June 17, 1996 No. 115

GOVERNMENT ANNOUNCES MEASURES TO OPPOSE

U.S. HELMS-BURTON ACT

Foreign Affairs Minister Lloyd Axworthy and Minister for International Trade Art Eggleton announced today that the government will introduce legislation amending the Foreign Extraterritorial Measures Act (FEMA) to help protect Canadian companies against foreign measures such as the U.S. Helms-Burton Act.

Mr. Eggleton also said that Canada will request a ministerial-level meeting of the North American Free Trade Agreement (NAFTA) Commission. He noted that this is a necessary step before any request for a NAFTA dispute settlement panel.

"The Helms-Burton law flies in the face of international legal principles," said Mr. Eggleton. "The FEMA changes will give Canadian companies more legal tools to protect themselves against U.S. court claims under Helms-Burton. We will continue to defend Canadian interests strongly, including through the NAFTA process."

"Canada shares the U.S. objectives of improving human rights standards and moving to more representative government in Cuba," Mr. Axworthy said. "But we are concerned that the Helms-Burton Act takes the wrong approach. That is why we have been working with other countries to uphold the principles of international law."

The Helms-Burton Act permits lawsuits to be launched in U.S. courts against Canadian and other foreign firms allegedly "trafficking" in property expropriated by Cuba from American nationals. It also provides for restrictions on temporary entry into the United States of corporate officers and controlling shareholders of these companies, along with their spouses and minor children.

The proposed FEMA amendments would authorize the Attorney General to:

issue "blocking" orders declaring that judgments handed down under any objectionable foreign law will not be enforced or recognized in Canada;

allow Canadians to recover in Canadian courts any amounts awarded under those foreign rulings, along with their court costs in Canada and the foreign country -- a measure known as "clawback"; and

create and, in future, amend a schedule listing pieces of objectionable foreign legislation that, in the view of the Attorney General of Canada, violate international law.

As part of the FEMA amendments, the government will update penalties so that they are more effective in deterring Canadians from abiding by objectionable foreign laws. These provisions will give Canadian courts the discretion to vary the penalty according to mitigating circumstances.

Canada has held two rounds of consultations with the United States on the Helms-Burton Act under the NAFTA dispute settlement process. Before going to a dispute settlement panel, the issue must be raised at a meeting of trade ministers at a NAFTA Commission session. Canada would be in a position to request a NAFTA panel 30 days after the Commission meeting.

Canada has objected strongly to both the claims provisions and those relating to the denial of entry under the Act. In addition to the NAFTA consultations, Canada has been working with other countries in opposing the U.S. law in regional and multilateral organizations.

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For further information, media representatives may contact:

Catherine Lappe Nicole Bourget

Director of Communications Director of Communications

Office of the Minister of Office of the Minister for

Foreign Affairs International Trade

(613) 995-1851 (613) 996-6271

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

Backgrounder

CANADA'S FOREIGN EXTRATERRITORIAL MEASURES ACT,

THE U.S. HELMS-BURTON ACT

AND THE NORTH AMERICAN FREE TRADE AGREEMENT

Canada's Foreign Extraterritorial Measures Act

The Foreign Extraterritorial Measures Act (FEMA) became law in February 1985, and was designed to defend Canadian interests against attempts by foreign governments or courts to apply unreasonable laws or rulings in Canada.

FEMA currently gives the Attorney General of Canada, in agreement with the Minister of Foreign Affairs, the authority to forbid compliance in Canada with extraterritorial measures that, in the Attorney General's view, infringe Canadian sovereignty. In addition, there is authority to restrict provision of documents to foreign courts if such an action infringes Canadian sovereignty.

The Act is now being strengthened to allow Canada to respond to new measures, such as recent attempts by the United States to attack legitimate Canadian business interests under the Helms-Burton Act.

The proposed FEMA amendments would permit the Attorney General of Canada to block any attempt by a foreign claimant to enforce a judgment under a law such as Helms-Burton in Canada. It would also give Canadian companies recourse in Canadian courts if awards are made against them in U.S. courts under the Helms-Burton Act. The FEMA amendments would provide a right to claim damages in Canada for an equivalent amount against the American claimant.

Moreover, in the future the Attorney General could place other foreign laws he considers objectionable on a list under FEMA.

Here is how these changes might apply in a hypothetical example:

U.S. national X might win a suit against a Canadian, Y, in a U.S. court under the Helms-Burton Act.

If the Canadian had no assets in the United States, the U.S. national would have to ask a Canadian court to enforce the judgment. The Attorney General of Canada could issue an order blocking this process.

The Canadian, Y, could choose to sue X in Canadian courts to recoup the full amount of the award that X had won in the foreign court. This amount plus court costs in both countries would be applied against X's assets in Canada.

In addition to these FEMA changes, financial penalties under the Act will be increased to discourage compliance with objectionable foreign laws. Under the current system, a Canadian company, faced with conflicting demands under foreign and Canadian law, might well choose to obey the law of the foreign country if the penalties there are substantially greater than in Canada. Under the FEMA changes, courts will be able to vary the penalty according to mitigating circumstances.

Current penalties range up to C$10,000 or five years imprisonment, or both, upon indictment. Comparable maximum financial penalties under the U.S. Cuban Assets Control Regulations are up to US$ 1 million.

The U.S. Helms-Burton Act: Title III

Title III of the Helms-Burton Act allows U.S. nationals with claims on expropriated property in Cuba to sue in U.S. courts in order to recover money from foreign companies or people who "traffic" in that property.

