Protecting Everyone's Right to Property

International & National Security Law Practice Group Newsletter - Volume 1, Issue 3, Fall 1997

December 1, 1997

Edwin D. Williamson

The recent agreement between the United States and the European Union designed to settle their differences over the Helms-Burton Act offers a great opportunity to negotiate a treaty that would confirm internationally recognized rules protecting property rights.

Last April, the U.S. and the EU undertook to "develop agreed disciplines and principles for the strengthening of investment protection" which "inhibit and deter the future acquisition" of property expropriated in violation of international legal principles. The parties set a deadline of Oct. 15, 1997. The U.S. agreed to continue its suspension of Title III of Helms-Burton, which permits U.S. nationals to bring claims in U.S. courts against anyone "trafficking" in property confiscated by the Cuban government, and to seek from Congress a legislative waiver of Title IV of Helms-Burton, which requires the U.S. to deny visas to "traffickers." The EU agreed to suspend its Helms-Burton challenge in the World Trade Organization.

The U.S.-EU agreement provides a splendid opportunity to establish, clearly and conclusively, in the form of a binding international agreement among the major industrialized countries of the world, international legal rules recognizing and protecting property rights. This is sorely needed, because the international recognition of property rights lags behind the recognition of other human rights. By concluding an agreement confirming property rights, not only would future expropriations in violation of international law be discouraged; a framework would be established for working out the existing claims involving Cuban property. Politically such an agreement is necessary. President Clinton must go back to Congress to get a waiver of Title IV. In addition, continued suspension of Title III will cause, at a minimum, an attempt in Congress to limit the president's suspension authority. Congress is unlikely to accept a deal with the EU that falls short of establishing binding rules protecting property rights and providing some promise of settling (or at least recognizing) the claims by U.S. citizens, including those who were Cuban nationals at the time their property was confiscated by the Cuban government.

Reaching an agreement establishing binding international rules regarding property rights should be quite easy. Such an agreement would prohibit expropriation of property unless done for a public purpose, without discrimination and with "prompt, adequate and effective" compensation. Parties to the agreement ("contracting parties"), as well as their nationals, would be permitted to institute arbitration proceedings against other contracting parties who violated the rules on expropriation. There is nothing unusual about these principles in the context of investment treaties. They are found in the North American Free Trade Agreement (NAFTA) and most bilateral investment treaties, and they are included in the draft multilateral agreement on investment (MAI) currently being negotiated in the Organization for Economic Cooperation and Development.

To provide additional deterrence to those who would seek to gain by the expropriation of the property of others, an international registry would be established for the registration of claims (whether by contracting parties of non-contracting parties) without meeting the standards prescribed in the agreement. Claims could be registered by a contracting party or by a national of a contracting party and would have to be registered within, say, two years of the alleged expropriation. The appropriateness of the registration of any claim could be contested in an arbitration proceeding brought by any contracting party or the national of a contracting party. A national of a contracting party would be able to institute arbitration proceedings for the uncompensated value of the property placed on the claims registry against nationals of other contracting parties who acquire the property. Such a claim could not be asserted by a national of a contracting party with respect to property expropriated by that contracting party, unless that contracting party had failed to provide the claimant with an effective domestic remedy. Such a claim could be asserted with respect to property wrongfully expropriated by a non-contracting party, notwithstanding the fact that the claimant was a national of the expropriating state at the time of the expropriation.

The treaty would confirm that everyone enjoys the right to own property and not to arbitrarily deprived of his or her property. The principle that confiscation does not pass good title to confiscated property would also be embodied in the treaty. Contracting parties would agree not to provide financing and other support for the development of property that had been placed on the claims registry.

Having established the principles for the protection of property rights, the U.S. and EU will have provided a framework for working out existing claims, particularly those involving Cuba. Title III could be replaced with the dispute settlement regime established under the agreement. The breadth and vagueness of the term "traffics" used in Helms-Burton could be replaced by a more precise concept of ownership. In deciding the existing claims, an arbitration panel would be instructed to take into account the innocence of any acquisition of confiscated property. Claims established before the U.S. Foreign Claims Settlement Commission would be presumed to provide a subsequent investor in the property with notice of the outstanding claim.

The first meeting between the U.S. and EU to negotiate the "disciplines and principles for the strengthening of investment protection" took place in Washington in June. A human rights treaty dealing with property rights should be adopted as the vehicle for the "disciplines and principles".

*Edwin D. Williamson, a former legal adviser of the US. Department of State, is a partner in the Washington, D.C. office of Sullivan and Cromwell.