Commentary originally published by Fox News Latino on May 24, 2016. Written by Michael P. Hatley, Associate, Reneo Consulting, LLC.

Considered in isolation, the Cuban government’s mid-April decision to widen the purchasing prerogatives available to the island’s privately held cooperatives is a modest step of little international significance. But given the central role played by Cuban co-ops in the shifting regulatory landscape governing the relationship between Cuba and the United States, U.S. companies seeking business opportunities in Cuba should be paying close attention.

To be sure, the recent ruling from the Cuban government is narrow. It covers only former state-run entities that have been transformed into private cooperatives offering food and food-related services. These restaurant co-ops will, for the first time, have the latitude to buy supplies directly from government producers and competitively priced wholesale outlets — and not be forced to purchase expensive goods from retail outlets. The new rule gives certain Cuban restaurant co-ops a fighting chance to turn a profit and expand their offerings.

It is part of the Cuban government’s cautious experimentation with market reform — a topic that was debated at the April meeting of the Communist Congress in Havana. It marked the first gathering of the full Communist Congress since 2011, when the Congress announced a range of agricultural reform initiatives, some of which stalled or were never implemented.

Now, half a decade later, the climate in Havana is different, given the stirrings of rapprochement with the U.S., a visit from President Obama, and what appears to be an increased willingness to experiment with market-based policies.

U.S. businesses should be watching Cuba carefully to see if it addresses the agricultural reform process and perhaps pries open the rules governing co-ops in other sectors.

These reforms are important to American companies because, at least for the foreseeable future, co-ops are at the nexus of business opportunity in Cuba. The Obama administration’s recent amendments to the U.S. embargo regulations create numerous possibilities for U.S. companies to engage with private Cuban co-ops, including exporting tools and equipment, importing a variety of Cuban-made goods, and launching certain agricultural development projects.

There is little doubt that the obstacles to U.S.-Cuba trade, even business involving Cuban co-ops, are daunting. The U.S. State Department’s so-called 582 list – a litany of goods that can be imported from private Cuban co-ops – hasn’t been significantly updated or expanded since it came out a year ago. Onerous tariffs of 100 percent or more are still being foisted on certain Cuban goods — the same burden the U.S. imposes on goods made in North Korea.

But until our Congress repeals the U.S. trade embargo, deals involving private Cuban entrepreneurs and co-ops are a way for U.S. companies to demonstrate good faith while making connections and establishing a presence on the island. For example, Airbnb became one of the first American companies to establish a presence in Cuba after the recent reforms by partnering with private Cuban property owners. There’s running room for similarly bold and creative companies to get involved.

To seize these opportunities, U.S. executives should anticipate and prepare for how the Cuban regulatory climate is likely to change. Any cooperation in the Cuban co-op space should be of great interest to American businesses.

In and of itself, the recent restaurant co-op reform may not represent a major change in the course of U.S.-Cuban relations. But it may be a sign of things to come. When combined with the big thaw of the past 18 months and the prospect of additional co-op liberalization, U.S. companies should be focused on the opportunities in Cuba — not the obstacles.

Michael P. Hatley, Esq., advises companies on business opportunities in Cuba as an associate at Reneo Consulting LLC, the business consulting arm of the law firm Gilbert LLP

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As tens of thousands of euphoric Cubans greet President Obama and his family in Havana on March 21, the President will be doing more than solidifying a new era in U.S.-Cuban diplomatic relations. He also will be inaugurating what has the potential to become a mutually beneficial trade and business partnership – an enterprise that, given sufficient time, will spur jobs and growth in both countries.

Realizing this potential, however, has two imperatives. First and foremost, the U.S. Congress must end the disastrous trade embargo that has served only to hurt the Cuban people, hamstring American companies and undercut our reputation and credibility throughout the world. Second, U.S. private and public leaders must recognize that this new dynamic is very much a two-way street. The U.S.-fueled acrimony that has characterized our bilateral relationship must be replaced with one attribute prized by the Cuban people: mutual respect.

