The Puerto Rico legislature is debating the venue where bond disputes would be heard.
The legislature is doing this as part of creating a bill authorizing selling up to $3.5 billion in bonds.
Some investors believe that mainland U.S. courts would be friendlier to investors in case of any dispute about bond payments. They have asked for Puerto Rico to specify that disputes would be heard in mainland U.S. courts. Many have specifically requested New York state courts as the venue.
The Puerto Rico House of Representatives recently passed a bill that would have allowed mainland investors to sue in mainland courts. On Thursday the Puerto Rico Senate revised the bill to allow suits only in Puerto Rico or New York courts.
The House will now consider the Senate version.
According to Mintz Levin attorneys Len Weiser-Varon and Bill Kannel there are three possible outcomes.
If a New York venue is explicitly allowed and the Puerto Rico Treasury secretary explicitly mentions it in the bonds' offering statement, than bond buyers could sue in New York, they wrote in Public Finance Matters.
Second, if all provisions for a mainland venue are disallowed by the legislature, the bonds are sold without any statement about where disputes would be heard, and a dispute developed, bond buyers could try to sue in New York but Puerto Rico could contest the state court system's jurisdiction.
Third, if the legislature or the secretary put language into the bond documentation explicitly stating disputes would be heard in Puerto Rico courts, then disputes would have to be heard there.
Puerto Rico plans to sell about $2.8 billion in general obligation bonds in March.
In other Puerto Rico news, on Friday morning the United States Bureau of Labor Statistics revised Puerto Rico's unemployment rate over the last several years due to a change of its application of seasonal adjustments. The application makes the increase in the last few months seem more gradual rather than abrupt.
While in the old data, Puerto Rico had a 13.5% unemployment rate in July 2013, in the new data it was 13.9%. In the old data Puerto Rico had a 15.4% unemployment rate in December 2013 but in the new data it was 15.5%.
Puerto Rico reached its peak employment count of the last 12 years in December 2006. Compared to the December 2006 employment totals, employment in December 2013 was off 20.7%.
