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1 1 (November 23, 2020)

handle is hein.crs/govdcts0001 and id is 1 raw text is: ~* Conreqmsiona Research Servi Puerto Rico's Financial Oversight and Management Board: The Supreme Court's Analysis and What It Means for Congress November 23, 2020 The Supreme Court's recent decision in Financial Oversight & Management Board for Puerto Rico v. Aurelius Investment, LLC (Aurelius), in which the Court rejected an Appointments Clause challenge to Puerto Rico's Financial Oversight and Management Board's (Board) composition, is significant to Congress for several reasons. First, it allows Puerto Rico's debt adjustment proceedings under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to proceed. More generally, Aurelius reinforces Congress's authority to create offices that do not require Senate confirmation if the individuals filling those offices perform primarily local duties in the Territories (e.g., American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands), or the District of Columbia. This Sidebar analyzes the Court's ruling and its potential import. Background on PROMESA Puerto Rico and many of its instrumentalities have experienced significant difficulties paying their debts. Under Chapter 9 of the Federal Bankruptcy Code, a municipality -defined as a political subdivision or public agency or instrumentality of a State-can sometimes obtain relief from debts it cannot repay by filing for bankruptcy. But the Bankruptcy Code excludes Puerto Rico from the definition of State for Chapter 9 eligibility purposes. (The Bankruptcy Code thus differs from its predecessor, the Bankruptcy Act, which included the Territories in its definition of State.) Puerto Rico tried to surmount this obstacle by passing its own statute in 2014 to create a bankruptcy-like debt restructuring procedure for its public utilities. The Supreme Court ruled in 2016, however, that federal law preempted that statute, leaving Puerto Rico with no valid avenue for debt relief. Congress responded in 2016 by invoking the Territorial Clause of Article IV of the U.S. Constitution (also known as the Territories Clause)-which empowers Congress to make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States-to enact PROMESA and establish the Board. PROMESA grants the Board various powers and responsibilities to provide a method for Puerto Rico to achieve fiscal responsibility and access to the capital markets. Title III of PROME SA also created a process by which certain U.S. Territories and their instrumentalities may adjust Congressional Research Service https://crsreports.congress. gov LSB10555 CRS Legai Sidebar Prepared for Members and Commt tees of Congress --- ------------------------------- ------ -------------------------------------------------------

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