Page 21 - Suffolk University Law Review
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7] THE EVOLUTION OFDEMOCRATIC GOVERNANCE 613
Treasuny Secretary concluded that special congressional legislation was
necessary in order to restructure the debt of Puerto Rico and its
instrumentalities.159 Bondholders and conservative members of Congress
opposed the proposed legislation because they were concemed that it would
establish a precedent allowing states to declare bankruptcy. 160 To address this
concern, the Treasury and Justice Departments adopted an approach relying on
the Territorial Clause.161
This approach forced the Justice Department to change its position regarding
the sovereignty of Puerto Rico. The Justice Department previously argued in
the First and Eleventh Circuit Courts of Appeals that Puerto Rico was a
sovereign, and not a territory for the purposes of double jeopardy.162 In
Sanchez Valle, the Solicitor General justified its intervention, in part, by
alleging that the Court's decision could impact the defense of federal
legislation and federal policies conceming Puerto Rico in a variety areas,
including bankruptcy.163
In April 2016, Congress invoked the Territorial Clause to propose a bill that
would later become known as PROMESA.164 Strong opposition by
bondholders made it extremely difficult to obtain congressional approval of the
bill in the form conceived by the Treasury Department.165 Many concessions
had to be made to members of Congress who voiced the bondholders'
crisis).
159. See Danica Coto, US Treasury Secretary Jacob Lew Urging Congress to Pass Legislation By March
to Help Ease Puerto Rico 's Economic Crisis Before It's Too Late, U.S. NEWS (Jan. 15, 2016),
https://www.usnews.com/news/worJd/articles/2016-01-15/us-treasury-secretary-demands-action-on-puerto-rico
s-crisis [https://penna.cc/U75V-VWNU] (reiterating congressional intervenrion required "to help ease Puerto
Rico's economic crisis before it's too late").
160. See 163 CONG. REc. S3 l l 6 (daily ed. May 24, 2017) (statement of Sen. Grassley) (warning against
allowing Puerto Rico to restructure dcbts); Press Release, Dan Newhouse, Newhouse Statement on PROMESA
(June 9, 2016), https://newhouse.house.gov/media-center/press-releases/newbouse-statement-promesa [https://
penna.cc/P8HV-DWWU] (rejecring PROMESA as solution to Puerto Rico's economic problems); Cyndi
Suarez, Wil/ Puerto Rico 's Recent Bankruptcy Create a Precedent for States?, NONPROFJT Q. (May 9, 2017),
https://nonprotitquarter Iy.org/2017 /05/09/will-puerto-ri cos-recent-bankruptcy-create-preceden t-states/ [https://
penna.cc/P5RS-R9S5] (highlighting creditors' concerns with precedent set by PROMESA and Puerto Rico).
161. See 48 U.S.C.A § 2121 (b)(2) (West 2016) (providing constitutional basis for enactment of FOMB).
"The Congress enacts [PROMESA) pursuant to article IV, section 3 of the Constitution of the United States,
whicb provides Congress the power to dispose ofand malee ali needful rules and regulations for territories." Id.
162. See Brieffor the United States as Amicus Curiae Supponing Respondents, supra note 49, at *32 n.6
(referring to prior Justice Department arguments); see also United States v. Sanchez, 992 F.2d 1143, 1148-52
(1 lth Cir. 1993) (rejecting Justice Department's position); United States v. Lopez Andino, 831 F.2d 1164,
1167-68 (1 st Cir. 1987) (agreeing with Justice Department's position).
163. See Brief for the United States as Amicus Curiae Supporting Respondents, supra note 49, at • 1
(expressing govemment's interest in case).
164. See Puerto Rico Oversight, Management, and Economic Stability Act, Pub. L. No. 114-187, § 1 O 1,
130 Stat. 549, 553 (2016) (establishing FOMB).
165. See Main St. Bondholders, Mai11 Street Bondholders Ca/Is on Congress to Reject Updated PROMESA
Legislation, P.R. NEWSWTRE (May 19, 2016), http://www.pmewswire.com/news-releases/main-street-
bondholders-calls-on-congress-to-reject-updated-promesa-legislation-300272191.html [https://penna.cc/4ZEG-
MJT7] (highlighting PROMESA's deficiencies).
