On Tuesday, four liberal justices seemed sympathetic to Puerto Rico's bid to convince the U.S. Supreme Court to revive a law that could allow the U.S. territory cut billions of dollars in debt at some public utilities, a key test in the island's quest to ameliorate a fiscal crisis.
ABC News reported that some of the top court's justices doubted Puerto Rico's position as arguments in the case began. However, by the end of the session, they signaled an open mind to the idea that federal bankruptcy law does not prevent the island from passing its own measure offering debt relief to its local municipalities.
Elena Kagan, a liberal, said that before the oral argument started she favored Puerto Rico's position, but after hearing from the creditors' attorney, Kagan found the territory's arguments to be equally compelling. Only conservative Chief Justice John Roberts expressed an outright opposition to Puerto Rico's position and added that he was not sure the arguments involving territories "carries much weight."
It is yet to be known whether the top court will rule on whether the island's 2014 law known as the Recovery Act, conflicts with U.S. federal bankruptcy law. The Recovery Act would not apply to all of Puerto Rico's debt, but would let it put public utilities like power authority, PREPA, into bankruptcy, reports Reuters. Puerto Rico now faces what its governor has called "an unpayable $70 billion in debt."
According to Channel News Asia, Congress said that Puerto Rico as a U.S. territory in 1984, could not utilize bankruptcy laws that govern the U.S. states. But the federal bankruptcy law also indicates that no state can pass local debt-restructuring laws, and in one provision Puerto Rico is defined as a state.
Only seven Supreme Court justices heard the arguments in the case. Justin Antonin Scalia has not yet been replaced since his death in February, while Justice Samuel Alito recused himself. The U.S. Supreme Court is due to rule by the end of June.
