Lawyer 2 Lawyer

Legal Issues in Doing Business with Cuba

On December 17, 2014, President Obama announced that he was rejecting “the failed, Cold War-era policy era of the past to chart a new course in Cuba.”  Since then, we have made great strides in rebuilding our relationship with Cuba by re-establishing diplomatic relations, empowering the Cuban people through regulation, and finally, facilitating travel to Cuba. For attorneys, some see this as a great opportunity to expand their business or even create strong, lasting relationships with Cuba.

In this episode of Lawyer 2 Lawyer, hosts J. Craig Williams and Bob Ambrogi join legal affairs writer Victor Li and Aliette DelPozo Rodz, partner in the Miami office of Shutts & Bowen LLP, to discuss the legal issues in doing business with Cuba and the opportunities for law firms to expand into Cuba.

Victor Li is a legal affairs writer who joined the ABA Journal staff in 2013. He is a former reporter for Law Technology News, the American Lawyer magazine and Litigation Daily (NYC). A former prosecutor in the Bronx, Victor recently wrote a piece for the ABA Journal titled, “A New Dawn for Cuba as it Opens for Business.”

Aliette DelPozo Rodz is a partner in the Miami office of Shutts & Bowen LLP, where she is a member of the Business Litigation Group and Chair of the Cuba Task Force and the firm’s Diversity Committee. She is also co-chair of the firm’s Focus on Women Group.

Special thanks to our sponsor, Clio.

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Lawyer 2 Lawyer: Law News and Legal Topics

Legal Issues in Doing Business with Cuba

11/24/2016

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Victor Li: There is that element of forbidden fruit. This has been a country that’s been off-limits for a long time, the lure of getting in there and establishing yourself and really getting it on the ground floor is something that’s appealing to a lot of businesses.

Aliette DelPozo Rodz: The opportunity component is really what I think is enticing our clients from the perspective of what’s going on, what can we do? Real estate transactions are limited right now, but there’s so many other opportunities that Cuba is very much interested in.

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Intro: Welcome to the award-winning podcast, ‘Lawyer 2 Lawyer’ with J. Craig Williams and Robert Ambrogi, bringing you the latest legal news and observations with the leading experts in the legal profession. You are listening to Legal Talk Network.

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Bob Ambrogi: Hello and welcome to ‘Lawyer 2 Lawyer’ on the Legal Talk Network. This is Bob Ambrogi coming to you from Boston, Massachusetts where I write a blog called ‘Lawsites’, and I also co-host another Legal Talk Network program called ‘Law Technology Now’, along with Monica Bay.

J. Craig Williams: And I am Craig Williams coming to you from Southern California. I write a blog named ‘May it Please the Court.’

And Bob, before we introduce today’s topic, we’d like to thank our sponsor Clio. Clio is the world’s leading cloud-based legal practice management software. Thousands of lawyers and legal professionals trust Clio to help grow and simplify their practices. You can learn more at  HYPERLINK “http://www.Clio.com” Clio.com.

Bob Ambrogi: Craig, I’m really looking forward to today’s program as you know I just recently returned from my first visit to Cuba, which I found to be a very beautiful country, filled with very kind and beautiful people. My ability to travel there resulted from an announcement made by President Obama on December 17, 2014 that he was rejecting “The failed, Cold War-era policy era of the past” to chart a new course in Cuba.

Since then the two countries have taken major steps to normalize their relationship including re-establishing diplomatic relations and loosening trade and travel restrictions, and as our relations with Cuba have thawed, many attorneys are seeing opportunities for their own practices in that thawing and many of their clients are seeing opportunities for their businesses.

So today on ‘Lawyer 2 Lawyer’ we’re going to talk about legal issues in doing business in Cuba and the opportunities for law firms to expand into Cuba.

J. Craig Williams: Well, Bob, to help us do that today is our first guest Victor Li. Victor is a legal affairs writer who joined the ABA Journal staff in 2013. He’d been a reporter for Law Technology News, The American Lawyer magazine and Litigation Daily. He is a former prosecutor in the Bronx. Victor earned a J.D. from Tulane, an M.S. from Columbia University School of Journalism and a B.A. in History from Amherst.

