8
PUERTO RICO
Thursday, MARCH 31, 2016 |
LEAD STORY Continued from page 7
creditor that does not consent to such composition.� If the contract impairment issue is litigated on remand, it could run again into a serious ripeness challenge, since the local bankruptcy law has not been used yet by any commonwealth entity, Carlo-Altieri indicated. “A remand also creates questions of timing for the local government and even Congress. Questions have been raised about the effect a prompt decision in favor of the commonwealth could have on the legislative bills being considered, whether Congress would find it necessary to continue to legislate, create a control board mechanism or provide a different sort of restructuring tool, including Chapter 9 or a special type of territorial Chapter 9 for the island and Washington, D.C.,� he said. John Mudd, a lawyer and political analyst, believes the top court
will declare the law unconstitutional because of Section 903 or remand it back to the lower courts to decide on the contract clause and on whether the law is an illegal taking without just compensation. He said that either way, the courts will decide that it is unconstitutional because it violates the contract clause. “It is irrelevant,� Mudd said. Popular Democratic Party Rep. Manuel Natal, who is also a lawyer, advocated for a debt moratorium regardless of what is happening in the Supreme Court, noting that any decision will not take place until June. By that time, the government would have already defaulted on its debt, he indicated. The arguments in Puerto Rico v. Franklin California Tax Free Trust and a companion case on March 22 centered on the reasons why Congress decided to take Puerto Rico out of the bankruptcy law in 1984, since there is no explanation or legislative history on the matter.
At issue is whether Congress may have also forbade the commonwealth from approving its own bankruptcy law when it closed the door on the island’s access to federal bankruptcy protection.
Matthew M. McGill, the Washington, D.C., lawyer representing the bond-holding creditors, said the 1984 incident was really only another example of Congress “micromanaging Puerto Rico’s debt.�
“That is, that no part of Chapter 9 [of the U.S. Bankruptcy Code] applies to Puerto Rico, not even 903(1)—therefore no preemption— so the Circuit Court [decision] should be reversed and the island has the power to legislate in this field. Of course, this is all subject to possible remand and that the local restructuring law in some way is held not to violate the contract clause.� —Former Bankruptcy Judge Gerardo A. Carlo-Altieri on the options facing the U.S. Supreme Court
Justice Elena Kagan confessed that she had come to the hearing inclined to vote against Puerto Rico, but her opinion was changed by Landau’s arguments. She appeared to be inclined to believe that none of the bankruptcy code clauses apply to Puerto Rico, and as a result, the commonwealth government is free to draft its own law. Justice Sonia Sotomayor noted that Puerto Rico was being made to suffer limitations to its authority in deciding its own financial affairs, while Justice Stephen G. Breyer provided different legislative options that indicated he may be inclined in favor of Puerto Rico. Justice Ruth Bader Ginsburg wondered aloud why Puerto Rico was in a legal limbo on the issue of bankruptcy protection, “Why would Congress put Puerto Rico in this never-never land? ...What explains Congress wanting to put Puerto Rico in this anomalous position of not being able to restructure its debt?� she asked.
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