A "BIT" About Cuba - Using Bilateral Investment Treaties to Protect International Investments

By Charles B. Rosenberg Attorney, White & Case LLP | September 04, 2016

Co-authored by Raquel Martinez Sloan, Associate, White & Case LLP

In July 2016, Starwood Hotels & Resorts opened a new hotel in Havana, Cuba. Once unimaginable for a U.S. hotel company, the Four Points Havana offers more than its 186 guest rooms and modern spa; it provides an authentic Cuban experience where guests can enjoy traditional Cuban cuisine in the Don Quixote restaurant, sip on the island's most popular beers, Cristal and Bucanero, in Starwood's signature bar "Best Brews," and experience Cuba's most sought after cigars with the guidance of a cigar sommelier in the hotel's 5th Avenue Cigar Bar. As the first U.S. hotel in Cuba in nearly sixty years, the Four Points Havana signals the beginning of a new era, as previous forays into the hotel industry in Cuba did not end auspiciously for U.S. investors.

In 1958, Conrad Hilton personally opened the Habana Hilton at a cost of $24 million ($205 million in 2016 dollars). When Fidel Castro entered Havana during the revolution in January 1959, he made the Hilton his headquarters, shutting down its 500 rooms and casinos. After two more unprofitable years, the Cuban government took over the Hilton, along with all other U.S. hotels. In response to these and other expropriations by the government, the U.S. imposed an embargo on Cuba, which it has maintained in part because the U.S. holds $6 billion worth of financial claims against Cuba for these seizures.

Today, Cuban laws and policies reflect a different reality, in which Cuba seeks foreign investment to bring its economy into the 21st century. In 1995, Cuba enacted Investment Law No. 77, which enables foreign investments in Cuba via private enterprises. Cuba's close proximity to the United States and its miles of undeveloped and pristine beaches make the island particularly attractive for the U.S. hospitality industry. With the resumption of diplomatic relations between the United States and Cuba, U.S.- based hospitality companies increasingly are considering investing in Cuba to attract the steady stream of tourists away from competing Caribbean destinations such as Jamaica, Puerto Rico, and Mexico.

The amount of tourists visiting Cuba has skyrocketed in recent years. As shown below, the number of tourists visiting Cuba has steadily increased from less than a million in 1996 to nearly three million in 2014. These figures do not include the recent growth in tourism from the U.S. In 2015, almost 450,000 Americans visited Cuba, compared with an average of 350,000 from 2010-2014. Moreover the amount of U.S. visitors is expected to increase even further once eight U.S. airlines start offering flights to Cuba later this year.

The authors thank Nathan Mendelsohn for his assistance in preparing this article.

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