Puerto Rico Gov. Pedro Pierluisi asked the bankruptcy judge to pause an Oversight Board suit against a law the board says would scuttle the Plan of Adjustment.

Pierluisi’s lawyers filed the request with Judge Laura Taylor Swain Wednesday evening in an adversary proceeding part of the bankruptcy.

The governor signed Act 7-2021, a law which bars the government from supporting the proposed Plan of Adjustment, any cuts to pensions or “essential services,” or any fee increases or tax increases to support paying debt, on June 9. On July 2 the board filed suit against Pierluisi, Puerto Rico Senate President José Dalmau, and Puerto Rico House Speaker Rafael Hernández Montañez to overturn the law.

The law also would mandate $4.5 billion from government accounts be transferred to a newly created pension trust, which is not part of the board’s current fiscal plan.

According to the board’s suit, the act “purports to dictate the terms of a new Plan of Adjustment, contrary to the Oversight Board’s currently proposed Plan of Adjustment. The act would: (i) create new categories of ‘Uncontested Bonds’ and ‘Contested Bonds’; (ii) provide no recovery to the latter; (iii) cap recoveries for the former at an aggregate maximum of 58%; and (iv) leave retirement claims unimpaired.”

Pierluisi filed a request to stay the adversary proceeding on Aug. 25. Since then, the board, Dalmau, and Hernández Montañez told the court they oppose the stay. On Wednesday Pierluisi responded to the three parties.

“The court should not squander its resources to weigh in on a policy dispute between government entities, much less one that will have no real-world effect,” Pierluisi said in his response. “Instead, the court should stay this action to allow the parties to focus on resolving pension treatment issues… . The issues this case presents can and will be resolved in the proper forum — the plan confirmation hearing.”

“A stay would allow the parties to engage in pre-confirmation negotiations on pension claim treatment, and then resolve those issues at the confirmation hearing rather than through this unnecessary litigation,” Pierluisi’s lawyers said.

“The issues this case presents bear directly on plan [of adjustment] confirmation and should be evaluated at the confirmation hearing,” he said.

The board had argued that “resolution of this adversary proceeding will narrow critical issues regarding the disposition of pensions… [and remove] a cloud over agreements with bondholders, who cannot be sure such agreement will be honored as long as Act 7 remains in effect.”

Pierluisi said Act 7 is “not the cloud of uncertainty over the Board’s plan — the new legislation required to implement the plan is. And the cloud will remain even if this action were resolved in the board’s favor.”

As part of executing the Plan of Adjustment, the board currently anticipates asking the local government to pass legislation to authorize the new restructured bonds. Despite Pierluisi saying the legislation is “required,” the board has said it may issue the bonds without that approval, despite some market participants questioning the move.

Pierluisi said the adversary case poses an “unnecessary hardship” to him, his administration, and his legal team because his group was simultaneously trying to participate in an expedited discovery process in the central government debt deal and engaging in negotiations on the Plan of Adjustment.