At the height of the enthusiasm sparked by President Barack Obama’s historic restoration of relations with Cuba, several cruise lines rushed to secure a piece of the island’s untapped market under newly eased regulations promoting “people-to-people” engagement. The cruise companies knew that traveling to Cuba for tourism was illegal. So, instead of sipping mojitos at Varadero beach, Americans going to Cuba were supposed to participate in humanitarian and social impact initiatives to help Cubans gain independence from the state, the cruise lines pledged. But a recent trove of unsealed documents from related lawsuits filed in Miami federal court shows that behind the scenes, four major cruise lines — Carnival, Royal Caribbean, Norwegian and MSC Cruises — made deals with Cuban Ministry of Tourism agencies to provide “tourist services” to their passengers, despite the long-standing U.S embargo’s ban on tourism to the island. The services included excursions to cabarets and beaches that arguably did not comply with the travel rules at the time.
Carnival registered a subsidiary with the Cuban Chamber of Commerce in 2018 for the stated purpose of “conducting commercial activities related to tourism,” according to the documents. And the company also signed a memorandum of understanding with a tourism company named Gaviota, owned by Cuba’s military — which runs much of the economic activity on the island — for the provision of “tourism services.” Not wanting to be left behind, Royal Caribbean even made inquiries with a Cuban government law firm to secure permits to open and operate casinos in Cuba, according to the documents, which also show that Royal Caribbean profited from reselling Cuban “tourist visas” to passengers at a 50 percent mark-up.
The cruise companies went ahead despite warnings in the U.S. Treasury Department’s regulations and the agency’s communications that the authorization to take travelers to Cuba was no excuse for violating other laws and regulations, the records show. They also risked doing business with Cuba despite knowing that some of the ports they would be using were the subject of property-claims disputes because they had been confiscated from their owners by the Fidel Castro government in 1960. When confronted with the evidence in court, the companies have insisted that all their dealings in Cuba were legal because cruise travel was authorized by the Obama administration as part of an ambitious overhaul of U.S. foreign policy toward the Caribbean island. Although the Cuba travel bubble was short-lived, the cruise lines’ bet paid off: The four companies brought in at least $1.1 billion in revenue from sailings to Havana between 2016 and 2019. The booming business benefited the Cuban government as well; it pocketed more than $138 million. The details of the inner workings of cruise travel to Cuba emerged in hundreds of pages of unsealed documents filed in federal court in Miami that are part of lawsuits against each of the cruise lines by an American company, Havana Docks, which claims the cruise lines were illegally using its three piers at the port of Havana that were wrongfully confiscated by the Fidel Castro government in 1960. The records include contracts, financial statements, email exchanges, legal assessments and depositions. Some were just partially referenced in PowerPoint presentations shown during a hearing that began on Jan. 12 because their full version remains under seal at the cruise lines’ request. A judge’s ruling that the companies were involved in prohibited tourism would end up confirming many Cuban-Americans and South Florida public officials’ worst fears: that the people-to-people travel was a thin veil for illegal tourism that enriched Cuba’s coffers, helping to fund a repressive regime. And such a ruling could increase the chances of a multimillion-dollar payout to Havana Docks in compensation for illegally using its property in Cuba. Ultimately, the case is also a test of Obama’s presidential authority to make foreign policy changes that some insisted crossed the limits of what was permissible under the embargo.
After several motions and delays, U.S. District Judge Beth Bloom is set to decide whether the lawsuits will go to trial. ‘THE ART OF THE CUBAN COCKTAIL’ The picture that emerged at a January hearing, when the judge agreed to unseal some of the evidence, seemed to confirm some of the worries shared by Cuban exiles about the economic opening under the Obama administration, in particular, that the “people-to-people” travel category was tourism in disguise. In the beginning, some cruise executives themselves shared the same view. In a video shown in court, recorded at the Cuba Opportunity Summit organized by Knowledge@Wharton in 2015, Norwegian President and CEO Frank del Río said he believed taking thousands of American travelers under the “people-to-people” rules was “a stretch.”