Congress’ refusal to sweep aside the last vestiges of the embargo has made trade with Cuba a one-way boon for foreign companies, many of which stand to realize substantial profits from increased U.S. travel alone. Until this myopic boycott is ended, U.S. businesses will continue to be handcuffed; an unfortunate reality that will hurt multiple sectors of our economy – from travel, tourism, hospitality, and transportation to agriculture, medical products, telecommunications, and technology.

Commentary published by CNBC. Read the entire article here.

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Published by The Litigation Daily on February 3, 2016. Written by Jenna Greene. 

At first glance, Scott Gilbert seems an unlikely champion to win freedom for Americans held prisoner by hostile foreign governments.

A star insurance litigator known for his penchant for motorcycles and rock and roll, Gilbert has helped blue-chip clients recover more than $50 billion in coverage disputes with their insurance carriers.

Although he spent more than two decades at big firms—Covington & Burling, then Dickstein Shapiro—before founding his own shop, Gilbert LLP, he’s never held a government post or worked as a diplomat.

What Gilbert can do—masterfully—is negotiate settlements. It’s a skill he drew on, for example, to co-draft the landmark Wellington agreement creating a special centerto handle asbestos claims.

That same talent helped him broker a deal in late 2014 for the release of Alan Gross, a former U.S. AID worker who was held prisoner in Cuba for crimes against the state. And it led the family of Amir Hekmati to hire Gilbert to get the ex-Marine home from Iran, where he was imprisoned as a spy.

On Jan. 16, Hekmati and three other Americans held captive in Iran were released in a prisoner exchange.

Gilbert spoke to The Lit Daily about his role in the cases, and how his practice has evolved.

The interview has been edited for clarity and length.

Litigation Daily: How did you come to represent Amir Hekmati, a U.S.-born former Marine who traveled to Iran to visit his grandmother, where he was promptly arrested and charged with spying?

Scott Gilbert: We were contacted in June of 2015 by some individuals who had observed the work we did for Alan Gross with the U.S. government in Cuba in obtaining his release and serving as a facilitator for the negotiations between the U.S. and Cuba. They called me looking for some strategic advice with respect to Amir’s situation.

We talked to Amir’s sister, Sara Hekmati, who asked us if we would represent the family and get involved to secure Amir’s release from Iran. As we had done with Alan Gross, we agreed to do it on a pro bono basis and got involved immediately in dealing with the U.S. government.

It involved meetings with senior officials at the Department of Justice, the State Department and within the White House and the NSC. We had frequent meetings, phone calls, provided our views and some advice, and really wanted to make sure that the U.S. government understood the importance of this, maintained it as a priority and was pursuing negotiations that we felt were viable and likely to lead to a positive outcome. We were successful in that effort, and would express great gratitude to the people in the Obama administration who tirelessly worked on this to free Amir and these other Americans.

LD: Did you work with any of the lawyers representing other imprisoned Americans? Wilmer Cutler Pickering Hale and Dorr, for example, represented Washington Post reporter Jason Rezaian.

SG: We did not. When I first got involved, my instinct was to reach out and try to talk to the lawyers or others who were representing at least two of the other prisoners. Once I got a good feel for the situation and Amir’s factual case, I determined frankly that if there was an attractive victim, I really felt Amir was the best example of that, and there would be no benefit to him in our working closely with these other entities.

It was pretty clear from the outset of our involvement that the Washington Post, for Jason, their strategy was largely to push Iran and to try to create tension in terms of Jason’s situation. While that didn’t trouble me, vis à vis Amir I didn’t think it was a particularly effective strategy, and not one that we wanted to pursue. The strategy that was pursued by Saeed [Abedini, an Iranian-American pastor] similarly was directed at Iran and trying to convince them to release these prisoners.

We knew from experience that wouldn’t happen, there would have to be a deal, there ultimately would have to be a trade. We wanted to work that quietly behind the scenes. That’s what we did.

