EFE (via 14ymedio), London, February 3, 2023 — The trial in London of the claim for non-payment of the CRF I investment fund to the National Bank of Cuba (BNC) and the Republic of Cuba for 72 million euros (78 million dollars) of public debt went to trial on Thursday.
1. What will be decided in this trial?
The trial before the commercial division of the London High Court of Justice seeks to establish whether CRF is a legitimate creditor of Cuba — if it has the right to claim the payment of sovereign debt from Havana — and whether this court has jurisdiction over the issue. After the end of the public part, it will be weeks, even months, before the court issues a judgment. The court does not have to publish it, and its dissemination may depend on the parties. In addition, the ruling will not be final, so it could be appealed, prolonging the process. As for the substance of the issue, experts agree in pointing out the significance of the ruling for Cuba, which is going through a very delicate financial situation after more than two years of serious economic crisis.
2. Who are the plaintiffs and the defendants?
The lawsuit was filed by the CRF I irrigation capital fund, founded in 2009 and based in the Cayman Islands, a tax haven. According to different sources, it is Cuba’s largest sovereign debt holder and holds bonds of 1.2 billion euros (1.3 billion dollars).
The BNC is a Cuban state bank with commercial powers, but until 1997 it also served as a central bank. In that year, the Cuban Government created the Central Bank of Cuba (BCC) and limited the functions of the BNC to commercial ones. However, it continued to take responsibility for the registration, control and service of the debt it had placed. This means that the BNC would be the entity that would respond in the first place to the debt. That’s why CRF I also sued the Republic of Cuba. In the event that it wins, it can also claim from the Cuban State the satisfaction of the debt with its funds and assets.
3. Where does this debt come from?
The debt originated as a result of two loans that Cuba closed in 1984 with two European banks, the French Crédit Lyonnais and the Italian L’Instituto Bancario Italiano, with the BNC as guarantor. Three years later, then Cuban president Fidel Castro declared his country’s debt — and in general that of all the ex-colonies — “unpayable,” and the Island ceased to comply with its creditors.
The situation changed with the arrival of his brother Raúl Castro to the presidency in 2006, as he tried to reopen the door of international financial markets as part of the economic reforms he launched.
Cuba renegotiated its debt with the Paris Club (where the main creditor nations are located) in 2015 and again in 2021. As did Russia, which forgave Cuba much of the credits granted during the Soviet era and improved conditions again in 2022.
But Havana did not negotiate with the London Club (where private creditors are grouped). CFR I says that it contacted Cuba on several occasions to reach an agreement, but that in seven years it did not get a response. In February 2020, CFR I filed the complaint that led to this trial.
4. What have been the arguments of the plaintiff and the defendant?
Cuba has reiterated that CFR I is not a legitimate creditor. Its argument has three fundamental points:
– That the fund took over this debt illegally, bribing an employee of the BNC. About this, the former worker himself, convicted of bribery, has testified electronically from a prison on the Island.
– That the procedures for the acquisition of this debt were not complied with: the two relevant signatures were not obtained, nor was government authorization received.
– That CFR I is a “vulture fund” that only seeks litigation and does not act as a “responsible” creditor.
CFR I, which denies being a “vulture fund,” assures that it did not bribe any employee and has questioned the veracity of the testimony of official in prison, claiming that he could have been pressured by the Cuban government. CFR I also states that it acquired the debt correctly and is, therefore, a legitimate creditor.
5. What could be the consequences of the trial?
The court has to decide whether CFR I is a legitimate creditor and, more importantly, whether the court has jurisdiction over this issue.
On the first point, it could decide either way, and that would mainly affect CFR I and whether or not it could claim the debt.
But the fundamental thing, as Cuban-American lawyer Luis Carlos Battista explained to EFE, is whether the court “decides that there is jurisdiction,” because new lawsuits from other creditors could arrive. There are billions of dollars at stake.
They would claim the debt from Havana and even try to satisfy it with state assets abroad, where Cuba has a network of companies, including banks. Many of them belong to Gaesa, the business conglomerate of Cuba’s Ministry of Defense, which controls telecommunications, remittances, imports and tourism on the Island, among other sectors of the economy.
For this, another trial would be necessary, in which the creditors — on whom the burden of proof would fall — would have to ask the court to lift the corporate veil of Gaesa and its subsidiaries.
Translated by Regina Anavy
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