“Tourism is still illegal under today’s set of rules and policies and guidelines,” Del Río, himself a Cuban American, said. “And it would be difficult for us to have a ship with 4,000 tourists — people, let’s call them — show up in Havana and call that people-to-people travel. That would be a stretch of the rules.” Del Río said Norwegian would not take advantage of changes in the travel regulations made by the U.S. Treasury Department at the time because other laws governing the embargo, like the 1996 Helms-Burton Act, were still in place. “My perspective is, from my three brands, until Congress officially repeals Helms-Burton, even if you can backdoor through [the Treasury Department] it wouldn’t be the proper thing to do, and I don’t think you can do it on a sustained basis. I don’t think that that backdoor or that loophole if you will, would work on a sustained basis,” he said. The Helms-Burton Act, passed by Congress in 1996, codified many of the rules that constitute the embargo against Cuba. Its Title III, enforced for the first time in 2019 by President Donald Trump, allowed Havana Docks to sue the cruise lines for using its confiscated property. Still, when the Treasury Department further eased the guidelines to explicitly allow “carrier services by vessels” in September 2015, the cruise lines, including Norwegian, jumped to do business with Cuba.
But some of the actions taken by these four companies may have arguably gone beyond what was legal, the court records show. According to unchallenged evidence presented during the January hearing, Carnival, Royal Caribbean and Norwegian, all based in Miami, signed contracts with Havanatur, the Cuban Ministry of Tourism’s largest travel agency, for the provision of “tourist services” to their passengers, the records show. MSC Cruises did the same with Cubanacan, another government travel agency and hotel chain. “Through this agreement, the parties have stipulated the terms by which Havanatur shall sell tourist reception services in the Republic of Cuba in order to serve passengers sent by the agency,” reads the contract signed by Del Río on behalf of Norwegian, according to screenshots of the document shown in court. “The latter,” meaning Norwegian, “shall likewise make payments resulting from these services.”
MSC Cruises entered into a similar agreement with Cubanacan, under which the Cuban agency was in charge of providing “tourist services,” including shore excursions to the passengers. “This appears to be powerful evidence that there was an intention to provide tourist activities,” Judge Bloom said at the January hearing. As part of the deals, the cruise lines marketed and sold excursions offered by the Cuban companies — from a “cocktail-making class” to spending an evening “under the Cuban sky” at the famous Tropicana Cabaret in Havana and excursions to Varadero and Santa Maria beaches — that did not appear to comply with the requirements in Treasury’s general licenses authorizing both the cruises and the passengers to travel to Cuba, the records show.
A paragraph in MSC Cruises’ marketing material selling an eight-hour excursion to the famous Varadero beach resort says: “The idyllic natural setting and warm, Caribbean water are perfectly complemented by free use of beach umbrellas and chairs during your stay as well as a delicious buffett. You’ll have about five hours to savor the surroundings, go swimming, stroll along the beach, listen to Cuban music or even have a go at beach games. This thoroughly relaxing tour ends with your scenic return journey to the port and your ship.”
According to descriptions of Old Havana sightseeing tours, Havana bus tours, excursions to see a colonial-era cannon ceremony at the bay or go scuba diving offered by the cruise lines, those also did not seem to follow regulations that travelers should maintain a full-time schedule of educational activities that included substantial interaction with locals. In its guidelines at the time, the Treasury Department explicitly said that exploring the streets of Havana and engaging in “brief exchanges with shopkeepers” and “casual conversations with waiters at restaurants and hotel staff” were not “educational activities that will result in meaningful interactions” with Cubans.
Norwegian told its passengers these excursions complied with Treasury’s rules, Havana Docks’ lawyers said during the hearing. But Carnival included a disclaimer in its marketing material for evening excursions to Tropicana, the Cabaret Parisien and the cannon ceremony known as “El Cañonazo,” acknowledging that “this evening shore excursion does not comply with the People-to-People guidelines and cannot be considered to be part of the required full schedule of activities.” This disclaimer was made available to cruise passengers.
Screenshots of Carnival’s memorandum of understanding with Gaviota, the militaryowned tourism company, do not show when it was signed. The full document remains under seal and it is not known if Carnival made any payments to Gaviota. In 2017, Gaviota was added to the State Department’s list of firms that U.S. companies are banned from doing business with.