The government confirmed for me during my first meeting, because it was one of my first questions, that one of these prisoners would not be going home without the other. As a negotiating matter and a U.S. political matter, it really wasn’t viable to have one of them return while the other two remained in prison in Iran. I knew that if we were successful on behalf of Amir in pursuing this approach and encouraging the U.S. government and helping them in terms of a negotiating strategy, that negotiation would encompass everybody by definition. There was no benefit that I perceived in affiliating with the other prisoners publicly, and on a private basis, we had a very different strategy than they did.

LD: What is your response to people who worry that doing a trade might encourage others abroad to abduct or imprison Americans? What does history tell us?

SG: History tells us that since the 1960s, the United States has done more than a dozen trades to obtain the return of American citizens. We’ve traded more than 40 foreign prisoners to other nations or groups. This is not a novelty by any means. One of our most conservative presidents, someone revered by conservatives who have criticized President Obama [for the trade], is President Reagan. He did a very famous trade with the Soviet Union to obtain the return of an American. [Reagan swapped a Soviet spy in exchange for Nicholas Daniloff, a correspondent for U.S. News & World Report.]

If you look at a country like Israel, that none of us would characterize as being soft on its adversaries, or soft on national security, one of the things Israel is most famous for is doing whatever it takes to bring Israelis home. Not long ago, they traded almost 1,000 prisoners for one Israeli soldier.

It really is a question of government policy, whether you want to tolerate a situation where you leave Americans imprisoned in a hostile territory, or whether you will do whatever you can to bring them out.

I believe frankly that the world in which we live in today, the notion that by doing the trade that President Obama just did is going to encourage Iran or other entities to take Americans prisoner because they’ll be able to get back a high-value asset is sort of silly.

If you look at this trade, the Iranians did demand the release of terrorists. Early in the negotiations, the administration absolutely refused to release those people. So who did President Obama release in the end? He released seven people who were accused of sanctions violations, who today would be violating no law. That’s who we traded back. Is that going to incentivize Iran, so they can get more sanctions violators out of prison? Do we really think that’s what they cared about?

In this negotiation, which I would point out precedes the Iranian elections in February, which was the reason for its timing, in this negotiated deal, Iran was looking for legitimacy and was looking for economic benefit. It did a humanitarian trade, as it would call it, as part of all of this.

But the notion that Iran will kidnap Americans in order to trade for the kinds of individuals who were released from prison —at least one of whom doesn’t want to go back to Iran—is silly.

LD: Have you had a chance to meet with Amir?

SG: I have not met Amir in person. I’ve talked to him a number of times, and met his family. I expect we’ll get together in the next couple of weeks. As was the case with Alan and people who return from these situations, Amir needs some space and some time to be with his family, to start to get his life back.

LD: How did you come to represent Alan Gross?

SG: About four years ago, we were asked by [Williams & Connolly] and also some prominent members of the Jewish community to sit down with [Alan’s wife] Judy Gross and talk to her about whether the Gross family might have viable claims against the government contractor with whom Alan worked and the U.S. government.

We ended up having to file litigation against the contractor, the U.S. government and the contractor’s insurance companies in different lawsuits. We went through various mediations and resolved those matters. In the course of that, I got to know Judy Gross extremely well. I also got to know Alan. I went to Havana a number of times to visit him in prison to talk about his strategy as well as to have him sign court-related documents.

Toward the middle of that representation, the Gross family switched lawyers. Then about nine months to a year later, they asked me if I’d be willing to represent Alan and get him out of Cuba. I said that I would, and we’d do it pro bono. That was about a year and a half before Dec. 17, 2014, when we brought him home.

LD: How is Alan doing?

SG: I saw Alan and Judy Gross two nights ago for dinner. Alan is doing quite well. His favorite pastime in Washington is to go for very long walks, including in the recent winter weather we’ve had here. And when I say long, I mean eight or 10 miles. Alan will smoke a cigar and take a walk and enjoy his freedom. To be able to walk without hitting a wall in your room is something that we take for granted. It was something he fantasized about during his five years in prison.

