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Judge Taylor Swain. (GFR Media)

Washington - Judge Laura Taylor Swain ruled yesterday on the constitutionality of the appointees to the Oversight Board that controls the financial decisions of the elected government of the island, under the power of Congress to legislate on a territory like Puerto Rico.

Swain argued that “Congress has plenary power under the Territories Clause to establish governmental institutions for territories that are not only distinct from federal government entities but include features that would not comport with the requirements of the Constitution if they pertained to the governance of the United States”.

 “Turning to Puerto Rico, Congress has long exercised its Article IV plenary power

to structure and define governmental entities for the island… In this sense, Congress occupies a dual role with respect to the territories of the United States: as the national Congress of the United States, and as the local legislature of the territory,”  said Swain in a 35-page opinion, rejecting Aurelius Investment lawsuit seeking to cancel the Puerto Rico PROMESA Title III debt restructuring case.

Aurelius has argued that because they are "US officials" the appointments of Board members must have complied with US constitutional standards, following presidential nomination and Senate confirmation.

Under PROMESA, then-President Barack Obama had the option of appointing six of the members based on Congress leaders´ recommendations and he would only select one member. For Aurelius, the appointing process made the law unconstitutional and the Puerto Rico Title III debt restructuring process had to be invalidated.

Aurelius' lawsuit was carefully filed not to challenge the entire law.

In her opinion, the judge accepted the positions made more clearly than ever by the federal government through an “amicus curiae” (friend of the court) filed by then US Attorney General, Donald Verrilli in the Puerto Rico v. Sánchez Valle case in December 2015.

That argument laid the groundwork to defend the subsequent approval of PROMESA, which imposed the Board and a debt restructuring process through a territorial bankruptcy presided over by Swain.

Verrilli said back in December 2015, that Puerto Rico "is not a separate sovereign.” Now, he is one of the attorneys of the Board.

“Congress has plenary power under the Territories Clause to establish governmental institutions for territories that are not only distinct from federal government entities but include features that would not comport with the requirements of the Constitution if they pertained to the governance of the United States. It has exercised this power with respect to Puerto Rico over the course of nearly 120 years, including the delegation to the people of Puerto Rico elements of its plenary Article IV authority by authorizing a significant degree of local self-governance. Such territorial delegations and structures may, however, be modified by Congress,” wrote Swain.

For the judge, all local government in Puerto Rico “derives from Congress."

The federal Department of Justice, under Donald Trump´s administration, had argued against Aurelius. "A finding that the appointment clause applies to territorial officials would not only question this historic practice but would also question the governance structures of the territories and the District of Columbia that have been in place for decades," Justice said.

Meanwhile, the Board itself had invoked before court the power of Congress to decide on the appointments.

"We welcome Judge Swain’s thorough and well-reasoned opinion holding that Congress was not constrained by the Appointments Clause when creating the Oversight Board and therefore the appointments of the Oversight Board are constitutional," said the Board.

"Malleability"

For constitutionalist Carlos Ramos González, a professor at the Interamerican University, Judge Swain has reaffirmed the "malleability" of the US Constitution clause for territories that allows Congress to give and take away collective rights with broad authority.

"The government of Puerto Rico is at the discretion of Congress “wisdom” when deciding how to govern its territories. It is a thesis that should outrage those of us who live here, but it is plausible under the constitutional right of the United States, "said Ramos González, from San Juan.

For former federal bankruptcy lawyer Gerardo Carlo Altieri, the judge's inclination towards the Board has "many connotations."

The Board saw in the dismissal of Aurelius' case an advance of what it expects to be Swain´s decision on the lawsuits filed by the government and the legislature regarding the entity´s power to demand labor and government reforms.

“PROMESA empowers the Oversight Board to, among other things, approve the fiscal plans and budgets of the Commonwealth and its instrumentalities, override Commonwealth executive and legislative actions that are inconsistent with approved fiscal plans and budgets, and commence a bankruptcy-type proceeding in federal court on behalf of the Commonwealth or its instrumentalities,” noted Swain.

Former judge Carlo Altieri said that the lawsuits filed by the government of Puerto Rico have "historical bases and reasoning that appeals to politicians", but "the law is quite clear regarding the fact that the Board has the final say in all matters related to fiscal plans and budgets ".

He also warned that "until the US Supreme Court does not revoke the Insular Cases, that is, unfortunately, the law in Puerto Rico".


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