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Socialist Cuba; The nullity of the
foreign investment contracts due to an illicit cause: defraud the Cuban
Worker.
By: Dr. Alberto Luzárraga.
www.futurodecuba.org
SUMMARY
During the course of the past several years, diverse private and publicly
owned companies have signed contracts with Cuban government owned companies
in order to establish the terms and conditions under which they invest in
Cuba. Joint venture contracts regulate among other things the way that
profits are shared, but parallel to these contracts, there exists another
contract undertaken with a Cuban government company that furnishes the
workers. The structure of both contracts is such that they are null and void
from inception due to the fact that they are based on an illicit cause,
namely: to defraud the Cuban worker of most of his wages.
Present Cuban law demands that the hiring of workers be made through a Cuban
Government owned company and that the wages be paid to that company in
convertible currency i.e. dollars. Such wages are not passed on to the
worker that delivers the service. The Cuban State delivers to the worker a
sum, in Cuban currency, that is numerically equal to the agreed salary in
dollars; but retains for itself the exchange differential that has
fluctuated between 20 and 30 pesos per dollar. In this manner, assuming an
exchange rate of 20 pesos per dollar, a Cuban worker that receives 400 pesos
per month as his wages, is in fact only receiving 5% of what the Cuban State
charges the foreign investor, i.e. 400 dollars or 8000 pesos.
The Cuban government entity that hires the workers is a company with an
illicit purpose. It has been created only to harm and defraud a third party,
namely the Cuban worker. It is a sham.
Work contracts that provide for the payment of wages to a third party whose
only existence is to provide a subterfuge and not pay wages fully and
directly to the worker are null and void. An international labor convention
ratified by Cuba prohibits specifically this type of hiring. The real
contract exists between the foreign company and the Cuban worker. The third
party is a company with no business capability and a sham, in that it is a
useless intermediary in the labor relationship.
The foreign investor is perfectly aware of the system, and accepts it
because it allows him to obtain labor at prices substantially lower than the
international market. It is also assured of a compliant labor force that
lacks the right to unionize independently and be represented by leaders of
their choice. In spite of the attempt to create this sham, daily reality
tells the truth. Diverse employer acts of a juridical nature vis à vis their
employees evidence the existence of a true labor relationship.
The civil legislation and jurisprudence of which Cuba is an heir have always
considered as null and void those contracts that have an illicit and or
immoral cause. This tradition goes back to Roman Law, (the precursor of all
modern western law) and the medieval laws of King Alfonso the Wise of Spain,
traditions that are more than 2000 and 800 years old respectively.
The civil consequence of nullity is the return of the things that were the
object of the contract, or the equivalent in cash if the return in kind is
impossible as in the case of the work performed.
In this case however, we are looking at a nullity arising from a crime. The
crime is committed by the Cuban Company that provides workers to the foreign
investors, joined in this act by the foreign investor. Both are co-authors
of the crime of robbery. There exists robbery because the property of a
third party has been taken away with violence to persons or things, a
definition that exists in all criminal Codes including the Cuban. The
violence to persons consists in the violence applied to the Cuban workers by
the State Security, who incarcerates anybody that does not remain silent and
accepts the status quo.
Contractual nullity that results from the commission of a felony has
different consequences. The culpable parties that are the co-authors, (in
this case the Cuban government and/or its sham employment company, and the
foreign investor) may not demand from each other the fulfillment of the
criminal object of the contract; and the assets that are the object of the
crime are seized and held to indemnify the damages caused by the commission
of the crime.
The non-culpable and damaged party is the Cuban worker that has a "de facto"
unwritten labor contract with the foreign employer that has imposed abusive
conditions taking advantage of the workers' lack of alternatives and
protection. This worker retains his civil action to demand damages from the
party that employed him subject to abusive conditions. He may demand his
back wages plus legal interest, at the rate applied by the international
market for the type of work performed, plus any other punitive damages that
are deemed appropriate.
I- CUBA'S FOREIGN INVESTMENT LAW
Law #77 of 5 September 1955 regulates foreign investment. Article 33, which
we quote, establishes the system that we have described. Note: Translation
issued by the Cuban government.
Article 33.1. The workers in joint ventures who are Cuban or permanent
residents in Cuba, with the exception of the members of the management or
administration, shall be contracted by an employing entity proposed by the
Ministry of Foreign Investment and Economic Cooperation, and authorized by
the Ministry of Labor and Social Security.
Article 33.3. In totally foreign capital companies, the services of Cuban
workers and foreign workers residing permanently in Cuba, with the exception
of the members of the management and administrative body, shall be hired
through a contract between the company and an employing entity proposed by
the Ministry of Foreign Investment and Economic Cooperation, and authorized
by the Ministry of Labor and Social Security.