Judy is doing well. And I’m pleased to say they’re both about to become first-time grandparents in about a week. I would visit Alan monthly in Havana and we would sit in the small room that we were allowed to be in together, for many hours at a time, day after day. I would talk about what would happen when we got him out, what he would do, how his life would go. I’m very pleased to see him living it fully.

LD: Do you continue to be involved in Cuba-related matters?

SG: I go to Cuba at least once a month for three or four days. I continue to serve as a facilitator between the Cuban and U.S. governments, although increasingly, they’re doing quite a good job of that themselves. The need for a marriage counselor, as it were, is becoming less.

Most of my involvement now has been to advise or represent entities that want to do business in Cuba. The regulations promulgated by [the Office of Foreign Assets Control] are being broadened, and they’re really geared largely toward selling U.S. products to Cuba. The major problem with that is that Cuba doesn’t have money to pay for U.S. products, and it’s got an ailing economy.

The projects we’re involved in are looking at this from the other side—projects that will increase travel to Cuba, increase Cuba’s capacity to deal with travelers, increase investment in Cuba and increase exports from Cuba—all of which is intended to bring more capital and dollars into Cuba to stimulate their economy and encourage more private entrepreneurship and investment by Cuban entities. It’s a very exciting time, and there’s a lot of interest within both countries in moving these kinds of projects forward.

In addition to Alan and Amir, we got another person out of Cuba during the fall of 2015. The individual has not talked to the press at all, and we haven’t publicized it. He served 15 years in prison in Cuba of a 25-year sentence.

LD: How have the skills you developed over the years as a lawyer and a litigator been relevant to these new undertakings?

SG: I found as a relatively young lawyer at Covington, where I spent 18 years, that the skill sets I developed, the abilities I had, could be applied in a variety of substantive areas. Each of us is a package. We have great positives, all of us have negatives, and the key is to try to maximize your positives and minimize your negatives in order to be effective.

It was pretty evident to me during my involvement in the Wellington agreement negotiations, the asbestos claims facility, that my greatest strength lies in strategic analysis, and on the negotiation side. [I’ve] applied that in the insurance area, in the mass torts area, and the firm has been involved in a variety of other areas.

I learned as a young lawyer, ironically, that the greatest detriment of being well-known in a particular area is that everybody slots you into that. Even though you could apply the same approaches in something else, people will say, “That’s the insurance lawyer” or ‘“This is the securities lawyer.” In some ways, it’s very limiting.

It’s been refreshing and fun to be able to apply the same kind of skill sets in other areas. Some of those we do for corporate clients, and some we do on the pro bono side. About two years ago, we created a consulting firm that is owned by Gilbert called Reneo. Translated from Latin, it means to untangle or to resolve. We do a variety of work, the minority of it being insurance-related. Much of our Cuba work is done through Reneo now.

LD: Why make it a separate entity? Why not do it as part of the law firm?

SG: One, I wanted to emphasize the fact that Reneo is not insurance-centric. Our firm really has an international reputation as an insurance boutique. I didn’t want to dilute that. So I created a consulting firm that would be doing work that was much more diverse than insurance or liability strategic analysis and advice.

The second is that since I began practicing law, I’ve heard from clients and others about the problems associated with hourly billing. At Gilbert, we do a lot of creative fee arrangements, we’re responsive to client needs in those regards, but fundamentally, we’re a firm where the majority of our work is billed and paid by the hour. In the end, most clients, no matter what people say about alternatives, seem to be comfortable with those kinds of barometers.

