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The legal process of entering into a joint venture with the Cuban water utility company

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  1. Introduction.
  2. Investment in Cuba.
    1. The advent of Fidel Castro and his bearded revolutionaries.
    2. 1976 codification of Cuba's abandonment of foreign investment by Fidel Castro.
    3. Cuba's implementation of a foreign investment law in 1995.
  3. A post-Fidel Castro Cuba.
  4. The client.
  5. Legal procedures for investing in Cuba.
    1. Approval of the written request to the Cuban Executive Committee of the council of ministers for a joint venture.
    2. Other necessary elements of the proposed joint venture.
    3. Final procedural step.
  6. Substantive legal issues under Law 77.
    1. Real estate: Location of the offices of the joint venture.
    2. Employment of workers for the joint venture.
    3. Pertinent tax issues pertaining to the joint venture.
  7. Conclusion.

This paper examines the legal process of entering into a joint venture with the Cuban public water system through a joint venture in a Post-Fidel Castro Cuba. Although Fidel is no longer at the helm, the Cuban Communist party is still in power. Since Cuba has a state planned economy, we place great emphasis upon the Cuban state procedural requirements for foreign direct investment. We also analyze the applicable substantive legal issues; specifically real estate, labor, and taxation. Before discussing the legality of entering into a joint venture with the Cuban water company, a general understanding of the history and current situation of foreign investment on the island is necessary. Before 1959 there was a significant amount of foreign investment in Cuba. Most investment was from U.S. nationals. Matias F. Travieso-Diaz, partner at the international law firm of Pillsbury Winthrop Shaw Pittman, notes that the large amount of foreign investment in Cuba before 1959 suggests that in a favorable investment environment, foreign investment can thrive in Cuba. With the advent of Fidel Castro and his bearded revolutionaries to Havana in January of 1959, the investment environment rapidly changed. From 1959 to 1963 the Castro government expropriated the assets of foreign nationals. After evaluating thousands of claims from U.S. nationals whose properties where confiscated by the Castro regime, the United States Foreign Claims Settlement Commission (FCSC) certified 5911 claims with a total value of $1.8 billion in 1960 dollars. Spanish nationals were the next largest group of investors affected by the Cuban expropriations. In total Spanish investors lost $350 million.

[...] Leonard, Castro and the Cuban Revolution (1999). [xxxvi] Id. [xxxvii] USA Today, available at http://www.usatoday.com/news/world/2007-09- 12-cuba-raul_N.htm?csp=34. [xxxviii] Ana Julia Jatar-Hausmann, The Cuban Way (1999). [xxxix] Thomas M. Leonard, Castro and the Cuban Revolution (1999). Daniel C.K. Chow & Thomas J. Schoenbaum, International Business Transactions (2005). [xli] Id. [xlii] Id. [xliii] Id. [xliv] Id. [xlv] Antonio R. Zamora, Cuba's Businesses Enterprises: How Business is Conducted on the Island Fla. J. Int'l L (2003). [xlvi] Id. [xlvii] Id. [xlviii] Law 77, The Foreign Investment Act, art [xlix] Id. [...]


[...] Approval of the Written Request to the Cuban Executive Committee of the Council of Ministers for a Joint Venture Before addressing the substantive Cuban law, we start with the procedural Cuban law for foreign investment in Cuba. Under Law 77, all foreign investment must be authorized by the Executive Committee of the Council of Ministers.[xxix] The Executive Committee is composed of the most important and powerful policy makers in Cuba. The committee consists of eight people: the president of the republic (who is the maximum leader of Cuba and has the final say in all decisions), two ministers of the government, the secretary of the Executive Council, and the four vice presidents (who are often deemed as possible successors to the president).[xxx] Even in a post-Fidel Castro Cuba, it is essential that the request for approval to invest in the island appeals to the nationalist and socialist sentiments of the Cuban Communist Party. [...]


[...] travel agency, aims to enter into a joint venture with the Cuban water company (that currently owns one hundred percent of the water system), we will submit a written request for a joint venture. A joint venture is a more practical option than requesting to completely privatize the entire Cuban water system because the Executive Committee of the Council of Ministers are not receptive to a complete privatization of a Cuban utility company. The overcharging for utility services by U.S. [...]

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