What seemed like a significant moneymaker back in 2015 could be a very costly exercise for major cruise companies such as Carnival Corporation, Royal Caribbean Group, Norwegian Cruise Line Holdings, and MSC Cruises.
A controversial ruling from a Miami federal judge stated that the cruise companies engaged in “prohibited tourism” and “trafficking activities” during the short period cruises were allowed by the Obama administration to sail to Cuba.
By carrying passengers to Cuba and profiting from the use of Havana Port facilities confiscated by the Fidel Castro-led government, the cruise companies engaged in illegal activities, according to the judge.
Havana Docks and the Libertad Act
Havana Docks is the company that held the concession to operate the docks in Havana before the Castro era. However, during the Castro regime’s nationalization of the docks in the 1960s, the owners of Havana Docks were never paid. The court papers state:
“Havana Docks claims each Defendant unlawfully trafficked in property confiscated by the Cuban Government—the Terminal and its piers—in violation of the Cuban Liberty and Democratic Solidarity Act of 1996, or the Libertad Act.”
The law allows companies that lost properties and businesses to sue any companies that profited from using their confiscated business, in this case, the docks in Havana.
U.S. District Judge Beth Bloom agreed and said in her ruling: “By using the Terminal and one of its piers in various ways, Carnival, MSC SA, Royal Caribbean, and Norwegian committed trafficking acts.”.
According to the Miami Herald, between 2015 and 2019, cruise companies earned at least $1.1 billion in revenue and paid $138 million to Cuban government entities. Under the rules and regulations that the Obama administration had set out, the cruise lines were allowed to engage in people-to-people activities, but not tourism-related activities. Yet that is precisely what the cruise companies did, according to Judge Bloom.
“The January 2019 email and testimony from Jorge Delgado, the Vice President of Global Business Development at Royal Caribbean, demonstrates that excursions from Havanatur fell short of the people-to-people travel requirement of enhancing contact with the Cuban people, supporting civil society in Cuba, or promoting the Cuban people’s independence from Cuban authorities,” Judge Bloom stated.
What Do The Cruise Companies Say?
During the court case, the cruise lines stated their activities were entirely legal while in Cuba, and sanctioned under licenses issued by US government organizations. However, the judge did not go with that argument, stating the cruise lines had simply interpreted the rules and regulations as they saw fit, saying:
“To interpret people-to-people travel to include the Tropicana Cabaret and Cabaret Parisién is to ignore the regulation’s express distinction between permitted educational travel and impermissible tourist travel.”
“The fact that the Treasury Department promulgated licenses for traveling to Cuba, and Executive Branch officials, including the President, encouraged Defendants to do so, does not automatically immunize Defendants from liability if they engaged in statutorily prohibited tourism,” she wrote.
That the situation is viewed with trepidation by the cruise companies comes forward in an email sent by Carnival Corporation Chairman Micky Arison to then-President Trump. On April 17, 2019, Arison wrote:
“President Trump, I wanted to follow up on our discussion regarding Cuba. The news is reporting that Title III of Helms-Burton, the Cuba lawsuit ban, will be fully lifted today. If there are no exceptions or clarifications, we would be subject to significant legal liability for our use Of the Ports. We do not own the ports or even manage them, but because we use them, we could be deemed as “trafficking” in confiscated property and the penalty to my company alone would be over $600 million.”
What’s the Damage?
The damage could be far more significant for MSC, Norwegian Cruise Line, and Royal Caribbean, spending far more time in Cuba than Carnival Corporation ships. Carnival Corp reported 83 days at the Havana Port Terminal, MSC 190 days, Norwegian Cruise Line Holdings 299 days, and Royal Caribbean the most with 314 days in port.
The case will be going to a jury trial now, which will assess the damages that the cruise lines will need to pay to Havana Docks.
John Kavulich, president of the U.S.-Cuba Trade and Economic Council: “As the plaintiffs seem to be seeking compensation based upon what the Libertad Act permits, the four cruise lines will determine if a decision by a jury would be more costly than using the Libertad Act formulas to calculate what is owed to the plaintiffs. Key to remember: The jury will be residents of the Miami, Florida, area, and will certainly include individuals of Cuban descent.”
Neither Carnival Corporation, which released its quarterly earnings earlier today, nor Royal Caribbean, NCLH, or MSC has responded to the judge’s ruling.