I wanted to create an entity where hourly billing is not an option. Reneo does not bill by the hour. Clients at Reneo are on fixed-fee arrangements, or they will pay essentially a contingency: if Reneo doesn’t solve your problem, don’t pay us anything, and if we solve it, here’s the agreed-upon fee. I wanted to experiment and see if it was possible in this marketplace to create an entity that could operate on that basis with no exceptions for hourly rates. Reneo has been successful in that regard. Clients appreciate it, because the fees are very result-oriented. For us, it’s a fee that represents the value that we add.

I will say I think that it’s much harder on the service provider than on the client to figure out what an appropriate fee is, and not guess wrong.

Reneo technically is a law firm, it is affiliated with Gilbert, so we clear all conflicts together. Reneo is subject to all the same ethical rules as Gilbert is, but it operates differently.

LD: Is it hard going back to doing bread-and-butter insurance work after you’ve done things like winning people’s freedom from prison and helping bring about historic changes in international relations?

SG: No. The level at which I’m able to work in the insurance area and otherwise is not necessarily the same level that I worked at 15 or 20 years ago. At Gilbert, I know every case that we’re involved in, and I become personally involved where I’ll add value for the client. If we’re doing work where I will not add particular value, there’s no point in a client involving me or paying my rate. I’m there, I’m on tap, I’m available. The work that I’m doing in these cases is interesting and very strategic. It’s dealing directly with clients in management and their boards of directors.

My dealings with insurers are long-term. I have relationships in the insurance industry that go back two or three decades. I enjoy dealing with those people. Many of these adversaries are friends of mine.

Most importantly, where I as an individual have always obtained the greatest gratification, and I’ve been very fortunate in my career, is in resolving problems. Whether that problem is trying to bring two nations together or bring two companies together or keep a company alive through a major catastrophic crisis, the stakes are high. When you resolve the problem, there’s a feeling a satisfaction that I think can’t be duplicated.

I couldn’t ask for a different career. I’m now in my 60s, and my wife asked me recently if I ever thought I would retire. I looked at her—Why would I do that? What is that? I’m having a lot of fun, and we’re obtaining the right outcomes. Why would you ever stop? I’ve been very, very lucky.

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I. INTRODUCTION

Facilitating increased telecommunications services between the U.S. and Cuba has been a cornerstone of President Obama’s new policy toward Cuba.  Soon after the President’s December 17, 2014 announcement regarding this new policy, the U.S. Departments of Treasury and Commerce amended their regulations to broaden opportunities for U.S. companies to provide telecom services and infrastructure to Cuba.  Slow action by the U.S. State Department and the Federal Communications Commission (“FCC”) to amend their Cuba telecom policies, however, has continued to pose obstacles to U.S. telecom providers seeking to do business in Cuba.

In recent weeks, the State Department and FCC have taken long-awaited steps to eliminate these remaining barriers.  These actions will bring FCC regulations more in line with President Obama’s Cuban telecom initiatives and facilitate new opportunities for U.S. telecom companies to do business in Cuba.

II. PREVIOUS FCC REGULATIONS

The FCC implements policies and procedures for Cuba-related telecom service based on policy guidance from the State Department.  Until recently, FCC regulations relied upon guidance from State that had not been updated since January 2010.  These outdated directives placed a number of restrictions on U.S. telecom carriers doing business with Cuba that were inconsistent with the Commerce and Treasury Departments’ recent sweeping regulatory changes regarding the provision of telecom service to Cuba.

  1. Inclusion on Section 214 Exclusion List

Under previous FCC regulations, Cuba was the only country on the “Exclusion List” for international Section 214 applications.  FCC regulations require all facilities-based carriers to obtain Section 214 authorization to provide international call service from the U.S. to foreign countries.  While the authorization process for most countries typically is efficient and streamlined, providing call service to countries on the Exclusion List requires a separate authorization that is notoriously difficult to obtain.  Carriers must go through a burdensome application process that includes State Department review.[1]