Carnival did not answer questions about the memorandum, the registration of a subsidiary in Cuba or the specific tours brought up in the hearing. In a written statement, the company told the Miami Herald: “Carnival Corporation, like othern major cruise companies, took passengers to Cuba pursuant to licenses issued by the U.S. government and with the encouragement of the President as a means of creating interactions between Americans and Cubans which, over time, would, and did, benefit the Cuban people. The statute specifically exempts lawful travel to Cuba
and the use of Cuban facilities, such as a port, necessary to that travel.”
“Carnival Corporation only undertook lawful travel as provided under these U.S. government licenses, and contracts with Cuban organizations were part of this Screenshot of a PowerPoint presentation by Havana Docks’ lawyers filed in a Miami federal court. Carnival signed a memorandum of understanding with Gaviota, a tourism company run by the Cuban military. Gaviota is under U.S. sanctions.
lawful travel program,” the statement adds. “State Department officials working under the Obama Administration made verbal and written statements that cruise travel to Cuba was covered under the ‘lawful travel’ exception in the Helms-Burton Act: they told this to Havana Docks itself when asked.” A spokesperson for MSC Cruises said that the company does not comment on
pending litigation. Royal Caribbean declined to comment. Norwegian did not respond to a comment request. Several lawyers with knowledge of the Cuba embargo regulations consulted for this
story expressed surprise at the evidence regarding tourism that has come up in court.
“The issue here is that not only did they sign a document that used the word tourism. Then you have your passengers engaged in what any person reasonably would understand as tourism,” said John Kavulich, the president of the U.S.-Cuba Trade and Economic Council, who has closely followed the Helms-Burton lawsuits. “But here’s where it gets challenging. The cruise lines are saying ‘none of this mattered because we did it legally, we had a license from Treasury, from Commerce, the blessing of the White House’ that immunized them from everything else. The question for the
plaintiffs and the judge is, are they correct?” Florida members of Congress who at the time opposed the Obama administration’s policies of engagement with Cuba expressed concern about the new evidence.
“Under the Obama-era concessions to the Cuban regime, travel restrictions to Cuba were eased,” Republican U.S. Sen. Marco Rubio said. “The use of travel agencies to funnel money to companies owned by the Cuban military is actively funding the repression against the Cuban people.”
When told about the documents by the Herald, in which he is mentioned, Miami Republican U.S. Rep. Mario Díaz-Balart called for a Treasury Department investigation.
“When President Obama permitted virtually unrestricted travel to Cuba, I repeatedly and publicly stated that this type of travel was unlawful,” Díaz-Balart said. “If the alleged terms of these contracts are accurate, they would constitute a clear violationmof the law. [Treasury] must investigate these potential violations immediately and hold any and all violators accountable to the fullest extent of the law.”
THE LAWFUL TRAVEL DEFENSE
Evidence pointing to the violation of the tourism ban, which could prompt a Treasury Department investigation, may damage the cruise lines’ case in court because much of their defense strategy hangs on the argument that they traveled legally to Cuba. A central piece of the case is how judges will interpret an exception
The cruise companies argued at the January hearing that they met the conditions set by the “lawful travel” exception because they took passengers to Cuba legally under several government licenses. They said they were encouraged by the Obama administration’s change of regulations to allow U.S. companies to provide trips and lodging to Americans traveling under 12 authorized categories, including “people-topeople” educational exchanges. The Treasury regulations authorizing cruises to Cuba, however, did not define “lawful travel.” But neither the law nor Treasury regulations allow plain tourism. In November 2017, the Treasury Department published the following guidance on its website: “Is travel to Cuba for tourist activities permitted? No. Consistent with the Trade Sanctions Reform and Export Enhancement Act of 2000, travel-related transactions involving Cuba are only permitted for the 12 categories of activities…. Travel-related transactions for other purposes remain prohibited.”
The language in both general and specific licenses regulating travel to Cuba also warned about potential liabilities. A specific license obtained in July 2015 by Carnival, the first company that sailed to Havana from Miami, only includes authorization to provide carrier services between the U.S. and Cuba and lodging passengers “engaged in activities authorized” by Treasury’s Cuba regulations. The document, also filed in court, includes several warnings that “nothing on this license” excuses not abiding by other laws and regulations.
