Chaos and intrigue reign in UK court fight over Castro-era Cuban debt

Illegally recorded videos, chaotic protests and grounds from an imprisoned Cuban slope authoritative marked the archetypal week of a high-stakes trial successful the UK High Court betwixt Cuba and an concern fund.  

The money has sued Cuba implicit tens of millions of dollars' worthy of unpaid commercialized loans from the 1980s, erstwhile Fidel Castro was inactive ruling the island. The debts are truthful aged they are denominated successful German Deutsche Marks, a currency replaced by the euro successful 2002. If Cuba loses, it could extremity up costing the federation billions.

The fund's representatives testified successful tribunal connected Wednesday and said repeatedly that they did not privation to litigate, but that it was a "last resort" aft the Cuban authorities ignored repeated requests to negociate for a decade.

"For CRF, litigation is unattractive," the fund's chairman, David Charters, said Thursday, the 4th time of the trial. "It's slow, it's expensive, it's time-consuming. But if it's the lone mode to get the different broadside to the table, past you person to spell down that route."

The proceedings is seen arsenic a trial case. CRF1, formerly known arsenic the Cuba Recovery Fund, owns much than $1 cardinal successful look worth of European slope loans extended to Cuba successful the precocious 1970s and aboriginal 1980s, which Cuba defaulted connected successful 1986. 

CRF1, which began accumulating the presumption successful 2009, is suing Cuba and its erstwhile cardinal slope implicit lone 2 of the loans they ain for much than $70 cardinal dollars. If CRF wins connected this tiny portion of Cuba's full outstanding commercialized debt, estimated astatine $7 billion, it could pb to further lawsuits from different indebtedness holders, with claims against Cuba rising into the billions.

The Cuban squad has argued successful pretrial tribunal filings and during the proceedings that the indebtedness was not lawfully transferred oregon "reassigned" to CFR, which is registered successful the Cayman Islands, and has focused connected method aspects of Cuban instrumentality arguing that CRF does not person the close to writer Cuba based connected Cuban law.

The trial, which started a week ago, is expected to past until Thursday. Neither representatives for CRF nor the Cuban authorities responded to interrogation requests. Once the proceedings is over, a judgement is expected successful 2 to 4 months.

 It has drawn truthful galore attendees, including press, the justice ordered a 2nd courtroom opened, equipped with a video monitor, to grip overflow.

At slightest 4 radical recorded videos successful the overflow country and posted them online, drafting rebukes from the judge, Sara Cockerill. Recording proceedings successful the precocious tribunal is simply a usurpation of UK law. Cockerill demanded much than erstwhile that the videos beryllium removed from societal media and ordered those who had posted them to look successful tribunal to apologize, oregon other they'd beryllium charged with contempt of court.

By Wednesday, a frustrated Cockerill said if determination were immoderate further breach of the rules regarding recordings, she would unopen down the overflow courtroom and unit anyone who wants to ticker the proceedings "to beryllium connected the level successful here."

Adding to the intrigue: a tribunal attendee who's a dormant ringer for Raul Castro's lad and Fidel Castro's nephew, Alejandro. Cuban officials accidental the antheral is conscionable a property serviceman for the Cuban Embassy successful the UK.

Outside the courthouse, Cuban exiles protested and shouted "asesinos" and "cobardes" (Spanish for "killers" and "cowards") each clip the Cuban government's representatives and ineligible squad entered oregon near the building.

Defaulted sovereign debt, similar that of Cuba, trades connected the secondary market.  "Distress" investors specialize successful buying unpaid debts astatine a discount to look worth and past negotiating with the authorities successful question to settee them, usually for a information of the main and a information of the past owed interest. Many countries person been done indebtedness restructurings, from Greece to Nicaragua to Iraq.

In a CRF capitalist presumption from 2009, utilized arsenic grounds during the trial, the money wrote, "Historic restructurings of emerging marketplace indebtedness constituent to imaginable returns of 100% - 1,000%."

In tribunal testimony, a CRF typical said, "the full strategy" of the money was based connected President Barack Obama's predetermination successful 2008 and Obama's tendency to enactment toward ending the decades-long U.S. embargo against Cuba, imposed during the Cold War.  

When Obama and then-Cuban President Raul Castro announced a thawing of relations successful 2014, Cuban indebtedness temporarily changeable up to 30-35 cents connected the dollar, aft trading astatine 6-8 cents for decades, a CRF typical testified Wednesday.

But the concern thesis did not enactment out. Despite galore diplomatic efforts from the Obama administration, the Cuban authorities expressed small involvement successful immoderate U.S. commercialized beingness oregon concern connected the island.

After Obama's historical sojourn to Cuba successful 2016 determination was a harsh crackdown connected governmental dissent.  The embargo did not end, and galore of the relaxations announced nether Obama were rolled backmost nether President Donald Trump.

According to tribunal filings and testimony, CRF sent respective letters to the Cuban authorities and offered Cuba a "debt-for-equity swap" — not uncommon successful indebtedness restructurings involving countries with small currency connected hand. In specified a deal, the creditor receives a concession to, oregon ownership of, a government-owned spot specified arsenic an airdrome oregon a port. Creditors past put successful the plus and person a portion, oregon all, of the revenues generated by the asset.

Some of the astir melodramatic and combative grounds came from Raúl Olivera Lozano, a erstwhile authoritative from the Banco Nacional de Cuba, present serving a 13-year situation condemnation successful Cuba. He was convicted for agreeing to judge a bribe of 25,000 pounds successful speech for signing paperwork which allowed the indebtedness successful question to beryllium transferred to CRF, which past allowed the money to writer Cuba.

But Olivera Lozano says helium ne'er got paid. "I did that papers due to the fact that I expected economical benefits and the money," helium testified via videolink from Cuba, adding that the CRF typical "did not comply with that, and I recovered myself having been utilized by this gentleman," referring to Jeet Gordhandas, a CFR representative.

CRF has maintained the accusations of bribery are "scurrilous" and were falsified by the Cuban authorities solely to warrant not paying the debt.

While it whitethorn beryllium dramatic, the bribery allegation is not a halfway portion of the Cuba defense. Instead, the government's lawyers person focused connected ineligible interpretations of Cuban statutes, improper insubstantial enactment and whether CRF could rightfully writer the Cuban government

Even though Cuba's defaulted indebtedness is astir 40 years old, there's a precedent for bondholders waiting adjacent longer. More than 300,000 holders of czarist-era Russian bonds, which the Bolsheviks defaulted connected successful 1917 aft the revolution, received outgo successful 2000.

Because of the U.S. embargo against Cuba, American investors are prohibited from owning and trading Cuban debt, which frustrates immoderate frontier-market hedge money managers successful the U.S. They reason that holding Cuban indebtedness would amended service U.S. overseas argumentation interests due to the fact that it would springiness Americans a spot astatine immoderate aboriginal negotiating table.

Beyond the European commercialized debt, determination are inactive astir 6,000 American claims outstanding from individuals and companies whose properties were confiscated by the Castro authorities successful the 60s.

John Kavulich, the caput of the U.S.-Cuba Trade & Economic Council, is intimately pursuing the proceedings connected behalf of American companies with claims inactive outstanding.

"This has not been an elegant spectacle," helium said. "Companies and fiscal institutions are watching, and frankincense acold the connection they person received from the suit and the proceedings is to debar Cuba."