Act also violates a number of important principles of international law, as well as U.S. obligations under international agreements, including NAFTA and the WTO.
The Interamerican Juridical Committee, the independent legal arm of the Organization of American States, examined the issue in August of this year following a near unanimous resolution passed by the OAS instructing the committee to examine Helms-Burton. The IAJC found the legislation to be inconsistent with international law in a number of different respects. Key among these were the following: First, domestic courts are not the appropriate forum for resolution of state-to-state claims; second, the committee found that a claimant state, in this instance the United States, does not have the right to espouse claims of persons who were not their nationals at the time of the taking; and third, the committee found that the exercise of jurisdiction by a state over acts of trafficking by aliens abroad under circumstances whereby neither the alien nor the conduct in question has any connection with its territory is not in conformity with international law.
I should like to give, if I could, a short overview of the Helms-Burton Act. The titles in the Helms-Burton Act which have caused Canada and Canadian companies the greatest concern are referred to as Title III and Title IV.
Title III provides a mechanism for U.S. nationals with claims on property expropriated by the Government of Cuba to sue certain investors in such property for trafficking, while Title IV allows the U.S. government to ban business people, along with their spouses, minor children and agents from entering the United States if they are determined to be trafficking in expropriated property.
Trafficking is very broadly defined under the legislation. It includes selling, transferring, managing, purchasing, leasing, using, or otherwise acquiring or holding an interest in confiscated property, engaging in commercial activity, or otherwise benefiting from expropriated property, or causing, directing, participating in or profiting from such trafficking by or through another person. That is a broad definition, and clearly the legislation was intended to capture a wide range of activity so as to effectively accomplish its objective, that being to chill trade and investment with Cuba.
Although on July 16 of this year President Clinton suspended the right to sue under this title for a period of six months, the problems presented by Title III have not been disposed of. Liability for our Canadian companies began to accrue under it as of November 1. In addition, the President may choose not to review the suspension for a further period of six months in January, leaving our companies exposed to lawsuits at that time.
This is why the amendments contained in Bill C-54 are necessary. They are preventative, defensive measures of last resort to protect Canadian interests in the event that lawsuits are initiated against those companies.
I will leave the clause-by-clause description of the bill to others, but should like to highlight a number of the amendments for you.
First, the bill provides that no Helms-Burton judgment will be recognized or enforced in any manner in Canada. This clause is generally referred to as the "blocking" provision. It will give Canadian companies the assurance that, even though an action may be initiated in the United States, the U.S. complainant will be prevented from having the judgment recognized or enforced in Canada and, therefore, prevented from seizing any Canadian assets to satisfy the judgment.
Second, the bill contains a provision that will allow Canadian companies to sue in Canadian courts for damages to recover amounts awarded against them in Helms-Burton proceedings in the United States. This is commonly referred to as the "clawback" provision. In addition to recovering the amount awarded in the Helms-Burton judgment, the Canadian company will also be permitted to claim legal costs and consequential damages caused as a result of the enforcement in the United States of the judgment. As part of this ability to recover damages, the bill authorizes the initiation of an action by a Canadian company to recoup the legal costs incurred in defending a Helms-Burton lawsuit while the suit is ongoing.
Finally, the bill will improve the penalties that can be applied under the FEMA for violation of an order prohibiting compliance with objectionable extraterritorial legislation such as the existing U.S. embargo legislation. This increase in the penalties was necessary so that FEMA's penalties match the fines imposed under the U.S. Cuban embargo legislation prohibiting trade with Cuba and operate as an effective deterrent to compliance with this legislation.
The Canadian government believes that these amendments will go a substantial way toward enabling Canadian companies to continue to trade and invest in Cuba by deterring U.S. claimants from suing under Helms-Burton and by giving Canadian companies effective tools to protect themselves against lawsuits, should they be initiated.
The government also believes that this is a measured and appropriate response to the threat posed. As Ministers Axworthy, Eggleton and Stewart said in the context of introducing this bill, Canada and the United States share common objectives with respect to Cuba. Both countries would like to see steps taken toward democracy, economic reform, and a greater recognition of human rights. We differ in the approach. The U.S. has adopted a policy of isolation; Canada, on the other hand, believes in a policy of engagement.
We have launched a small but important package of assistance which has allowed Canadians in the non-government sectors to assist Cubans at a time of economic activity. We have a modest but very active Canada Fund for Local Initiatives aimed at supporting grassroots development administered by our embassy in Havana. As a result, Canadians are working with a variety of Cuban organizations, some becoming more independent of the Cuban government. We are also working with the Cuban government to pinpoint areas where Canadians can help to modernize some of its key economic policy institutions.