Outside the court, records show that the cruise companies were concerned about whether the licenses under which they took passengers to Cuba would offer enough protection, especially from lawsuits related to the use of confiscated property, and began lobbying efforts to stop the suits. In early 2019, news broke that the Trump administration was moving to green-light the lawsuits about confiscated property and the cruise companies received notification letters from Havana Docks about potential litigation. The companies then asked the Cruise Lines International Association to evaluate their legal risk. The CEOs of the four cruise companies sit on the association’s global executive committee.
The study, commissioned to law firm Venable LLP, warns that “it is unclear whether a court would find that carriers and travel service providers, including the cruise lines, are covered by” the lawful-travel exception. According to the deposition of the cruise association’s associate general counsel, Bradley Rose, the organization met with lawyers and lobbyists in January 2019 to
discuss how to influence the Trump administration to protect the cruise lines from the lawsuits.
The efforts included a letter to then-Secretary of State Mike Pompeo and even a meeting between Carnival’s chairman and Miami Heat owner Micky Arison and President Trump at the White House, Havana Docks’ lawyer Robert Martinez said at the January hearing. In a follow-up email sent to the White House on April 17, 2019, Arison again pleaded with Trump to modify the regulations to clarify that the “lawful travel” exception in,the Helms-Burton Act included cruise operations.
“If there are no exceptions or clarifications, we would be subject to significant legal liability for the use of the Ports” in Cuba, Arison wrote. “While it might appear that such an exemption would protect cruise lines from legal claims, lawful travel is not defined.”
“The potential penalty to my company alone would be over $600 million,” he noted. Not only were Arison’s efforts unsuccessful, but two months later the Trump administration banned cruise travel to Cuba altogether to punish Cuba for its support of the regime in Venezuela.
‘PUTTING LIPSTICK ON A PIG’
During the January hearing, however, the cruise lines’ lawyers called cruises to Cuba “the quintessential example of lawful travel.” They also tried several arguments to defend the tourist activities in Cuba. Screenshot of a PowerPoint presentation by Havana Docks’ lawyers filed in a Miami federal court. Carnival CEO Micky Arison wrote an email to President Donald Trump
asking to protect cruise companies from lawsuits related to confiscated property in Cuba. Essential.
One Carnival lawyer, Meredith Schultz, interpreted a Treasury prohibition on “transactions related to activities that are primarily tourist-oriented” as not barring “excursions that are tourist-oriented” because the word used was “transaction” and not “excursion.” She went on to say that, “It says it’s related to activities that are primarily tourist-oriented. This means that transactions can be secondarily tourist-oriented.” Another lawyer representing Norwegian, Allen P. Pegg, took a different approach and said the excursions to spend an evening at a cabaret or go scuba diving indeed complied with the people-to-people regulations.
“Plaintiff pointing to issues that you know: ‘That looks fun.’ That’s essentially what they’re telling Your Honor. ‘And that scuba diving trip looks like it might have been a good time.’ That does not undercut the fact that these were all designed and had critical components of meaningful interaction with the Cuban people, which is what people-to-people is all about.”
The lawyers also argued that the passengers themselves also bore responsibility. “I think if you’re going to say: ‘Oh, if you spent the whole day on the beach,’ that’s a Helms-Burton claim against that person, not against Carnival,” Schultz said. “There is daylight there between the cruise ships providing carrier services and what the passengers are doing. And [the passengers] are the ones signing these declarations and making these affidavits.” The general license under which the cruise lines could transport people to Cuba required that the passengers were in compliance with one of the 12 authorized travel categories. Passengers had to sign affidavits to attest they were, and the cruise lines had to keep the records for five years. When Pegg, Norwegian’s lawyer, made a similar argument, Judge Bloom called it “somewhat circular” because the passengers signed the affidavits based on the excursions and itineraries offered by the cruise lines.
with U.S. requirements (this includes any Royal Caribbean shore excursion). Just be sure to know that a day tour must be booked; night tours alone won’t meet the requirement.” The cruise lines’ lawyers also pointed out that Treasury never went after the companies for their activities in Cuba. Citing “concerns” about its record-keeping practices, Treasury did issue a “cautionary letter” in 2019 warning that Royal Caribbean’s “dealings in possible unauthorized travel by U.S. persons to Cuba appears to have violated” U.S. regulations. But the agency did not find enough
evidence to conclude there was a violation. A Treasury Department spokesperson said the agency does not comment on investigations and could not answer questions related to the lawsuit.
