[JURIST] The US Court of Appeals for the First Circuit [official website] ruled [opinion, PDF] Wednesday that bondholders of Puerto Rico’s Employee Retirement System deserve a hearing to determine if their case has merit to proceed. The lawsuit focuses on Puerto Rico’s fiscal emergency law [text, PDF] that was passed last year. Lawsuits over debt payments, particularly any lawsuits toward the Government Development Bank, are frozen and its protects the government [AP report] from being sued for defaulting on payments. The court also ruled that the board under PROMESA [NBC News report], the bill the Senate approved in November to help the country “achieve fiscal responsibility and access to the capital markets,” had a right to intervene and “constitutes an abuse of discretion” by the lower court.
The debt crisis of Puerto Rico has been extensive and a severe worry to many around the world. A UN independent expert warned last week that increasing austerity measures to the American territory will threaten residents’ human rights [JURIST report]. Juan Pablo Bohoslavsky stated that “ensuring financial stability, controlling public debt and reducing budget deficits are important goals, but should not be achieved at the expense of human rights.” In June the US Supreme Court ruled [JURIST report] 5-2 that Section 903(1) of the Bankruptcy Code preempts Puerto Rico’s Recovery Act. All of this was preempted by the Puerto Rico legislature passing a bill [JURIST report] that would allow the island territory to enter into a state of fiscal emergency and begin the process toward a debt moratorium.