Our dialogue with Cuba has always included a frank discussion of human rights. We have voiced our concerns about Cuban constraints on such civil and political rights as freedom of association, freedom of expression, and freedom from arbitrary detention. For example, Canada objected to the detention earlier this year of members of an emerging human rights organization, the Concilio Cubano. We have also raised these concerns in the UN General Assembly and the commission on human rights.
This kind of dialogue has contributed to some positive actions by Cuba. Last year, Cuba ratified the UN Convention against Torture. Cuba has also had discussions with the UN Commissioner on Human Rights and several international human rights organizations.
Canada, of course, strongly condemned the shooting down of two civilian aircraft by the Cuban airforce on February 24, the incident which helped provoke the passage of the Helms-Burton Act, and we were active in the consideration of the incident by the International Civil Aviation Organization, ICAO.
However, we do not think Helms-Burton is the way to deal with the Cuban problem. It risks pushing Cuba further into isolation and diverts attention away from Cuba itself.
Both the European Union and Mexico have either adopted or authorized for adoption equivalent legislation to Bill C-54. Mexico's legislation came into force on October 24, and the European Union's foreign ministers agreed on October 28 to adopt EU-wide blocking legislation. These pieces of legislation contain blocking and clawback provisions similar to our legislation, as well as penalties like those imposed under Bill C-54 for compliance with objectionable foreign trade laws.
In closing, I should like to stress, as Minister Eggleton did when he was speaking to this legislation in the house, that all of the amendments proposed in the bill are moderate and defensive in nature. Hopefully, they will never have to be employed. They are a reactive antidote, if needed, but it is vital that they be available to Canadian companies in order to provide them with the tools to protect themselves, should this ever be required.
Thank you for your attention. We would be happy to answer any questions you might put to us at this time.
The Chairman: I should like to ask a preliminary question.
On the basis of your statement, Mr. Wright, I formed an evaluation. Let me put it before you to see if I am correct.
The purpose of the bill is to provide better protection for Canadian persons against the new U.S. law commonly known as the Helms-Burton Act. It supports the accepted doctrine of international law relative to attempts by national legislatures to legislate extraterritorially.
It might be useful if someone would tell us what the accepted doctrine with regard to purported extraterritorial legislation is. What is the doctrine?
Mr. Wright: You are correct on both points. I will turn to my colleague, Mr. Lauzon, who can comment on the doctrine.
Mr. Gilles Lauzon, Q.C., General Counsel, Department of Justice: There are a number of bases on which states can legislate. The most acceptable basis is territory, which means that you govern the actions of citizens and of other persons on your territory. That is the normal basis of jurisdiction. Other, more exceptional bases, are also acceptable. One is nationality. Sometimes you can regulate the conduct of your own nationals when those nationals are always abroad.
Some other bases are unacceptable. There is the so-called "effects doctrine". If you perceive that some action committed abroad might have some sort of effect at home, then you might choose to legislate on this and require people abroad to conform with your idea of what is right and what is wrong.
In Canada's view and in the view generally of the international community, this is not a proper basis for jurisdiction. More proper bases are territory and, in some cases, nationality.
The authors have had much to say on this, as have the courts to a limited degree. Those are the accepted bases of jurisdiction.
The Chairman: Am I correct in thinking that, when Canada makes a law with regard to the governance of a mercantile vessel operating on the high seas, that is an example of the second kind of permissible legislation?
Mr. Lauzon: On that point, I think you are right. You can attach to that what is called the "personality principle".
The doctrine of extraterritoriality gets all its force when you have a conflict between two states. A state can object to the extraterritorial legislation. When dealing with the high seas, of course, there is no territorial sovereign. As a rule, there is no one there to object. It is accepted in maritime law that we can legislate in relation to what happens on Canadian ships abroad. There is no problem there.
Senator Ottenheimer: This bill expresses Canada's objection to extraterritorial legislation in the U.S. How do we, as Canadians, distinguish between our objection to this extraterritorial legislation and Canada's extraterritorial measures with respect to fishing beyond the 200-mile zone? I am not opposing that; I am from Newfoundland. However, in case an American were to ask such a question, what would you advise as a reply, rather than leave the room for matters of urgency?
Mr. Lauzon: My colleague from foreign affairs has the answer to that.