Ultimately, the cruise lines’ lawyers said, the court has no business in considering if the cruise companies facilitated tourism because they received authorization from the U.S. government to travel to Cuba. “I guess Carnival’s position is it wouldn’t matter if there were many excursions that were tourism-related because the Court should not look behind the blanket authorization,” Judge Bloom said. “That is correct, your Honor,” Schultz replied.
“If there’s even one passenger who complied with people-to-people requirements, Carnival has done its job by providing carrier services to that passenger if that passenger’s lawful travel and Carnival’s use of the terminal is incident to that passenger’s lawful travel,” the lawyer continued. “That box is checked. It’s done. So yes. The Court does not need to look into what actually happened in Cuba.” After hours of going back and forth on the lawful travel defense, Martinez, the Havana Docks’ leading counsel, provided a colorful description of the defendants’
presentation. “These cruises to Cuba were tourist cruises,” he said. “And to call them anything else is to put lipstick on a pig.” Havana Docks’ lawyers declined to comment for this story.
‘THE MORE THEY DIG INTO IT, THE WORSE IT WILL LOOK’
As many Cuban exiles worried, the records show that the Cuban government made significant money out of these deals to provide “tourism services” to American travelers. Havanatur, for example, received $38 million, and the government made $54.4 million just in “tourist” visa fees. Some of the money the cruise lines paid went to obscure offshore companies controlled by the Cuban government, such as Agencia Marítima Mapor S.A., based in the Virgin Islands and linked to a global network of offshores through which the government and the military carry out the island’s shipping and maritime dealings while avoiding U.S. sanctions. MSC Cruises paid $9.3 million to Mapor for services as a “ship agent” at the Havana port, according to the court documents.
Of the four companies, Royal Caribbean made the most revenue, $430.9 million, and sought opportunities to make more. Between 2017 and 2018, the cruise line explored the possibility of operating onboard casinos while in Cuba, according to the company lawyers’ description of emails between several Royal Caribbean executives and lawyers with COMAR, a Cuban government legal agency. The emails themselves are under seal because Royal Caribbean cited attorney-client privilege. Their content was described as “Casino Opening in Cienfuegos and Santiago,” “RCCL trying to secure permits to open and operate Casinos in Cuba,” “Operation of cruise ship casino during berthing in Cuban territory,” “Casino Opening Hours Seeking legal advice from counsel,” “shipboard casinos,” “operating onboard casinos,” and “compliance/legality of opening casinos.”
Though the Trump administration’s shutdown of U.S. cruise travel to Cuba in June 2019 hurt some of the island’s self-employed workers near the port, especially drivers, souvenir makers and restaurant waiters, the records also back up claims by Florida politicians that comparatively little money went to Cuban private businesses and entrepreneurs, contrary to what both the Obama administration and the cruise industry publicly claimed.
After the Trump administration and members of Congress like Rubio expressed concern that the Cuban government was pocketing much of the money from cruise travel, Royal Caribbean executives sought to find data proving otherwise.
Ahead of a meeting with Rubio, Eleni P. Kalisch, at the time a Royal Caribbean vice president, asked two company executives if they could provide data about how much the company paid the Cuban government versus how much they were able to “directly support the Cuban people.” She said the Cruise Lines International Association was collecting the data and was trying to “portray the financial support we provide to the Cuban people as equal or greater than the support to the government (assuming the data supports that).” The two company executives were identified only as Michael and Roberta in a PowerPoint presentation with excerpts from an undated email exchange. The full version of the emails is still under seal. “Havanatur is a government agency, so hard to make a case this is going to the Cuban people,” said one of the unidentified executives. “This is going to be a hard one,” the other executive replied. “The port fees is a similar situation with
everything going to the government, the buses we used are all government-owned. Maybe a little tiny bit for the restaurants we go but minuscule amount.” One of the executives in the email exchange said the data would likely support the White House’s claims. Another one replied: “Yep, the more they dig into it, the worse it will look.”