What Cuba Needs to do to Attract the Multinational Investor
In sum, Cuba needs to adopt modern commercial laws, including modern business organization forms in order to facilitate the investments it wishes to attract from abroad. Since Cuba was a civil law system before the Revolution, it could well choose to look to the laws of Spain or those of other Latin American countries to draft its new commercial laws. In the alternative, it may well decide to look to U.S. law to adopt its corporate, limited liability and partnership laws. This might be attractive for a number of reasons: Cuba’s close financial ties to the U.S., the many commercial transactions between Cubans and the Cuban diaspora in the U.S., the remittances from this diaspora, and the fact that members of this diaspora are likely to be the initial capital source of many new enterprises started in Cuba.
It would be counterproductive for Cuba to take the position that it can build on the laws already adopted by merely modifying them again. For example, creating a new corporate law beginning with a law that was adopted for corporations in the 19th Century would be an onerous task given that some portion were subsequently repealed by other legislation and constitutional provisions and other portions were abrogated by yet other legislation, Moreover, the anonymous share corporation law was never restated as a complete law with modern corporate law provisions so that the actual rules governing a Cuban corporation could be determined by reference to one piece of legislation instead of a hodgepodge of conflicting laws, regulations, constitutional provisions – all of which suggests that the effort to build on what is already there would be time-consuming.
Independent Professional Tribunals
To the benefit of the economy and society, under a system of rule of law, the State protects investments, both local and foreign, by protecting property rights and enforcing contracts between economic actors. This dual enforcement role is accomplished by independent tribunals.
Independent tribunals allow for an even playing field, so that all those who chose to innovate and engage in commerce can do so without fear of unfair disadvantage. For example, the creation of robust legal institutions in the United States for its settlers resulted in widespread participation in the economy and a generally prosperous population.[11] South American countries with ample natural resources, on the other hand, developed extractive institutions to benefit their colonial powers. Subsequently, their local oligarchies concentrated power and resources in a small elite. As a result, robust legal systems did not develop and there was a lack of widespread economic participation and dynamism.[12]
Cuba’s current tribunals are not independent. They are comprised of persons recommended to and elected by the National Assembly and the majority of the members of the courts are not lawyers. While they have equal rights and duties with the lawyers on those tribunals, the non-lawyers do not have any academic preparation to know and apply the law. As members of the public at large, they are supposed to represent people’s justice. People’s justice, however well-meaning, is not the same as enforcing laws and applying rules by a tribunal of persons who know the law and understand its function and application. The participation of persons who consider they are “doing justice”, as opposed to applying pre-established rules, creates an inordinate element of uncertainty in the current Cuban legal system.
Fortunately, Cuba has a professional and well-informed legal bar. Courts could be recreated and judges selected from the bar’s very capable and independent members. The National Union of Jurists of Cuba (UNJC) is a non-governmental organization that represents and convenes legal professionals throughout Cuba. It has a current membership of 14,000, including law students, lawyers, judges, prosecutors and academics, all of whom pay dues.
The bar association has regular meetings dedicated to inform its members about legal developments nationally and abroad (although it focuses on the typical legal topics in a socialist system – history of law, constitutional law, contracts, administrative law); it holds seminars with foreign lawyers, and holds annual meetings. It also publishes compendiums of scholarly articles
The bar association itself could create committees to review legal credentials and propose lawyers to serve on the new courts, much as the American Bar Association makes recommendations in the U.S. These lawyers could then be elected to the courts by the National Assembly.
Another method of appointment would be that the bar association select the members of the Supreme Court and that, in turn, select the members of the lower courts, with the advice of the bar association. The judges on the Supreme Court would have an incentive to select members of the lower courts who are able to handle most cases effectively so that only a limited number of highly significant matters would come before it. The principal differences from the manner in which the courts are currently staffed is that the courts would be composed only of lawyers, would not report to the National Assembly, and that the lawyers recommended to serve on the courts would be selected by and from the members of the Cuban bar.
Conclusion and Recommendations
Creation of independent courts is particularly important in cases such as Cuba where there is a prior history of expropriation of private property. The presence of independent courts act like a binding promise to the investor of certainty that its property rights will be protected and its contracts fairly interpreted without favoring the State or any other powerful party to a dispute.
Another element of uncertainty that prevents Cuba’s qualification as a rule of law system is the existence of the parallel governmental structure of the Communist Party, many members of which are also government officials, as is typical in a Marxist-Leninist socialist system. What is the role of the parallel structure of the Communist Party with respect to the law? The preambles of the Cuban Constitution of 2019 states it is a fundamental pillar and guarantee of the Cuban economic, political and social order. In carrying out that role, does it have the power to overrule actions taken by the legislature or approvals granted by government agencies? If so, can the investor rely on the creation of legal structures under Cuban laws, regulations and government approvals to effect its investment in Cuba if the Communist Party has discretionary power?
While the Communist Party exists under the Constitution of 2019, a formal pledge by the Communist Party that it will not interfere with the laws adopted by the National Assembly and the regulations adopted by the ministries in enforcing those laws would give the investor the additional comfort it will need to make an investment under the current political order. Moreover, an amendment of Cuba’s law regarding expropriation will be needed to specifically provide protection to the foreign investment.
Part 1 provides a discussion on “What is and What is not Foreign Direct Investment”. Also, see Part 2 “Rule of Law” and Economic Development”.