So Victor, recently you wrote a piece for the ‘ABA Journal’ entitled, “A new dawn for Cuba as it opens for business.” Just one quick note, Victor does not speak for the ABA or the ABA Journal but is relaying his personal findings. So we’d like to welcome you to the show, Victor.

Victor Li: Thanks Craig, thanks Bob. Great to be here, and thanks for adding that disclaimer before I said anything, so I appreciate that.

Bob Ambrogi: Great to have you, Victor; and also joining us today is Attorney Aliette DelPozo Rodz, a partner in the Miami Office of Shutts & Bowen LLP, where she is a member of the Business Litigation Group and Chair of the firm’s Cuba Task Force as well as the firm’s Diversity Committee. She is also co-Chair of the firm’s Focus on Women Group. Welcome to the show, Aliette.

Aliette DelPozo Rodz: Thank you. Thank you for having me Bob and Craig.

Bob Ambrogi: We are really happy to have you here today. Aliette, I wonder if I could just start by asking you as a Cuban-American yourself how do you personally feel about this warming of relations between the United States and Cuba?

Aliette DelPozo Rodz: I am nothing shy of a static as to this warming of relationships between the two countries. It is unfortunate that we’ve had this embargo as long as we’ve had in my opinion. I don’t find that it really has had any real benefit, and the fact that we have moved towards opening up the trade and commerce avenues albeit slowly but a step in the right direction, I think is a wonderful sign of progress.

J. Craig Williams: Victor, has everyone been in favor of this opening or there have been some people who have been trying to fight it and stop it?

(00:04:55)

Victor Li: Well, the lawyers I spoke to for the peace, there were Cuban-American lawyers, and they obviously had some mixed feelings about President Obama’s actions and what that has meant going forward, Steven Zack, who was the former ABA President, was prominently featured in the article and his family lost everything during the revolution. They own some factories and their house got ceased, then they were put under a house-arrest for a couple of months before they were able to leave, and some of the other lawyers I spoke to as well had similar stories like, there are couple of partners at Akerman Senterfit who are you helping to spearhead a lot of this investment opportunities for businesses like Airbnb and whatnot, and they had relatives involved in the Bay of Pigs Invasion.

So this isn’t something that they kind of took lightly, this is something that gave them some mixed emotions and some pause as to what they were doing, but on the other hand they saw it as an opportunity to help try to bring in American legal traditions and respect for the rule of law, and they feel like it’s a good way to kind of if not bring about change in Cuba, but to kind of push Cuba towards accepting at least some of these changes to liberalize the country and open it up for following generations.

So they see it as an opportunity, and obviously there’ll be some lawyers I think who will never forgive what happened, will never accept just be able to move on. The ones I spoke to for the peace who were actually involved in doing some of this work, they were able to kind of look at the big picture.

Bob Ambrogi: I thought that was an interesting part of your article. Victor, you mentioned that some of the lawyers believe that engaging with Cuba is really the best way to move Cuba forward. Alette, I wonder what’s your perspective on that?

Aliette DelPozo Rodz: Can I tell you? It’s interesting. There are two things that you hear from Victor, which, Victor, you’re absolutely correct. It’s emotion and then practicality and pragmatism, right? From an emotional perspective, of course, everything that happened with regard to the Bay of Pigs and what has happened to thousands of people as a result of the Communist regime, has been devastating on many, many families, and many families have been separated, many have lost, and so, that emotional aspect, I don’t think 50 years can change, and so from that perspective you are always going to obtain and have a group of people that simply don’t even want to hear about Cuba because they’re so emotionally tied to the past.

Now, the reality is, what was the purpose of the embargo and what effect has it had over the last 50 years? And if you look at that purpose and effect, you realize that from pragmatic perspective you understand that it simply didn’t work and allowing business and the doors to open and for there to be flow of information of communication of opportunity is somewhat allowing the Cuban people to broaden their horizons.

I’ve been in the island nation and seen the excitement that the Cuban nationals have over the changes that have taken place between the United States and Cuba, and when you walk the streets and you talk to the people you will realize how educated a lot of the community is. It’s not what you see on television, it’s not this community that is uneducated and just simply not skilled, they want to learn, they want to grow, they want to prosper.