The members of the management and administration of the totally foreign
capital company shall be designated by the company and directly hired by it.
Article 33.4. Payments to Cuban workers and foreign workers residing
permanently in Cuba shall be made in national currency, which must be
obtained beforehand from convertible foreign currency.
Article 34.1. The employing entity discussed in the previous Article
individually contracts and directly hires Cuban workers and permanent
residents. This employing entity pays those workers their wages.
Article 34.2. When a joint venture or totally foreign capital company
considers that a specific worker does not meet the requirements of the job,
it can request that the employing entity replace that worker with another.
Any labor dispute shall be settled with the employing entity, which shall
pay the worker, at its own expense, the indemnification to which he or she
is entitled, determined by the competent authorities. In pertinent cases,
the joint venture or totally foreign capital company shall compensate the
employing entity for such payments, in accordance with the procedure
established, and always in compliance with existing legislation.
The texts quoted leave no room for doubt. There exists an interposed company
and payments to the Cuban worker are made in Cuban currency that must be
obtained from the prior conversion of foreign currency. Dismissals are
processed through this intermediary who pays severance expenses. Only by
exception does the foreign company pay expenses.
There is more however. The system discriminates against Cubans. Art 33.1 and
33.3 establishes that the members of the management of a company fully owned
by foreign investors or those of mixed capital are designated by the general
shareholders meeting and hired directly by such companies. Obviously the
managers are not going to work for payment in worthless pesos and they are
consequently authorized to contract directly.
Therefore, a regime that boasts of defending national sovereignty and the
rights of workers, makes Cubans second class citizens in their own country,
gives preference to foreigners and is so concerned with keeping the foreign
capitalist happy that it normally pays the severance for dismissed workers!
In a way the Cuban government guarantees the "quality" of the persons it
sends to work, an unprecedented practice that is motivated by a need of the
system: to intimidate and control even more the labor force.
We mentioned before in the summary, that the workers' direct labor relation
with the foreign company cannot be denied in spite of the articles of the
foreign investment law. With the typical juridical incompetence of the
regimes that do not recognize any law except force, the law contradicts
itself and creates certain direct remuneration systems that belie and
vitiate its attempt to institute a sham.
Were we to apply what in law is known as the doctrine of the "piercing of
the veil" it would not be difficult to demonstrate that this "employment
company" is nothing but a subterfuge. It is a gross scheme.
Presumably this anti-juridical "stew" was cooked to find a way to reward the
faithful party members and the "nomenklatura" that work in middle and upper
management in the mixed capital enterprises. The text or article 32 that
follows illustrates our assertion.
Article 32.1. Joint ventures, the parties to international
economic-association contracts and totally foreign capital companies may be
authorized to create an economic stimulus fund for Cubans or permanent
residents in Cuba who are working in activities corresponding to foreign
investments.
Article 32.2. The contributions to the economic stimulus fund shall be made
out of earned profits. The amount of these contributions shall be agreed
upon between the joint ventures, foreign investors and national investors
who are party to international economic-association contracts, and totally
foreign capital companies, on the one hand, and the Ministry of Foreign
Investment and Economic Cooperation, on the other hand.
Communism's "new man" is not so new after all. He wants his share and wants
it now. Apparently, "bourgeois cupidity" again raises its ugly head. What
would Marx and Lenin have to say!
Completing the picture of unscrupulous exploitation, working hours for the
tourist industry (where the most important investments are) have been
extended to 64 hours a week for ordinary jobs and 72 hours for certain
specific ones. Further, workers are to donate "spontaneously" the lion's
share of their tips to the State.
Finally at the request of the hotel investors the resolution of 5 September
1995 of the CETSS (State Committee for Work and Social Security) granted
said companies and their managers ample powers to suspend, transfer or
dismiss any employee. A "commission" that is headed by the manager of the
company, always a foreigner, must confirm such measures. If any doubts
remained as to the where the actual labor contract exists, these rules
clarify the issue.
II-THE INTERNATIONAL LABOR CONVENTIONS
We have described the damages inflicted on the Cuban worker and how the
system works. However it is notable that all of this is taking place in
flagrant violation of International Labor Conventions ratified by Cuba.
For example: Labor Convention #95 of the International Labor Organization of
June 8 1949 refers to the protection that should be accorded to the workers
salary. Cuba ratified this Convention on 24 September 1959.
Article 9 regulates withholdings. "Any deduction from wages with a view to
insuring a direct or indirect payment for the purpose of obtaining or
retaining employment, made by a worker to an employer or his representative
or to any intermediary (such as a labor contractor or recruiter) shall be
prohibited."
