Reactions to Supreme Court Ruling on Puerto Rico Debt Recovery Act

SAN JUAN – Representatives from various Puerto Rico sectors have reacted to the U.S. Supreme Court ruling that upheld the unconstitutionality of the 2014 Puerto Rico Debt Enforcement and Recovery Act, saying it was preempted by the U.S. Bankruptcy Code The Recovery Act would have allowed certain public corporations to restructure their debts.

Popular Democratic Party President and gubernatorial candidate David Bernier reiterated his call to redefine Puerto Rico’s political relationship with the United States so that “in the present and in the future, our economy and governance is not subject to interpretive ambiguities. Beyond the legal and ideological debates, our country needs stability and a firm foundation so together with can confront our fiscal crisis….”

Bernier convened his party’s board to a meeting Friday to discuss the relationship with the U.S. government.

In a statement regarding the top court’s decision in the Commonwealth of Puerto Rico v. Franklin California Tax-Free Trust, et al, case, Resident Commissioner Pedro Pierluisi said, “The practical significance of the Court’s holding is crystal clear:  only Congress can provide the Puerto Rico government with the authority to restructure its debts, a step that is essential if the territory is going to overcome its severe—and worsening—  economic, fiscal and demographic crisis.

“One chamber of Congress has already acted. Last week, the House approved H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act, or PROMESA. PROMESA pairs broad debt restructuring authority with the creation of a temporary and independent fiscal oversight board. The bill obtained the support of 87 percent of Democrats and 57 percent of Republicans, including nearly 80 percent of House leadership, nearly 80 percent of the Congressional Hispanic Caucus, 90 percent of the moderate, pro-growth New Democrat Coalition, 90 percent of the Congressional Progressive Caucus, a majority of the conservative Republic Study Committee, the Obama administration, and nearly every major editorial board in the nation,” he added.

Pierluisi said action on PROMESA has now shifted to the Senate, “and it is my hope that our sister chamber will act in similarly bipartisan fashion to approve this imperfect but indispensable bill so that it can be sent to the President and swiftly signed into law.”

The Supreme Court, in a 5 to 2 decision, on Monday affirmed the July 2015 decision of the U.S. Court of Appeals for the First Circuit and held that the Recovery Act—enacted by the Puerto Rico government in 2014—is preempted by Chapter 9 of the federal bankruptcy code and is therefore unconstitutional under the Constitution’s Supremacy Clause. The court concluded that Chapter 9 preempts the local Recovery Act, despite the fact that Congress in 1984 barred the government of Puerto Rico from authorizing its public entities to restructure their debts under the supervision of a federal court pursuant to Chapter 9.

Justice Secretary César Miranda

Justice Secretary César Miranda said the top court was wrong.

“We presented this case before the Supreme Court because we were and are absolutely convinced that it is legally impossible for Puerto Rico to be left in a total state of indefensibility in the restructuring of its debt. There is no precedent in the U.S. judicial system that has left any state without a recourse to restructure its debt,” he said.

He added it was unexplainable for the top court to accept as correct the island’s exclusion from the Federal Bankruptcy Code in 1984. “For that reason, this decision surprises us,” he said.

The president of the Puerto Rico Bar Association, Mark Anthony Bimbela, regretted the court’s decision. He called for a redoubling of efforts to make possible a mechanism to deal with the island’s fiscal crisis and insisted the first issue to be resolved is the colonial status of Puerto Rico, through a constitutional assembly, he stated.

Bimbela said the government should consult the people in the upcoming elections if they want “a democratic and participatory mechanism, such as a constitutional assembly, to resign our current colonial status.”

The Bar president reiterated “the importance of the governor appearing Monday, June 20, at the United Nations [The governor has yet to be assigned a turn to speak at the UN’s Special Committee on Decolonization], and as one voice request immediate action by the UN General Assembly to demand that a process of self-determination be made viable.”

Bimbela believes the court’s decisions on the Sánchez Valle and local bankruptcy cases “have a symbiotic relationship, whose interaction is essential in determining the true obligation of the United States with regard to Puerto Rico’s debt.”

“Both decisions place us as a people in a state of aggravated helplessness. On the one hand, careful reading of the Sánchez Valle case suggests that in the absence of sovereignty, Puerto Rico cannot respond to the administrative mistakes committed. In the aforementioned context, who must respond is the sovereign power, which is the federal Congress. Thus the debt is doubly unpayable,” he said, explaining that while on the one hand, there is no money to pay, on the other hand, as is not sovereign, the government cannot be ordered to pay the debt “because our legal capacity to go into debt arises from the sovereignty of a third party, in this case, United States.”

He also stressed that the economic crisis in Puerto Rico is caused largely by the island’s lack of powers.

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