As an example, such a claim could involve a Canadian firm that invests in a property that a U.S. national claims was expropriated by the government of Cuba sometime in the past.

This section of the Act comes into effect on August 1, unless President Clinton decides to use his discretionary authority under the Act to delay it for periods of six months.

If the claims provisions come into effect August 1, the earliest that lawsuits could be filed in U.S. courts would be November 1, 1996.

The U.S. Helms-Burton Act: Title IV

Title IV of the Helms-Burton Act allows the U.S. government to deny entry to senior executives of companies that the U.S. State Department determines are "trafficking" after March 12, 1996, in property subject to a U.S. claim. This provision also applies to spouses and minors of these executives.

This aspect of the bill applies to those who "traffic" in expropriated property from March 12, 1996. The American government has already sent advisory letters to three firms -- one Canadian, one Mexican and one Italian -- warning them that persons associated with the company may be excluded from the United States.

Canada's Moves to Oppose Helms-Burton

Canada's objections to the Helms-Burton Act have been raised at the highest levels. Canada is working to oppose Helms-Burton in such international bodies as the World Trade Organization (WTO), the Organization for Economic Co-operation and Development (OECD) and the Organization of American States (OAS).

Canada is also pursuing this issue through the North American Free Trade Agreement (NAFTA), which has rules governing investment and temporary entry.

NAFTA consultations were held with the United States in late April and again in May. Mexico participated in both sessions and shares Canada's concerns.

Canada has now requested a ministerial-level meeting of the North American Free Trade Agreement Commission. This is a necessary step toward proceeding to a dispute settlement panel under the NAFTA.

The NAFTA dispute settlement process

The first step in a NAFTA dispute is to hold consultations.

If the issue cannot be resolved at this level, the next step is to refer the matter to the ministerial-level NAFTA Commission.

Thirty days after the Commission meeting, the matter may be referred to a panel for resolution.

Canada, the United States and Mexico have held two rounds of consultations on the Helms-Burton Act.

Canada intends to request a NAFTA Commission meeting to discuss the issue. Under NAFTA rules, the meeting should be held within 10 days of the request.

Helms-Burton: Key Dates

The Helms-Burton legislation began as separate bills in the U.S. Senate and House of Representatives in February 1995. The House and the Senate each approved significantly different versions of the legislation in the fall of 1995. At that time, the U.S. Administration opposed the inclusion of Titles III and IV in the bill.

Key events in 1996 include:

February 24: The Cuban air force shot down two U.S. civilian aircraft. President Clinton threw his support behind the bill soon afterward.

March 3-4: Minister for International Trade Art Eggleton raised the issue in a Washington meeting with his American counterpart, then-U.S. Trade Representative Mickey Kantor.

March 4-5: The summit of Caribbean Community (CARICOM) leaders, including Prime Minister Chrétien, issued a communiqué in Grenada strongly objecting to the bill.

March 5: Mr. Eggleton met with the ambassadors of European Union (EU) countries plus 17 other countries to outline Canada's concerns about Helms-Burton and to suggest working together on the issue in international organizations.

March 12: The Helms-Burton bill was signed into law by the U.S. President. On the same day, Canada requested formal consultations with the United States under NAFTA Chapter 20.

March 28: Foreign Affairs Minister Lloyd Axworthy expressed Canada's concerns about Helms-Burton in a meeting with U.S. Secretary of State Warren Christopher in Washington.

April 16: At the World Trade Organization (WTO) General Council meeting, Canada joined other countries, including the European Union, Mexico and Japan, in expressing strong opposition to Helms-Burton.

April 22: European Union foreign ministers issued a statement in Luxembourg condemning the Helms-Burton Act and indicating an intention to consider a challenge under the WTO.

April 26: The first round of NAFTA consultations, involving both Canada and Mexico, was held in Washington.

May 3: The EU formally requested WTO consultations on Helms-Burton.

May 16: Prime Minister Chrétien and Central American leaders from Nicaragua, Honduras, Guatemala, El Salvador, Costa Rica and Belize issued a communiqué stressing the right of sovereign states to maintain trade and commercial links according to their own foreign policies and laws.

May 21-22: Mr. Eggleton strongly registered Canada's concerns at an OECD ministerial meeting in Paris.

May 22-23: Mr. Axworthy raised the Helms-Burton issue with foreign ministers in Argentina and Brazil during a visit to those two countries.

May 28: A second round of NAFTA consultations was held in Washington.

May 29: The U.S. government sent out advisory letters to three companies, including one Canadian firm, informing them that they were potential "traffickers."

June 4: EU-U.S. consultations were held in Geneva under the auspices of the WTO.

June 4: The Organization of American States issued a resolution at its General Assembly in Panama, calling for the Inter-American Juridical Committee to investigate whether the Helms-Burton Act is consistent with international law.

June 11: Mexican President Zedillo expressed strong concerns about Helms-Burton in a speech to the Parliament of Canada while visiting Ottawa.

June 17: Publication of U.S. guidelines on Title IV.

June 18: Canada will request a NAFTA Commission meeting of trade ministers which, under NAFTA rules, should be held within 10 days.

July 15: Deadline for U.S. Presidential decision on suspension of Title III.

August 1: Title III comes into effect unless suspended. If it is implemented, U.S. claimants can warn "traffickers" that they have 90 days in which to divest themselves of Cuban assets or potentially face lawsuits in U.S. courts.

November 1: First date for claims to be filed in U.S. courts if the claims provisions of Helms-Burton are implemented.