Mr. Douglas Forsythe, Economic Law Division, Department of Foreign Affairs and International Trade: That comment has been made before. The distinction lies in what Mr. Lauzon has identified. There is a clear conflict where we have a territorial state, Canada, which has certain laws and policies that the Americans have violated in exercising territorial jurisdiction.
In the case of the jurisdiction of fisheries, we had a situation where there was no territorial state with which to have a conflict.
As its basis of jurisdiction, the United States is claiming that it is justified by the effects doctrine to which Mr. Lauzon referred, but clearly it is almost indefensible to say that an expropriation which took place 35 years ago somehow resonates and has an effect in the territory of the United States today.
In the case of the fishery, we were dealing with a direct impact on Canada. It was quite a different case. It was an apples and oranges comparison for them to characterize what we were doing as being the same as what they were doing under Helms-Burton. I think this will be a matter for argument if the Canada-Spain case ever proceeds on its merits. It will be argued at The Hague.
Senator Ottenheimer: I will try to remember that in case I am ever caught in that situation.
The Chairman: I want to ensure you that I understand the answer. You are saying that, in the case of our amendments to the Coastal Fisheries Protection Act, we were dealing with an area of sea in which there was not an established national jurisdiction; is that correct?
Mr. Forsythe: We have a conflict in the sense that there is a flag state involved.
Another element should be introduced here. This is a question of international agreement or international consensus with respect to when the application of extraterritorial law is appropriate. Clearly, that is not the case in the United States action.
The Chairman: You are saying that in certain situations international law does accept the possibility of extraterritoriality.
Mr. Forsythe: That is correct. If you were to examine the Criminal Code of Canada, you would see that it contains a number of sections where the Parliament of Canada exercises its right to apply extraterritorial jurisdiction. Almost always, it follows international agreements, which are usually conventions in this post-war era.
In the case of the fishery, we were arguably ahead of international agreement, but as I think subsequent events have shown with conventions on straddling stocks, that Canada was reflecting a consensus at the time we took our controversial measures.,There was a consensus building within the international community that this was an appropriate measure for a state to take to preserve straddling stocks. That consensus has since been expressed in agreements with the United Nations. This consensus is completely absent in the case of the American actions.
The Chairman: You are saying that it is impossible to argue that there are relevant effects from what happened in Cuba many years ago, whereas in the case of our legislation, the effects were clear and present.
Mr. Forsythe: I would not say it is impossible to argue about the Cuban case because that is exactly what the Americans do argue, but we think it is an extremely weak argument and we dismiss it.
Senator Grafstein: This is quite important. Let me see if I can phrase my question in a way that is acceptable from my perspective.
To say that the Coastal Fisheries Protection Act breaches international law is inappropriate if one accepts the position that international law depends on strong consensus or precedent. In other words, Canada is not in breach of any law that it has entered into. It has exempted itself from the international law, and, therefore, it is not a precise precedent in terms of a conflict with international law as it applies to the Coastal Fisheries Protection Act.
I am trying to draw a distinction between established principles, conflict between the states, and territorial rights on the one hand and a non-clear consensus of rights on the other hand as it applies to the Coastal Fisheries Protection Act. Is that a fair way of dividing the two cases?
Mr. Wright: I wish to add a point here. We are here to talk about the Helms-Burton Act. We will try to answer any question that either you or senators put to us on this question, but we are here to talk about Helms-Burton, not Canadian fisheries policy or the Fisheries Act.
Having said that, if it is your view that we should continue down this road, we would be happy to try to answer your questions.
The Chairman: The problem is a fundamental one -- at least, for me it is. That is why I started as I did.
Are there situations in which extraterritorial legislative actions are acceptable in international law? You have said "Yes". You have then said that the Helms-Burton statute does not come within the parameters of what is acceptable and you have explained why.
Consequently, I feel comfortable to examine the terms of the bill.
Senator Ottenheimer: I do not disagree with that. It is a basic matter.
The question of "extraterritoriality" is an important one. In dialogue with Americans, it is a question on which they could push us.
Leaving that aside, am I correct in assuming that the Government of Canada introduced this bill because they felt they did not have other recourse with respect to Helms-Burton?
If that is the case, what, if any, recourse is there under the GATT or NAFTA? Are they possible means of protecting Canadian interests, or are they irrelevant?
Mr. Wright: There are courses of action that we can pursue both under the World Trade Organization and under the NAFTA.
We have agreed to join with the European Union. It is their case, but we will be active third parties to the dispute that they have initiated with the United States on this. We will be examining the consistency of this action with the WTO, and we have reserved our right to proceed to the next step under the NAFTA as well.