Take Miami for example; the Miami Cuban community, which is quite significant, built Miami to what it is today, a magnificent metropolitan city. They were really at the foundation, so you look at what is that Cuban inertia of ambition and business and growth, and you can see the great potential that there is by opening up the boards. We are so close, we are such a hub that if you separate the emotion and you understand and respect that emphasize of course with that aspect it’s really parallel and wholly separate from the reality that the embargo did not change, communism did not bring it down, and perhaps doing business and opening these doors and not allowing there to be an excuse for actions taken in the island nation can perhaps do a different change in a positive manner, to do a pragmatic and business approach. I think it’s great quite frankly.

Bob Ambrogi: Yeah, I have to say I certainly felt that during my trip there that I was welcomed with open arms and a lot of enthusiasm. I actually met a lot of Cubans who had never met somebody from the United States before and it was interesting to have conversations with them. I don’t speak Spanish well but I would happen to be telling that my son who is very fluent in Spanish, so that made it easier for me.

Aliette DelPozo Rodz: You know, I met an engineer that was talking to me about the passion of what he does and how he does it and I’ve spoken to many lawyers about their business and how they love what they do and how prosperous they have been within their business, and of course, within the confines of their planned economy and Communist regime. There are pauses, there are issues, no question, but the people really are inviting. They are very much excited for this change, and I think that that if you look at the regulations that the United States has put forth and the effect that they have for the betterment of Cuban people, they truly had a positive cause to them.

J. Craig Williams: Verizon Wireless is the first cellular provider to start its roaming capabilities there and I’m sure that there will be businesses that will follow, but —

Bob Ambrogi: AT&T did the day after I returned. We should try to have AT&T.

Aliette DelPozo Rodz: Yeah, I will try it, I will try it.

J. Craig Williams: And some people, if you travel to Mexico, at least in Southern California a lot of people travel to Mexico and you’ll see Kentucky Fried Chicken and Dairy Queen, and there’s a lot of people to decry the Americanization of foreign countries with McDonald’s and some other things that we put out there. What’s the future of Cuba for business and are we going to see some Americanization?

Aliette DelPozo Rodz: I think Americanization is — what’s that saying, Bob, when in Rome, do like the Romans. When in Cuba, we are going to do like the Cubans want us to do. It’s their island nation and you do have to go through different areas of power as to approvals. And so they have, they are very specific and I’ll say it in Spanish what it is [Spanish] which is their list of what are the foreign opportunities for investment?

I think they will dictate what happens in Cuba. I don’t think that we can pretend to expect the United States or Americans to do that. Keep in mind that Europeans, Asians, Latin corporations are already in Cuba doing business as Cuba has allowed them to do. We are coming to the table if you will, late, but nonetheless geographically we are so well-positioned that we have a greater advantage to these competitors with regard to business because of our proximity to the island nation.

Bob Ambrogi: Victor, I know that your article came out in June and given that I know the ABA Magazine publication cycle I suspect you had to submit it several months before that.

Victor Li: Yeah.

Bob Ambrogi: A lot has changed, probably already since then, but what did you find, what are – I think you spoke primarily the US law firms, I don’t think you spoke to lawyers in Cuba for your article, but what are US law firms doing now as relationships are warming with Cuba? What are they hoping to do with regard to Cuba?

Victor Li: Well, yeah, I spoke to one Canadian firm just to kind of get the perspective of a country that had been dealing with Cuba, who had worked with them and a new kind of what it was like to do that, but otherwise, yeah, I mostly spoke to American lawyers and law firms. Actually Aliette was one of them and she was great to talk to —

Aliette DelPozo Rodz: Thank you.

Victor Li: — but a lot of it is just perceived with caution. Obviously there’s a lot of enthusiasm, like the lawyers that I spoke to all said that within like pretty much like the day after or going into weeks and whatnot, they were getting calls from their clients after President Obama made his announcement, “What can I do, what are the steps I have to take to get in, is it worth it for me to do this”, stuff along those lines. And so there was definitely a lot of enthusiasm for companies to, especially in the tourism industry obviously.

