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Judge will hear Paul Hastings motion to compel Puerto Rico to pay its legal fees

By on January 28, 2019

SAN JUAN – Judge Laura Taylor Swain has agreed to hear, during the Jan. 30 omnibus hearing, a motion by law firm Paul Hastings to compel the Commonwealth of Puerto Rico to pay its legal fees amid a dispute over new provisions in the island’s recently enacted tax reform.

Officials from Paul Hastings, which represents the Unsecured Creditors’ Committee, said last week that the firm was informed on Jan. 22 that the Puerto Rico Treasury Department was withholding payment on the firm’s “pending, unopposed fee statements” of October and November 2018 because the agency was trying to determine whether the fees should retroactively be subjected to a 29 percent tax as a result of the Tax Reform Law enacted on Dec. 10, 2018.

Before Jan. 22, 2019, Paul Hastings said, it had no reason to believe the Treasury Department was considering taking such a position. The firm added it withheld filing the motion to compel until Friday to give the Puerto Rico Fiscal Agency and Financial Advisory Authority and the Treasury Department time to reach a resolution on the matter.

The tax reform imposes a 29 percent tax on contractor fees for work performed from abroad for the commonwealth. The stipulation is geared toward the law firms, most of which are located in New York, that are doing work for Puerto Rico in the in-court bankruptcy-like process under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa). Many firms have said the disposition will force them to raise legal fees charged to Puerto Rico.

The dispute takes place after Puerto Rico Treasury Secretary Teresita Fuentes resigned from her position.

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