If you are interested in the detail of which provisions of either the WTO or the NAFTA we might be examining, we would be happy to go into that. Would you like us to do identify that detail?
Senator Ottenheimer: It would be helpful.
Mr. Wright: Perhaps Ms Osendarp can go through the cases.
Ms Joanne Osendarp, Trade Remedies Division, Department of Foreign Affairs and International Trade: As Mr. Wright was saying, we have already said that we would be participating as a third parties party in the EU's WTO challenge.
With respect to that and the grounds that they will be using, there are GATT and GATTS grounds. But I will not comment extensively on the WTO case.
With respect to the NAFTA challenge, we said to the Americans, in a letter requesting a commission meeting on June 28, that we would be looking at chapter 3, concerning goods; chapter 12, the services chapter; chapter 11 in particular, which governs investment; and chapter 16, which governs entry of business persons into the territory of NAFTA partners. Those are the chapters we will be looking at in our NAFTA challenge.
The Chairman: Where does that action stand now? What is the timetable?
Ms Osendarp: We have gone through all the procedural requirements to be in a position now to request a panel. We have had two rounds of consultations -- the first on April 26 and the second on May 28. We also had a NAFTA commission meeting on June 28. These consultations were required before we could actually ask for a NAFTA panel.
We are presently studying the timing of the request, but we could request a panel immediately because we have been in a position to do so since the end of July.
Senator Bolduc: There are three steps. You have taken the first one. Will the second be the panel?
Ms Osendarp: We have actually done the first two. There are three steps. We have had consultations and our commission meeting. The third step is the request for a panel.
Senator Ottenheimer: Since there are possible remedies under WTO and NAFTA, is it a fair statement that part of the reason for the legislation is to show solidarity with the European Union and to mend our fences as an act of enlightened self-interest? I am not saying that that is reprehensible, but would that be part of the reason for the legislation?
Mr. Wright: I stand to be corrected, but I think we introduced our legislation before anyone else did. We took the first step in putting forward this legislation ahead of both Mexico and the European Union.
Part of it is because we are not totally comfortable our rights, under both the NAFTA and the WTO, would be adequate to protect the interests of either Canadian business people, businesses in the U.S. under Title III, or business persons and their families travelling to the United States under Title IV. We wanted to protect ourselves both ways.
The Chairman: I wish to stay with this issue because it is fundamental.
We have here a bill to amend a statute which was enacted in 1984. Do other countries which are directly involved in the present discussion have legislation comparable to our Foreign Extraterritorial Measures Act, 1984? Does France have it, or the United Kingdom, or Mexico?
Mr. Forsythe: Yes, the United Kingdom certainly does. They have the Protection of Trading Interests Act, upon which we drew as an inspiration for the original Foreign Extraterritorial Measures Act.
France possesses certain regulatory powers to block, but nothing really comparable. Hence, the EU's recent decision to adopt similar legislation on an EU-wide basis to bring in consistency.
The Chairman: To state the obvious, you are not breaking new ground here; you are simply beefing up the provisions which Parliament has already made.
Mr. Forsythe: You are quite accurate that the legal principles have been established in the legislation.
The primary subject of amendment are sections 8 and 9 which gave blocking and clawback rights in respect of foreign anti-trust or competition law judgments and court actions. Basically, we are expanding that to a wider range of legislation -- in this case, Helms-Burton.
Senator Bolduc: One of the objectives of the bill is to redress in Canadian courts and to have redress against U.S. claimants. This will be efficient for the Canadian assets of those companies, but what about the American assets of Canadian companies?
Mr. Forsythe: There is no question that this is not effective in the sense that we cannot, ourselves, take the extraterritorial step to purport to tell American courts what to do. However, any potential American litigant would know that a clawback action was a possibility in Canada and would have to weigh the balance. Is it an absolute protection for Canadian assets in the United States? Certainly not, and we have never tried to tell any one that.
Senator Bolduc: You have clear but limited objectives.
Mr. Forsythe: That is correct.
Senator Grafstein: If this goes too far in terms of your analysis, please let me know.
Examining Helms-Burton for a moment in the American context, have either the Department of Justice or advisors in the United States given us any views respecting the ability to challenge Helms-Burton in the courts in the United States? Has anyone examined the remedies that a private or governmental claimant might have in the United States domestic arena to challenge Helms-Burton?
Mr. Forsythe: We are aware that a lot of analysis has been done. Are you asking whether the Government of Canada is considering such litigation?