But on the other hand these lawyers, what they were saying — at least what they said to me when I was reporting this article was, one thing to keep in mind about Cuba and it just kind of goes back to Aliette’s point earlier is, Cuba always does things the Cuban way, and American businesses can’t just expect to go in there and just basically take over the place. Have a Starbucks in any every corner.

Aliette DelPozo Rodz: Yeah, that’s not going to happen.

Victor Li: Yeah, along those lines, and so, there’s a lot of risk involved with regards to whether you even want to go into Cuba, in not necessarily danger or whatnot, but it’s one of those things where because it’s such an unknown territory, there isn’t a history of American businesses that have really done a lot of business there. It’s still very much kind of an unknown for companies and for a lot of companies that might not be the kind of risk that they are willing to take on.

J. Craig Williams: Bob, before we move on to our next segment, we need to hear a quick message from our sponsor.

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(00:14:57)

J. Craig Williams: And welcome back to ‘Lawyer 2 Lawyer’. I am Craig Williams, with me is my co-host, Bob Ambrogi, and talking with us today is ABA Journal Legal Affairs writer Victor Li and Aliette DelPozo Rodz, a partner in the law firm of Shutts & Bowen in Miami.

Bob Ambrogi: Victor, you mentioned there are risks and there is a lot of uncertainty about going into Cuba and yet there does seem to be an awful lot of interest in doing it. It’s not a huge market from an economic sense in the global scheme of things. What’s the attraction to businesses or to law firms with getting involved there?

Victor Li: Yeah, well, there was one attorney that I spoke to Yosbel Ibarra, who is at the Law Firm of Greenberg Traurig, he kind of talked to that point a little bit, like, saying that Cuba’s GDP is about $70 billion, so we’re not talking about a massive economy here, but there is that element of forbidden fruit. This has been a country that’s been off-limits for a long time, the lure of getting in there and establishing yourself and really getting it on the ground floor is something that’s appealing to a lot of businesses.

Aliette DelPozo Rodz: And if I can interject –

Victor Li: Yeah.

Aliette DelPozo Rodz: — no, I was just going to say, but along those lines keep in mind as well that the GDP for Cuba to turn that around, the rates have to be higher than 20% to permit that GDP growth to increase to a 5% or 7%. Right now their rates are lower than the average for the region.

So they are incredibly trying to entice business to come to Cuba and within that what are the sectors, right? I mean we have the tourism sector, we have energy, we have mining, we have transportation, we have health, construction. There is a lot of opportunity in the sense of the Virgin nature of the island nation, they have been at a significant standstill in many respects with regard to their construction, their development, their growth, their tourism, which has grown exponentially. That’s something as well that businesses that are looking at motel management.

Opportunity is there, and I think that’s why I wanted to kind of just chime in, because the opportunity component is really what I think is enticing our clients from the perspective of what’s going on, what can we do? Real estate transactions are limited right now but there’s so many other opportunities that Cuba is very much interested in.

Look at the Mariel free zone, that’s an area that truly is a strong focus for Cuba and that zone is where they are trying to entice with tax benefits as well. They have a no tax for 10 years which is obviously something that many companies are looking into. Right now in that area there are, what is it, five foreign companies, I think there’s two Mexican, Belgium, one from Spain, there’s another US company as well. It’s slow to move because everything I think that Cuba has been bombarded by all of the interest, and so our clients are really, they’re looking at how to position themselves, entry planning, that’s one thing that our clients are looking at how to navigate this trade embargo issue, because, keep in mind, gentlemen, embargo is very much still in full force and effect.

So we do have these amendments to regulation, but we do have to tread carefully to make sure that we’re complying with the U.S. regulations, and by the same token, adhering to the Cuban laws, which are very different to the United States’ rules and regulations.

So conducting also due diligence, for example, that’s another great factor. So there’s so much interest really in how to tackle that business opportunity.

J. Craig Williams: Victor, as we kind of hinted at, there are some things that are barriers to coming into Cuba, and certainly, culture is among them. You said is — we mentioned that Cuba is going to do, is Cuba is going to do, but what is it that Cuba does? How is the culture so different than Americans and what is it that Americans, especially lawyers need to be aware of as they start to move into Cuba?

