The Supreme Court ruled this morning that Puerto Rico cannot rely on its own bankruptcy legislation in order to restructure its public utility debt. In a five-to-two vote, from which Justice Alito abstained, the Court held that the federal Bankruptcy Code pre-empted Puerto Rico's attempts to deal with its public debts under its own bankruptcy laws -- even though the Code excludes Puerto Rican municipalities from its protections.
The ruling comes as Puerto Rico grapples with a fiscal crisis caused, in part, by $72 billion dollars in outstanding public debt, $20 billion of which is from its public utilities. The defeat follows another blow to Puerto Rico's limited independence, dealt out by the Supreme Court last Thursday. There, the Court ruled that Puerto Rico's sovereignty, at least as far as prosecutorial powers were concerned, stemmed from Congress, not the island's people. In response, Puerto Rico's governor has said he will bring his complaints regarding Puerto Rican self-government to the United Nations.