Senator Grafstein: The government of Canada might support a Canadian in a domestic challenge -- domestic in the sense that it is a challenge within the court system of the United States -- to try to muzzle Helms-Burton.
Mr. Forsythe: There are certainly Americans, some of them lawyers, who have been fairly public in discussing what they see as constitutional weaknesses of Helms-Burton, and we monitor the arguments for and against. It would be overstating it to say that we are actively studying the matter, in the sense of planning on participation, although if there were a Canadian involved in litigation, should it come to that, I am sure we could consider it, but that is a matter for another day and something to which I cannot speak.
Senator Grafstein: It is my understanding that Helms-Burton breaches well-established domestic precedents in the United States with respect to expropriation. I thought it was pretty clear under domestic law in the United States that, if someone had a claim, they could not seek to enforce that other than through the appropriate domestic legislation. Is that correct?
Mr. Forsythe: This is ground-breaking in terms of not just international law but also United States domestic law, and as to how a U.S. court would rule, I suppose we would have to invite U.S. counsel here to get a better answer.
Senator Grafstein: If American claimants have a concern about the confiscation, expropriation, or whatever in Cuba, aside from Helms-Burton, do they have a right to go to the domestic courts in the United States and then have that judgment enforced? In other words, the normal practice under comparative law here is to pursue your remedy in the Canadian system and then to take that judgment, if you succeeded, and try to have it enforced by extraterritorial means. That is proceeding by the rule of law, to my mind. In other words, if we are unhappy with something in the United States, we can proceed under either our domestic legislation or American legislation, choose our venue, and then, if appropriate, have that judgment enforced third party. Are there mechanisms for that in the United States?
Mr. Forsythe: There is some rather speculative litigation going on right now which claims to have a cause of action relating to property that is in Cuba that was expropriated from an American, and some claimant has emerged saying that there is a cause of action. That is being contested by the defence, as far as I know. Helms-Burton is giving a right of action that did not hitherto exist. I am not too sure if the claimant in the U.S. would have a right to bring a claim in a U.S. domestic court. U.S. law provided the Foreign Claims Settlement Commission.
Senator Grafstein: Please tell us about that.
Mr. Forsythe: The Foreign Claims Settlement Commission is a U.S. body connected with the treasury. In cases of situations where American nationals had property expropriated by foreign governments, there was a process whereby this body, the Foreign Claims Settlement Commission, would hear claims by Americans and would decide whether or not they were appropriate for the United States government to espouse -- that is, to step in and advance these claims to the foreign state -- and they would assess and put a value on those claims. In the case of Cuban expropriations, they closed the books on those claims in 1971.
This is a one-sided, unilateral process; it has never been presented as anything else. There are similar processes in Canada. We had a Foreign National Claims Commission until recently, which dealt with similar situations. On the basis, then, of adjudications unilaterally, a state would go to a foreign government and say, "We have these claimants and we are satisfied that they meet the criteria of international law and our domestic proceedings. Here is a dollar value." It usually goes to a settlement.
Senator Grafstein: That process is still open to claimants.
Mr. Forsythe: That is right. It is open to the U.S. and Cuba to negotiate a claim.
Senator Grafstein: I am trying to follow the rule of law here because one of the arguments is that this is contrary to international and domestic rule of law.
If I were a claimant on the issue to which the United States government is directing its attention, which is confiscation or expropriation of property, is there a claim available to me as a Canadian, or to an American in the international court process? We have talked about the domestic court process and extraterritorial matters. Are there international organizations in the Hague that can deal with expropriation issues? In other words, what are the international rights or remedies available to an American making such a claim?
Mr. Forsythe: Very often now investors have agreements with states when if they make investments, that there will be reference to arbitration panels, and so on. It is a matter of public international law. A private citizen does not have such a right. A state advances the claims, often at the Hague.
Senator Grafstein: To clarify, assuming an individual can convince the American government of the legitimacy of his claim, can the United States, state to state, then make a claim through the international legal process?
Mr. Forsythe: They are generally resolved through diplomatic means, which lead to claim settlements. There are procedures which allow for litigation of claims, such as the famous Barcelona traction case at the International Court of Justice. There must be an agreement to litigate there in those instances.
Senator Grafstein: I do not want to lead you too much but I assume that there would be a remedy through the international courts if the United States chose to support an individual claimant. I am going back to the original processes. If my international law experience is correct, if the United States government were concerned with a ship going down and they wanted to have that remedied, they could then litigate through an international process, provided it was the state that was making the claim as opposed to the individual, or the state supporting the claim on behalf of the individual.