Treasuny Secretary concluded that special congressional legislation was
necessary in order to restructure the debt of Puerto Rico and its
instrumentalities.159 Bondholders and conservative members of Congress
opposed the proposed legislation because they were concemed that it would
establish a precedent allowing states to declare bankruptcy. 160 To address this
concern, the Treasury and Justice Departments adopted an approach relying on
the Territorial Clause.161
This approach forced the Justice Department to change its position regarding
the sovereignty of Puerto Rico. The Justice Department previously argued in
the First and Eleventh Circuit Courts of Appeals that Puerto Rico was a
sovereign, and not a territory for the purposes of double jeopardy.162 In
Sanchez Valle, the Solicitor General justified its intervention, in part, by
alleging that the Court's decision could impact the defense of federal
legislation and federal policies conceming Puerto Rico in a variety areas,
including bankruptcy.163
In April 2016, Congress invoked the Territorial Clause to propose a bill that
would later become known as PROMESA.164 Strong opposition by
bondholders made it extremely difficult to obtain congressional approval of the
bill in the form conceived by the Treasury Department.165 Many concessions
had to be made to members of Congress who voiced the bondholders'
crisis).
159. See Danica Coto, US Treasury Secretary Jacob Lew Urging Congress to Pass Legislation By March
to Help Ease Puerto Rico 's Economic Crisis Before It's Too Late, U.S. NEWS (Jan. 15, 2016),
https://www.usnews.com/news/worJd/articles/2016-01-15/us-treasury-secretary-demands-action-on-puerto-rico
s-crisis [https://penna.cc/U75V-VWNU] (reiterating congressional intervenrion required "to help ease Puerto
Rico's economic crisis before it's too late").
160. See 163 CONG. REc. S3 l l 6 (daily ed. May 24, 2017) (statement of Sen. Grassley) (warning against
allowing Puerto Rico to restructure dcbts); Press Release, Dan Newhouse, Newhouse Statement on PROMESA
(June 9, 2016), https://newhouse.house.gov/media-center/press-releases/newbouse-statement-promesa [https://
penna.cc/P8HV-DWWU] (rejecring PROMESA as solution to Puerto Rico's economic problems); Cyndi
Suarez, Wil/ Puerto Rico 's Recent Bankruptcy Create a Precedent for States?, NONPROFJT Q. (May 9, 2017),
https://nonprotitquarter Iy.org/2017 /05/09/will-puerto-ri cos-recent-bankruptcy-create-preceden t-states/ [https://
penna.cc/P5RS-R9S5] (highlighting creditors' concerns with precedent set by PROMESA and Puerto Rico).
161. See 48 U.S.C.A § 2121 (b)(2) (West 2016) (providing constitutional basis for enactment of FOMB).
"The Congress enacts [PROMESA) pursuant to article IV, section 3 of the Constitution of the United States,
whicb provides Congress the power to dispose ofand malee ali needful rules and regulations for territories." Id.
162. See Brieffor the United States as Amicus Curiae Supponing Respondents, supra note 49, at *32 n.6
(referring to prior Justice Department arguments); see also United States v. Sanchez, 992 F.2d 1143, 1148-52
(1 lth Cir. 1993) (rejecting Justice Department's position); United States v. Lopez Andino, 831 F.2d 1164,
1167-68 (1 st Cir. 1987) (agreeing with Justice Department's position).
163. See Brief for the United States as Amicus Curiae Supporting Respondents, supra note 49, at • 1
(expressing govemment's interest in case).
164. See Puerto Rico Oversight, Management, and Economic Stability Act, Pub. L. No. 114-187, § 1 O 1,
130 Stat. 549, 553 (2016) (establishing FOMB).
165. See Main St. Bondholders, Mai11 Street Bondholders Ca/Is on Congress to Reject Updated PROMESA
Legislation, P.R. NEWSWTRE (May 19, 2016), http://www.pmewswire.com/news-releases/main-street-
bondholders-calls-on-congress-to-reject-updated-promesa-legislation-300272191.html [https://penna.cc/4ZEG-
MJT7] (highlighting PROMESA's deficiencies).
