One of the most important means Cuba's current government has to obtain foreign capital is to promote foreign direct investment (FDI) in the country.1 While firmly adhering to a socialist political and economic framework, Cuba has taken a series of measures in the last decade to promote FDI as a way to cope with the economic difficulties that have afflicted the country since the disappearance of the Socialist bloc.2
Cuba's efforts to attract foreign investment have resulted in the inflow of substantial amounts of foreign capital by way of FDI. In the event of a political and economic transition in Cuba from a socialist regime to a free-market society, however, these investments could come under attack by a successor Cuban government and private parties in Cuba and abroad.3 This Article analyzes the future risks that current investors in Cuba could face under a nonsocialist government and the extent to which the provisions of Cuban law-both current and future-could determine the outcome of challenges to the rights of these current investors.
II. BRIEF HISTORY OF FOREIGN INVESTMENT IN CUBA4
A significant amount of foreign investment, largely by U.S. nationals, was in place in Cuba during the Cuban Revolution of 1959 (Revolution).5 The large amount of foreign investment that existed in Cuba at the outset of the Revolution suggests that Cuba has a high capacity to absorb foreign investment if there is a favorable investment climate.
After the Revolution, from 1959 to 1963, Cuba expropriated the assets of foreign nationals in the country,6 which caused affected parties to submit claims to their respective governments. In the United States, the Foreign Claims Settlement Commission (FCSC) received evidence of, and assessed claims by, thousands of U.S. nationals whose properties in Cuba were confiscated by the Cuban government.7 The FCSC certified 5911 claims with a total value of $1.8 billion in 1960 dollars.8 Confiscated investments by nationals of other countries included $350 million by Spanish nationals and approximately $10 million each for nationals of France, Canada, and Switzerland.9
After the expropriations of the early years of the Revolution, foreign investment disappeared from Cuba for three decades.10 It was not until 1990 that the first project developed and, with the help of foreign investment, was completed.11 In August 1992, in an effort to foster foreign investment in major projects, Cuba amended its Constitution to adopt important changes to the property regime, including an express authorization for foreign investors to own property and be able to convey it to the state or to third parties.12
These changes to the Cuban Constitution created a somewhat flexible framework for foreign investment. Cuba further increased this flexibility in October 1994, when it officially declared that all sectors of the economy, with the exception of public health, education, and the armed forces, were open to foreign investment.13 These Constitutional amendments initiated a new wave of investment, mainly in services, real estate, and telecommunications.14 Not only did the dollar amount invested in these new ventures increase, but the operations subject to the ventures became more complex and of longer duration.15
Another important step towards the development of a foreign investment regime took place on September 5, 1995, when Cuba's National Assembly approved the Foreign Investment Law, Law No. 77 of 1995 (Law 77).16 A number of the changes instituted by Law 77 represented significant steps toward liberalizing Cuba's investment regime.17
Law 77 defined three permissible types of foreign investment: joint ventures (empresas mixtas); international economic associations; and companies with totally foreign capital.18 On December 6, 2000 the Executive Committee of Cuba's Council of Ministers officially recognized two new forms of FDI: production contracts19 and management contracts. …