Mr. Forsythe: There are processes for the state to advance claims on behalf of an individual.
Senator Andreychuk: I have a political question rather than a legal one.
Some people have argued that, while we protect certain businesses now by this legislation, Castro's time is limited if by nothing else, by age, and that we could end up with a situation where the then Cuban government, in the foreseeable future, would negotiate with the Americans or with certain individuals to reintroduce this sort of legislation. They may say that outsiders do not understand the linkages between Americans of Cuban descent and Cubans. They could be working both sides of the equation. We may find ourselves without remedies with a new regime that may choose to compensate in these situations. Having chosen one side of the equation, we will be left out. Is there a response to that?
Mr. Lauzon: It comes back to what was said a while ago. If a situation developed right now with a Canadian company in Cuba, we are protecting the interests of that Canadian company through our legislation. An American might try to sue the Canadian, and the Canadian could come to Canada and claw back the amount of money he has lost. He is reasonably well protected. Further down the line, the government of Cuba may change and a decision could be made, for instance, to expropriate the property of that Canadian and give it back to an American or a Cuban-American who wants to return to Cuba. If someone is expropriated and no compensation is paid, or the compensation is not acceptable, then Canada can be in a position of a state that espouses the case of one of its citizens and can obtain satisfaction through diplomatic channels for that Canadian citizen. If that does not work, then there is the possibility of recourse to international tribunals. One is not without legal remedy.
Senator Andreychuk: What is your present position or policy on compensation for property expropriated by other countries? Is it time-limited? Is it decided on a case-by-case basis? What is our position on expropriations by foreign governments?
Mr. Lauzon: I would suspect that, to a degree, it is on a case-by-case basis. If one were to consider the circumstances under which a property were expropriated, one would see what procedures exist in the country concerned and assess whether the property was evaluated fairly and reasonable compensation offered.
In Canada, we expropriate people. It happens when we build a highway or a power dam. However, we have mechanisms that allow for compensation. We believe that, generally, these are fair mechanisms and no one could or should complain. If they are a foreign person, their governments should not complain.
That might be the general legal answer, but perhaps there is something on the policy side.
Mr. Forsythe: We subscribe to the principle that full, prompt and adequate compensation is what the foreign investor should expect in the case of expropriation. The foreign investor should look for local remedies.
In the case of Canada, we have a mechanism to provide satisfaction. We espouse the claims of our nationals in cases where they are expropriated in foreign situations. As Mr. Lauzon said, one would have to examine a case on its individual merits.
In the case of the post-war expropriations by socialist regimes in eastern Europe, we have negotiated settlements on behalf of Canadians.
Senator Andreychuk: In one year's time if there is a different government in Cuba and if they reinstated the previous owners because there was not fair, adequate or any compensation, what would Canada's position be?
Mr. Forsythe: I am not sure I am in a position to state what Canada's position would be in the future. However, in the past, we have protected the interests of our investors. Your question is hypothetical, I am afraid.
The Chairman: Do we make a distinction between a situation in which there is a change of government policy which affects a particular expropriation on the one hand, and a situation where there is a revolutionary change such as took place in Russia in 1917?
I am thinking of the bonds. As I recall, people in the west who had bonds from the pre-revolutionary regime felt they should have been compensated. I do not want to go into the details of that, but do we make a distinction between a situation where there is a change of government and, consequently, a change of policy, and where you have a revolutionary disturbance? Is that a distinction of any relevance?
Mr. Forsythe: I am not aware of a distinction. You may, as a matter of policy, take a different approach to the settlement of claims within a certain country if there is a revolution and mass expropriation, rather than a single expropriation.
Senator Grafstein: I wish to return to a couple of legal questions. If this is beyond your purview, let us know.
We are a member of OAS, as is Cuba. Are there any trade dispute mechanisms in OAS that could have been exercised by the United States?
Mr. Ross Snyder, Deputy Director (Cuba), Caribbean and Central America Relations Division: I am not aware of any specific trade dispute mechanisms within the OAS.
Senator Grafstein: Is there no methodology there? The OAS has unanimously, save for the United States, condemned the Helms-Burton legislation. Are there any trade remedies within the various agreements that make up OAS?
