Bar Association Expects Favorable Supreme Court Ruling on Puerto Rico Bankruptcy Law
SAN JUAN – The Puerto Rico Bar Association expects a favorable U.S. Supreme Court ruling in the local bankruptcy case, with Bar President Mark Anthony Bimbela stating, “It is essential the law can be implemented because the last thing we need is that the few life rafts we have left be deflated.”
“In an unprecedented move, the Supreme Court accepted to evaluate two Puerto Rico cases. The first, People v. Sánchez Valle, already had its day in court on Jan. 13. Now, the challenge to Act 71 of 2014, which establishes a repayment, restructuring and compliance procedure for the Puerto Rico government’s debts,” Bimbela said.
In his written statement, Bimbela added that the contested law is very important “to provide relief to Puerto Rico’s battered economy. As an institution, we have appeared before the highest federal court and presented it with the validity and constitutionality of the legislation.”
The document presented by the association, in tandem with the Puerto Rican Bar Association of New York, argues that Act 71 would allow Puerto Rico to regulate and correct its finances in an orderly manner.
It also claims that the U.S. Congress, when approving a reform to the federal bankruptcy code in 1984, arbitrarily deprived Puerto Rico and the District of Columbia of legal tools to effectively manage their debts.
According to the document, this forced the local government to have to take legal action to “defend the public’s patrimony and the people of Puerto Rico.”
“We hope, for the sake of the country, that Puerto Rico’s arguments are accepted, and that we can begin a viable restructuring of our economy, and to finally see the light at the end of the tunnel,” the Bar’s president concluded.
In June 2014, a group Puerto Rico Electric Power Authority bondholders challenged Act 71, known as “Ley de Quiebra Criolla,” in San Juan’s federal court. Judge Francisco Besosa declared Act 71 unconstitutional, stating that the federal bankruptcy code rules in the legal area Puerto Rico tried to legislate on and prohibited the enactment of the statute.
In response, the government of Puerto Rico appealed to the U.S. Court of Appeals for the First Circuit, which upheld Judge Besosa’s decision. The Boston court also interpreted that the U.S. Congress reserved the right to amend chapter 9 of the U.S. Bankruptcy Code to include Puerto Rico.
On Dec. 4, 2015, the U.S. Supreme Court took up the Puerto Rico government’s request to review the Court of Appeals’ determination.