Victor Li: Well, I can’t really speak about Cubans and their attitudes towards America and whatnot. What the article really kind of dealt with is more just kind of looking at the law and how companies would have to kind of deal with a country that — let’s be honest, has been always displayed, may be the kind of respect for the rule of law that maybe countries like the United States have gone accustomed to in companies here have relied on. So a lot of based on what I reported, the advice that a lot of the lawyers gave was that — well, not advice, but yeah, suggestions that they —

Aliette DelPozo Rodz: The opinions, yeah.

Victor Li: Yeah, the opinions that they gave, I know saying advices, it can be a no-no, so I apologize. When you are going into a partnership with the government, because with a few exceptions these ventures in Cuba will be some kind of hybrid public/private structure with the government having the control, so you have to structure the deal from the beginning in a way that gives you a remedy in case something goes wrong, and one thing that the article talks about is that Cuba has signed on to a number of International Commercial Arbitration agreements and so that is probably the best avenue for a lot of American companies where they want to go in there to protect themselves.

(00:20:12)

And as Carolyn Lamm, who has done a lot of work in international arbitration and whatnot had mentioned, “If Cuba wants to get these investments going forward, they’re going to have to demonstrate that they can be trusted and they can and awards will be enforceable down there.”

So that’s one of the things that companies have to be wary of that you can’t just approach it as a typical deal. You have to build in some safeguards for yourself and to make sure that your assets are protected and that you have a mechanism for remedy in case something occurs.

J. Craig Williams: I have to ask you, as we are recording this, we are still a few days from our election for President in this country and Cuba too is possibly on the brink of a change in leader. Raúl Castro is 85, I think.

Aliette DelPozo Rodz: That’s right.

J. Craig Williams: So that was older, still there’s got to be a change there sometime in the coming years. How important is our election, do you think, to what happens over the next 5-10 years with Cuba, and also how important is, who is in-charge in the government there?

Victor Li: Well, obviously, it’s important because President Obama’s actions were all done through executive order not he bypassed Congress pretty much, and so, yeah, in theory the next President could come in and with one stroke of the pen, completely undo everything that Obama did. Also looking ahead —

J. Craig Williams: It doesn’t seem likely though, does it?

Victor Li: No, it doesn’t. Obviously you can’t predict what’s going to happen in politics, I never thought. I never thought Donald Trump would be the Republican nominee for President, but here we are.

Bob Ambrogi: Or that the Chicago Cubs who won the World Series.

Victor Li: Yeah, Chicago has won the World Series. So in this topsy-turvy world, who knows, but you would think that with the amount of business that has gone over to Cuba since President Obama’s executive orders and the additional amount of capital that’s been invested going forward, you would think that it would be very difficult for whoever it is to be able to just undo all that without a concerted effort from the business lobby to prevent that from happening or at least slow that down.

Aliette DelPozo Rodz: In my opinion, I don’t think — I think the next President will either slow it down or proceed. I don’t necessarily believe that it’s possible to actually — if they can do it, of course, but I think it’s had such a positive outcome that I find it unlikely that someone would undo what’s been done at least thus far. That’s my opinion at least.

But certainly I think that we more importantly than they, are looking at what can happen because our clients of course are investing time and money, and it’s important to them to be able to proceed in advance and continue to do so. I would ever pace that they can of course the things did not happen in Cuba at the pace that we expect them to occur here in the United States. But advancement-wise, I’m hoping that we don’t see anything, any backward movement.

J. Craig Williams: Well, Bob, I really get the chance to ask you a question on the show because you are a co-host not a guest, since you’ve been in Cuba recently, you can play a little bit of that and can you tell us about what your experience was about networking and how it was traveling?

Bob Ambrogi: Traveling was easy, there are still a number of restrictions on U.S. travel to Cuba and only U.S. citizens can travel there legally only under certain categories of travel. One of the ones that most commonly you find people traveling under is what’s called the People to People travel, in which you’re there to experience the cultural and historical and other aspects of being in Cuba.