Ms Osendarp: Not that we are aware of. As Mr. Wright was saying when he was introduced, what the OAS did was refer the issue of the Helms-Burton legislation to the Intra-American Juridical Committee and the committee issued its report in August. This report was clear that the Helms-Burton Act was inconsistent with international law for a variety of reasons. Mr. Wright cited three of them, but the report is full of reasons. Aside from that, we are not aware of any dispute-resolving mechanisms.
Senator Grafstein: You are not aware or have not examined whether it fell below any norms established within OAS?
Ms Osendarp: No.
Senator Grafstein: I am referring to norms versus precedents.
Mr. Snyder: They made their judgment in terms of international law. There are not any hemispheric mechanisms for dealing with a situation like this, and certainly nothing that we are aware of within the OAS.
Senator Grafstein: If there is, that would be helpful to us. We have not explored that and I can find no literature on it.
My other question relates to indemnity. What right has a Canadian firm which is challenged by the Helms-Burton legislation, which is apparently in breach of international law, to seek indemnity from the Cuban government?
What is the remedy for Canadian companies using property according to Cuban law and who have been effectively clawed back by a third party? What remedies do we have under international law against Cuba or under any treaty that we might have with Cuba if Canadian companies are innocent parties? They are invited in and are proceeding according to Canadian-Cuban relations. They are good corporate citizens as far as Canada is concerned and they are now caught, unfairly, in an international struggle that is not of their making.
Is there any protection under either international law or under our agreements with Cuba or otherwise that give solace to those Canadian companies that are affected by this?
Mr. Forsythe: Earlier we alluded to the principle of international law respecting Cuban's obligation to compensate. Senator Andreychuk referred to a possible hostile regime taking back Canadian investments. Then they would be contravening principles of international law.
We have no agreement with Cuba yet, though it is being considered, that would provide us further protection. Much would turn on property arrangements that Canadian companies have with Cuba, of which I must confess complete ignorance, to see what kind of redress may be available under Cuban law.
We would have to know about each transaction to give you an informed view.
Senator Grafstein: Again, if you examine the legislation you will see that it over-reaches its target when it comes to the question of damages. For example -- and there is the other challenge in the American courts -- if I buy a cigar and I then sell that cigar to someone else, assuming that the tobacco for the cigar was grown on a confiscated farm, a farm which was nationalized, is it true that, under a fair reading of the Helms-Burton legislation, I can be held liable for the value of the farm, not the value or the profit that I might make on the sale of the cigar?
Mr. Forsythe: That is exactly our reading of the bill. The amount that could be claimed as damages is totally disproportionate to your economic involvement.
Senator Grafstein: Is there any United States domestic legislation or protection to say that the quantum of damages is out of keeping with the proposition? In other words, in Canada, there would be a corrective mechanism at common law. We are dealing with administrative and international law here, so that makes it more complex. Is there any protection for exaggerated damages?
Mr. Forsythe: None of us here is U.S. counsel, but I was referring earlier to the fact that a number of opinions exist citing possible points of attack on the Helms-Burton act. This totally disproportionate damage is one that has been identified by some U.S. lawyers of which we are aware. I am afraid I cannot provide any more information for you.
Senator Whelan: I do not know where to start because I have many comments to make about Cuba and about what the government has and has not done.
I believe some of you were involved in the NAFTA deal.
There are other acts in the United States which are contrary to international laws and rules of trade. One act which was contrary to any agreement was the Agriculture Export Enhancement Act. I can find no place in the records, though it may exist, where the Canadian government ever stood up and opposed that act. They never said to them, "What you are doing is wrong. It is illegal. You are beating down our trading partners."
I remember when the former assistant secretary of agriculture, John Norton, from Arizona, wanted to be secretary. Dole and his colleagues would not allow it. He was here later and said that it would "beat the hell" out of our trading partners and was contrary to every international agreement they had. Do you have any comment on that?
Mr. Wright: This is on another program, senator, but I do clearly recall this issue. We did object for many, many years, to the EEP, the export enhancement program, as you know.
I am pleased to report that, as a result of the last round of trade negotiations, the United States has agreed to eliminate that program.
Having said that, you are correct. This is a problem which we have faced for many years. We have let the U.S. government know our strong objections to the way it has been managed.
Senator Whelan: I was in the private sector for a few years, not according to my own wish but because I was fired. I worked with a large financial institute on a proposal to build a hotel complex in Cuba. It included a retirement centre. That was at least eight years ago.