It almost appears written for Cuba's' present situation. There exists an
intermediary imposed by the government that the worker tolerates because it
the only way that one can obtain or hold employment in this type of company.
The choice is stark: either hold on to your job or live in abject poverty.
Article 6 reinforces the concept by saying: "employers shall be prohibited
from limiting in any manner the freedom of the worker to dispose of his
wages." What worse limitation than to impose a confiscatory exchange rate!
Let us continue. Convention #111 of 4 June 1958, ratified by Cuba on 15
September 1960 prohibits discrimination in employment.
Article 1 defines the term discrimination as follows: "For the purpose of
this Convention the term discrimination includes any distinction, exclusion
or preference made on the basis of race, color sex, religion, political
opinion, national extraction or social origin, which has the effect of
nullifying or impairing equality of opportunity or treatment in employment
or occupation."
We have shown that members of management may contract directly with the
company without going through the Cuban government hiring company. But,
composition of management is twofold. It consists of foreigners or Cubans
that agree with the party ideology. Clearly, there is discrimination for
reason of national origin or political ideology. It should be mentioned that
the ILO has already brought the issue of labor discrimination to the
attention of the Cuban government, asking questions as to whether Cuba is
violating the Convention. The issue was that labor preferences were granted
to party members. As is to be expected, Cuba responds with mind numbing
memorandums that "interpret" the local law and promise to look into things
later on, while the forbidden practices continue.
Convention # 87 refers to union freedom and the protection of the right to
unionize. Cuba ratified it in 1952. Freedom to unionize is regulated by
article 3, which we transcribe.
Article 3.1. Workers' and employers' organizations shall have the right to
draw up their constitutions and rules, to elect their representatives in
full freedom, to organize their administration and activities and to
formulate their programs.
Article 3.2. The public authorities shall refrain from any interference,
which would restrict this right or impede the lawful exercise thereof.
The ILO has also formulated observations to Cuba having to do with the
violation of this article, and made specific reference to the "interference
of the Communist Party of Cuba in the election of labor leaders."
Other observations made to Cuba have to do with the violation of several
other Conventions, as for example: the ones dealing with the prohibition of
forced labor; (convention #105 of 1957 ratified by Cuba in 1958 and
convention # 29 of 1930, ratified by Cuba on 1953); convention dealing with
employment policy, (#122 of 1964 ratified by Cuba in1971); and convention on
paid vacations, that incredibly Cuba also violates (#52 of 1936 ratified by
Cuba in 1953).
We are then facing a situation wherein basic worker's rights are ignored by
the Cuban regime, and this is a matter of public record, given the fact that
the ILO files are open to the public. Ignorance cannot be used as an excuse.
The foreign investor contracts with a tyrannical regime and is complicit
with it in the illegal exploitation of workers. The intention to take
advantage of the situation in order to effect personal gain is evident.
As an aggravating circumstance we should mention that many of these
conventions were ratified by Cuba many years ago (more than 60 years in some
cases), all of which proves the labor vocation of the Cuban worker who is
not unaware of his rights but only sees them repressed. The dissident press
in Cuba has published articles referring specifically to the abuse of rights
under convention #95. The international press and the Internet have picked
up these denunciations. Therefore the employer not only has access to public
records but also to widely disseminated information.
III- NULLITY AND ITS CONSEQUENCES
There is no doubt that an illicit and immoral cause exists in these
contracts. A service is contracted against all international norms and
conventions. The motive is transparent: to obtain an attractive profit
through the payment of an inferior wage, even after including in the
computation the amount that the foreign investor pays the government hiring
company.
The most important investments are concentrated in the tourist and
extractive industries. The meager circumstances of the Cuban people and
economy require that tourism be attracted by bargain prices, in spite of
which the rate of repeat visits is very small. In the case of the extractive
and agricultural industries, price is also a paramount requirement in order
to compete in world markets. In both cases this competitive price is borne
by the Cuban worker on his back, as he makes it possible by performing work
that is remunerated at a fraction of its market value.
The Cuban government directly and through its employment agent participates
in this scheme with one condition: share in the spoils. Its share consists
in a portion of the profits and the exchange differential that it keeps as a
result of its abusive conversion of foreign exchange. To do this it acts
sometimes directly and sometimes through others, but its responsibility is
the same.
To take with violence somebody else's property is defined as robbery by all
criminal legislation's around the world. There exists violence, because the
government intimidates and incarcerates anybody that dares to protest
against the status quo. The unions are not independent, as the ILO points
out. Its leaders are dependent on the Cuban Communist Party who imposes its
hand picked candidates. Thus the pattern of violence is complete, affecting
the worker and the unions that are supposed to defend and represent him.