  1. Non-discrimination Protections

Previous FCC regulations also required that agreements between U.S. and Cuban carriers comply with certain “non-discrimination” protections, which dictate that all U.S. carriers must receive the same effective accounting rate for providing similar call services between the U.S. and Cuba.  These protections were intended to prevent Cuba’s state-owned telecom company from discriminating among U.S. carriers competing to carry international traffic to the country.  U.S. carriers have argued, however, that such protections prevent them from negotiating lower rates and responding to market forces.  Cuba was the only country to which these non-discrimination protections still applied.[2]

  1. Establishment of Settlement Benchmarks

As an additional competitive safeguard, the FCC has established benchmarks governing the international settlement rates that U.S. carriers may pay foreign carriers to terminate international traffic from the U.S.  Under FCC regulations, U.S. carriers must negotiate settlement rates with Cuban carriers that are at or below the benchmark level of 19 cents per minute, or they must obtain a benchmark waiver from the FCC.[3]  In other words, U.S. providers can only offer direct calls to Cuba and roaming service if they pay the Cuban Government a fee no higher than 19 cents per minute.  These benchmark rates have delayed or derailed U.S.-Cuba telecom transactions in the past, as the Cuban Government historically has required a termination rate higher than 19 cents per minute.[4]

III. NEW FCC ACTION

On October 26, 2015, the State Department issued new policy directives to the FCC regarding telecom service to Cuba.  The FCC published a notice announcing its proposed implementation of those new directives on November 9, 2015.  According to the notice, the FCC will:

  1. Begin the process of removing Cuba from the 214 Exclusion List and immediately cease coordinating with the State Department in evaluating Section 214 applications for service to Cuba.

Implications of Change:  Removing Cuba from the 214 Exclusion List means that communications companies that already have global Section 214 authorizations can provide facilities-based services from the U.S. to Cuba without seeking additional authority or engaging in a burdensome application process.

The FCC has sought expedited comment on its proposal to remove Cuba from the 214 Exclusion List.  Comments are due on December 4, 2015, and reply comments are due on December 9, 2015.  According to some industry experts, the expedited timeframe suggests that the FCC may already be in the process of implementing its proposal.

  1. Begin the process of removing non-discrimination requirements currently applicable to the U.S.-Cuba call transfer route.

Implications of Change:  The FCC will no longer require that all U.S. carriers receive the same accounting rates from the Cuban Government, meaning that U.S. carriers will have more flexibility to negotiate rates and to respond to market forces.

  1. Continue to apply the appropriate benchmark settlement rate for telecom services between the U.S. and Cuba, while still allowing waivers as appropriate.

Implications of Change:  The FCC will continue to maintain the same benchmark settlement rate of 19 cents per minute for calls to Cuba, though the FCC will also continue to allow waivers of limited duration on a case-by-case basis.  The FCC’s failure to modify or eliminate these benchmarks may continue to hinder transactions with Cuba if the Cuban Government continues to require higher call termination fees.  The FCC has shown willingness in the past, however, to grant waivers for transactions in Cuba as necessary.

IV. CONCLUSION

The FCC’s new proposed actions bring FCC policy in line with current Treasury and Commerce regulations and President Obama’s policy on Cuba.  While the continued application of benchmark settlement rates may hinder certain transactions, the FCC’s removal of Cuba from the 214 Exclusion List and elimination of non-discrimination safeguards should make it easier for U.S. carriers to compete in the Cuban telecom market.

[1] See 47 C.F.R. § 63.12.

[2] See International Settlements Policy Reform, IB Dkt. Nos. 11-80, 05-254, 09-10, RM-11322, Report and Order ¶¶ 16–20, FCC 12-145, 27 FCC Rcd 15521 (2012) (“2012 ISP Reform Order”).

[3] See 2012 ISP Reform Order ¶ 17.

[4] Jens Erik Gould, Free Cuba Phone Market Urged on Obama by Nokia, AT&T, Bloomberg Business (Aug. 21, 2010). http://www.bloomberg.com/news/articles/2010-08-31/free-cuba-telecommunications-market-urged-on-obama-by-at-t-nokia-verizon.

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