Our deal was finalized for $26 million. Meanwhile, a huge financial institute in Toronto was buying a bank in California for about $350 million, a big deal compared to our little hotel in Cuba. They were sitting around the table with the California bankers and were asked where their next project would be. When they answered that they would build a $26 million hotel in Cuba, the Americans threw up their hands and said: "Oh, no! The regulators will never give final approval of this deal if you are going into Cuba because they come under the Enemy Act' and you may take profits from this bank and use it for the Cuba property".
The financial institute cancelled the whole deal. We had airplanes booked for the next day and two houses rented in Havana where the dope dealers and racketeers lived before they moved back to Florida. I throw that in for good measure because that is what they were.
The deal was cancelled and they, in turn, lost the bank in California as well as another $1.5 billion in the United States.
When I see these types of situations, I remember a quote of Thomas Jefferson: Let no nation tell another how it shall be governed. How far they have strayed from that. The Cold War was perhaps a good thing because of the competition it created in the marketplace. Some of you will remember a man named Gorbachev and how we led him astray by showing him how to democratize his country.
Have you studied what has happened in other countries such as Germany? Do you know what happened to the property rights of families in East Germany?
Mr. Forsythe: Certainly the German situation is somewhat different. It is coloured because, by unifying Germany, the persons became nationals of the country in which the expropriations were done. That is different from foreigners having their properties expropriated. It is not an analogous situation. Germany has put up a very elaborate scheme, as you are aware.
Senator Whelan: The high court of Germany has said that the families have no property rights to those estates.
Mr. Forsythe: That has complicated their scheme.
Senator Whelan: That also involved Canadians and Americans who thought they had property rights in Germany.
Mr. Forsythe: It is not something which I handle directly. Other colleagues are working on the problem. Certainly the mixture of the proposed legislation and the constitutional decision has complicated the situation greatly.
Senator Whelan: The Helms-Burton law is contrary to everything we understand about freedom of movement and all the issues associated with international trade, and so on.
How can a government pass such a law? Why was there backing from both Democrats and Republicans?
The Chairman: I doubt that these witnesses are competent to answer that question.
Senator Whelan: When I was chairman of the county road commission, we did more work in five years than the province of Ontario did in 35. We bought land from farmers to widen roads. We never once went to expropriation. The matter was settled, maybe on the front porch or in the kitchen, but we never spent money on lawyers. We settled it by mutual agreement. Could that not be done internationally?
Mr. Forsythe: Yes, that is as Mr. Lauzon said.
Senator Whelan: Canada settled its land claims with Cuba in 1980. All the other countries settled then. Why did the United States of America not settle at that time?
Mr. Wright: You would have to ask that question of the U.S. administration, senator.
Senator Whelan: You do not know that? With all the information you are giving us on the Helms-Burton law, are you telling me that you do not know that? It would be interesting for the committee to have that information. I do not intend to pose the question of representatives of the United States of America. I would think our bureaucrats should know that.
Mr. Wright: I would be happy to speculate. You could not only ask the U.S. government, you could ask Senators Helms and Burton that question. The environment in which this act was passed was one in which they were responding to an act to shoot down U.S. planes. The political environment was such that the U.S. administration felt it was not in a position to veto the legislation.
We made our opposing views known in very strong terms at the time, both to the administration and to the Congress. We have been consistent in that all the way through, and have maintained that opposition since the legislation was passed. They are certainly very aware of the Canadian government's views on this legislation.
Senator Whelan: The witness raised another theory on the shooting down of the American planes. There is no any evidence to indicate there was anyone in those planes. In fact, there has been some evidence to indicate that they were radio-controlled planes. No search for bodies was ever conducted.
The Chairman: Whether or not it is accurate to say that there were people on those planes, the Helms-Burton statute is on the U.S. books and we have before us a bill which is designed to provide protection for Canadian companies to that U.S. legislation.
Are honourable senators ready to deal with the bill clause by clause?
Hon. Senators: Yes.
The Chairman: Honourable senators, before us is a bill to amend a statute. It is a bill containing nine clauses. Does any senator wish to deal with any one of the clauses in particular?
If not, honourable senators, shall clauses 1 through 9 of the bill stand part of the bill?
Hon. Senators: Agreed.
The Chairman: Shall the title of the bill carry?
Hon. Senators: Agreed.
The Chairman: Shall I report the bill without amendment?
Hon. Senators: Agreed.
The Chairman: Honourable senators, there is an item of committee business that I should like to raise with you. Before doing that, however, I wish to thank the witnesses for helping me personally, and other members of the committee, in a rather arcane topic, one with which I have had no familiarity, namely, the question of extraterritoriality. Your testimony has been very helpful. Thank you very much.
The meeting continued in camera.