An association to deprive somebody else of his property and obtain an unjust
enrichment is what defines the felony and the contractual nullity. Legal
systems around the world regulate nullity in similar terms, i.e. by denying
validity to the acts involved. From a legal standpoint the contract never
existed and since it never existed its defects cannot be cured nor can the
contract be confirmed.
The Spanish Civil Code of 1889, that was applied in Cuba for more than three
hundred years until it was substituted by the actual one (the legality of
which is not acceptable albeit that it accepts the same principles),
regulates the matter in its article 1275. It stated: "Contracts without
cause or with an illicit cause do not produce any effects. The cause is
illicit when it is contrary to the laws or to morals."
Later on it declares in article 1305: "When nullity results from an illicit
cause or an illicit object, if the actions involved constitute a felony,
committed by both parties, then they shall not have any action to sue each
other. Proceedings shall be instituted against the parties, giving to the
things or moneys object of the contract the disposition that the penal code
establishes for the assets or instruments involved in the felony."
The juridical consequences established by all penal codes (including the
communists) are the same. Seizure of the assets and the profits obtained
(notwithstanding the conversions that may exist) and their sale, applying
the product so obtained to cover the civil responsibilities of the culprits.
These responsibilities would be the back wages at market rates due to the
Cuban worker plus interest, in addition to the damages that the court may
determine.
Article 1305 continues to say; "This rule is applicable to the case in which
there would be criminal action only on the part of one of the parties; but
the innocent party may ask for the return of what he gave, and shall not be
obligated to fulfill that which he had promised."
In sum the investment contract is null and void. The investor and the Cuban
State and or its agent or sham companies have no action to sue each other.
The worker retains his actions, as he is not a culpable party. The
employment contract with the Cuban worker (whose existence is covered up by
the attempt of sham through the interposed company) is also null, but the
innocent party has the right to sue and demand what he delivered, that is,
payment for his labor at a fair price.
IV- CONCLUSION
A democratic Cuba that respects property rights and its international
undertakings would never confiscate property arbitrarily à la Castro.
However, it could not validate passively the rape of the Cuban labor force
during the Castro years. That would not be justice, but precisely the
opposite. If tolerated it would:
a) Ignore the fact that a notorious and public felony has been committed.
b) Reward the investors that showed no scruples, by granting them an
advantage in time and in the amount of their investment. It should be noted
that present investors have come in at low prices, another advantage of
their complicit behavior.
To maintain the costs of those investments would give the unscrupulous
investor a competitive advantage to the detriment of those that would wish
to invest in a democratic Cuba in the future; inasmuch as new investments
would be made at market prices, and labor would have to be remunerated at a
higher rate from inception.
One cannot tolerate that international conventions be scoffed at, and
applied only when no harm accrues to the most voracious.
There is ample precedent for stern action. The penal legislation of most
countries already punishes crimes committed against the rights of workers.
These are crimes that the investors are well aware of. For example: the
biggest investor's in Cuba have been Spaniards. Spain's Penal Code of 1995
punishes those that by "abuse of necessity impose on workers at their
service labor conditions that harm, take away, restrict or suppress rights
granted to them by legislation, collective contracts or private contracts."
It is therefore juridically and morally correct for the future government of
the island to declare the nullity of these contracts, with its attendant
consequences. Cuba would not be inventing crimes or penalties. It would
proceed according to the rule of law.
What we have explained, renders hollow the protests against the measures,
imposed by the government and the congress of the United States, against
those who traffic with the Cuban government. Heated protests against the
alleged infringement of rights of the persons and companies affected by said
measures are supposedly buttressed by interpretations of international law,
that at a minimum are highly arguable.
However, grave labor injustices that bear no argument are ignored,
notwithstanding the fact that they contravene international agreements
ratified by Cuba who has been called to account for their breach.
The same can be said of those that advocate the liberalization of Cuba
commerce with the U.S. without pausing to ponder one basic issue: The Cuban
worker is the one that needs freedom to contract his work and thus collect a
fair wage.
Politically the arguments are even stronger. The resentment for the
injustice is such that a future Cuba could not be governed with labor peace
if the abuse is nor remedied. The investors that plan to take shelter in the
doctrine of the continuity of the acts of the state, or in international
treaties signed with Cuba in order to protect investments, forget one thing:
doctrines and treaties do not exist to protect criminal acts. The outrage is
of such import that it cannot withstand a serious argument before an
independent tribunal.
Present investors have only one solution. Do the right thing. Pay now the
back wages that are due, and demand the right to contract directly with the
worker. Otherwise you are complicit with a tyranny in exploiting the weak.
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