Legal Fiction in Action: Cuban "State-Controlled Entities" and Their Standing in U.S. Courts
A Troubled Florida Case with Broad Policy, and Perhaps Legal Implications
In a case that seemed troubled from the start, a Florida judge in Palm Beach recently entered a default judgment in favor of a Cuban entity, Danaous SRL, in a dispute over a contract for frozen chickens. The case raises significant questions about U.S. policy and the standing of Cuban entities in American courts. A few court records are included at the end of this post, and I’ll share more once the judgment is published on the Clerk’s website.
Here are some facts from the complaint and media sources. The Defendant, a Florida corporation called Overseas of the Americas (USA) Corp., promised to ship groceries—frozen chickens—to Danaous SRL, an entity in Cuba. Danaous SRL filed a complaint alleging breach of contract and damages of at least $84,000. According to the Plaintiff’s lawyer, while the chickens were delivered to Cuba, they were allegedly sold to another Cuban buyer at a higher price.
The Defendant initially appeared without counsel, a critical misstep since an attorney must represent Florida corporations in court. When counsel was finally secured, the attorney withdrew shortly after, citing irreconcilable differences. This procedural chaos culminated in a default judgment against the Defendant.
Ideally, this case would have been resolved through a trial on the merits rather than a procedural default. However, even without a full adjudication, it raises troubling issues about the ability of Cuban state-controlled entities (SCEs) to leverage U.S. courts despite the embargo and longstanding sanctions aimed at isolating the Cuban regime.
For this post, SCEs refer to the numerous schemes Cubans have devised to attract foreign investment and U.S. involvement under the guise of private enterprise. These include cuentapropismo (self-employment initiatives) and MIPYMES (micro, small, and medium-sized enterprises), marketed as independent businesses but tightly controlled by the Cuban regime.
Cuba’s only genuinely private sector is the black market, where individuals buy and sell goods and services without the government's prying eyes. These underground exchanges represent the only space where Cubans operate free from the regime’s oversight, albeit at significant personal risk.
In contrast, SCEs operate entirely at the state’s convenience, serving as profit centers for the socialist system. They are not private businesses as understood in free-market economies. Instead, their activities are carefully regulated and can be arbitrarily shut down for ideological noncompliance or perceived opposition to the government.
The Cuban regime determines what SCEs may do, sets rigid ideological and economic conditions, and retains ultimate control over their existence. According to independent lawyers in Cuba, SCEs are essentially state property. Operators act as stewards for the government, with profits flowing through heavy taxes, fees, and mandatory state-controlled banking channels. Even legal advice must be sought through state-run firms, denying operators access to independent legal counsel.
The Trading with the Enemy Act (TWEA) provides the statutory foundation for U.S. restrictions on transactions with hostile nations, including Cuba. Alongside the Cuban Democracy Act and the Helms-Burton Act, U.S. policy rests on two clear objectives: to support the Cuban people while isolating the regime by denying it access to resources that sustain its authoritarian control.
Cases like this expose contradictions in that dual approach. By granting standing to Danaous SRL, the Florida court has inadvertently legitimized a state-controlled entity, weakening the embargo and undermining U.S. policy.
Moreover, many SCEs operate on land or with assets confiscated from American citizens who have yet to be compensated, raising serious concerns about trafficking in confiscated property. This decision risks setting a dangerous precedent, inviting further exploitation of U.S. courts by Cuban entities and creating opportunities for the regime to circumvent sanctions.
Core principles of facilitation and evasion under U.S. sanctions law are implicated here. Facilitation occurs when U.S. systems enable benefits for restricted entities, even indirectly. Evasion refers to efforts by such entities to circumvent sanctions through intermediaries or regulatory loopholes.
While SCE proponents argue that they operate independently, their structure and operations ultimately serve the regime’s objectives. Any financial recovery from cases like this directly or indirectly supports the Cuban government, highlighting the urgent need to strengthen OFAC enforcement mechanisms under TWEA, other laws, and the Cuban Assets Control Regulations (CACR).
This case demonstrates the need for immediate legislative and regulatory action. Congress should amend U.S. laws to explicitly bar state-controlled entities from accessing U.S. courts. The CACR should also be updated to strengthen definitions of facilitation and evasion, preventing SCEs from exploiting regulatory exceptions.
If Congress fails to act, the next administration must step in. An executive order could revoke recent amendments to CACR, tighten licensing processes, and direct federal agencies to scrutinize claims of independence by Cuban entities. Judges, too, must demand robust evidence of independence in such cases and consider the broader implications of granting standing to Cuban plaintiffs. Legal counsel representing SCEs should be required to disclose ownership, control, and compliance with Treasury regulations to ensure transparency.
The Florida court’s decision to allow this case to proceed could have far-reaching implications. It legitimizes Cuban state-controlled entities, empowers the regime to exploit U.S. legal systems, and undermines decades of U.S. policy designed to isolate the regime and support the Cuban people. Moreover, it sends a troubling signal that trafficking in confiscated property may go unchallenged, delaying justice for American claimants and weakening U.S. commitments to property rights.
Congress and the next administration must act decisively to close this loophole and ensure that U.S. courts are not exploited to serve the interests of the Cuban regime. The principles of the embargo, the enforcement of TWEA and other laws, and the rights of American claimants demand nothing less. The United States must remain steadfast in its commitment to isolate the Cuban regime, support the Cuban people, uphold the rule of law, and, above all, advance U.S. national interests.