But for me, it was just a fantastic experience. I think as I said at the outset, the most amazing part for me was just the Cuban people themselves are just some of the nicest people I’ve ever met. I got to say they just go out of their way to make you feel welcome and warm and there — as Aliette was saying earlier in the show, they’re well educated, they’re interested in the world and interested in people, and it was just a really fantastic experience. I recommend anybody go there.

Aliette DelPozo Rodz: I agree with you. I can’t agree more.

J. Craig Williams: Excellent; well, thank you. And Aliette, it’s about time for us to wrap up and get your final thoughts as well as your contact information so that our listeners can reach out to you if they have some further questions. So Aliette, let’s start with you and then we’ll go to Victor.

Aliette DelPozo Rodz: Well, certainly, I am very hopeful that we continue to see the growth and hopeful with regard to what can happen as a result of it.

(00:24:58)

And so, we have formed the Cuba Task Force at Shutts to be able to assist our clients with their legal needs as to the entry planning, the navigating through the embargo issues; obtaining the permits for the export compliance, conducting the due diligence and protecting intellectual property and trademark rights while doing that, and we’ve put together a great team here at Shutts that is diversified in nature and ready to tackle at any part of that.

If you have any questions anyone that’s listening and would like to inquire, we’re actively assisting our clients now with OFAC licenses and with meeting different departments of head that pertain to the many different aspects of business that are being investigated. So we are boots on the ground in Cuba, together with our Cuban counterpart law firm that we are working with El Bufete Internacional and working here with OFAC very much so, and have been doing that for 20-plus years. OFAC licensure is something that we have done. One of our attorneys Olga Pina has been and has great experience with the transaction component as well.

And so my email is  HYPERLINK “mailto:arodz@shutts.com” arodz@shutts.com, my phone number here at the firm is (305) 347-342 and I’m happy to help and I thank you all for the opportunity to meet with you and discuss these new and ever changing regulations.

J. Craig Williams: Great, thank you, and Victor, can you give us your final thoughts as well as your contact information.

Victor Li: Great, and thanks again for having me on the show, I really appreciate it. I really enjoy writing the story and it did kind of hit home for me as well because even though obviously I’m not Cuban and obviously didn’t have that kind of ethnic connection to the story. Both my parents’ families fled from China during the Communist Revolution.

So I could understand what some of these lawyers were going through, what they were feeling and whatnot, and also seeing how China has changed over the years. Obviously I don’t know if that’s going to happen here with Cuba, obviously, there are different factors in place, but one thing that I think is also kind of interesting is the potential positive effect that this could have for the United States.

One thing that the story didn’t cover because it went to print too soon was Cuba’s world-class healthcare system. The fact that now I think a few days ago there was a story that the FDA is going to start conducting clinical trials on this incredible cancer drug that they’ve developed for lung cancer, and supposedly it’s miles ahead of where we had been with our drugs.

So this is a two-way street, it’s not just United States imposing its will on its neighbor and trying to get them to change their ways. This could be a beneficial two-way relationship and I’m really excited to see what happens.

If people want to get in touch with me, to follow up with this story or any other story, my Twitter handle is @lawscribbler, and my email here at the ABA Journal is  HYPERLINK “mailto:victor.li@americanbar.org” victor.li@americanbar.org.

Bob Ambrogi: Victor, I think that was just a really great point, it can only – I just from my brief experience with Cuba underscore the idea that we here in the United States stand to benefit from engaging with the Cuban people and I hope they stand to benefit from engaging with us as well, but it’s definitely a two-way street going forward.

Well, thanks to both of you, Victor Li of the ABA Journal and Aliette DelPozo Rodz of Shutts & Bowen in Miami for taking the time to be with us today. A really interesting discussion. Thanks a lot.

Aliette DelPozo Rodz: Thank you for having us.

Victor Li: Thanks for having us.

Aliette DelPozo Rodz: Have a wonderful afternoon.

Bob Ambrogi: Yeah, you too, and Craig, I guess that brings us to the end of our show. This is Bob Ambrogi. Thanks for listening. Join us next time for another great legal topic, and when you want legal think ‘Lawyer 2 Lawyer’.

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