MANILA, Philippines – Rappler Incorporated argued that the penalty imposed by the Securities and Exchange Commission (SEC) for an allegedly unconstitutional Philippine Depositary Receipt (PDR) provision is "too severe."
Rappler's lawyer Francis Lim said the SEC decision to nullify the PDRs issued by Rappler Holdings Corporation to Omidyar Network Fund LLC and revoke the articles of incorporation of Rappler are "anti-investor and anti-business."
"If there is any violation at all, we believe that the penalty meted out by SEC is too severe...Imagine revoking the articles of incorporation of Rappler Incorporated, which is not even a party to PDRs," Lim said in an interview with ANC's Early Edition on Wednesday, January 17.
Lim cited the Supreme Court (SC) decision on the case of Gamboa v Teves promulgated on June 28, 2011, where it held that the "capital" requirement in Section 11, Article XII of the 1987 Constitution refers only to shares of stock entitled to vote in the election of directors.
In 2011, the High Court ordered the SEC to apply this definition of "capital" in determining the extent of allowable foreign ownership in the case of PLDT Incorporated, and to impose appropriate sanctions if there was a violation of Section 11, Article XII, of the Constitution.
A former dean of the Pamantasan ng Lungsod ng Maynila (PLM) then filed a petition, alleging that the foreign ownership guidelines set by the SEC in 2013 were "tailor-made" to allow PLDT to skirt the law limiting foreign ownership in public utilities to 40%.
Throwback to Gamboa v Teves
"Control, according to [the] SC decision in Gamboa vs Teves, is done through [the] Board of Directors who manages the company," Lim said.
But SEC Chairperson Teresita Herbosa said PLDT's case and that of Rappler are two different issues.
"PLDT's case stemmed from a decision of the SC, changing the way it should compute foreign equity ownership in nationalized activities," Herbosa replied in a text message.
"Here, the constitutional provision has been there since before Rappler came into existence and it is clear: 100% Filipino ownership. [This] means 100% control, management, veto power should have been complied with from the time Rappler came about," she added.
Is the decision to revoke Rappler's incorporation papers too harsh? The SEC chief thinks otherwise.
"SEC orders revocation of companies even for just failing to submit annual reportorial requirements. Is it not fair to revoke also on ground of violation of the Constitution and the law?" Herbosa said.
Lim argued, however, that there is no factual basis for the SEC decision because Rappler, in December 2017, submitted a waiver of the provision in the Omidyar PDRs.
"[The] provision being mentioned by SEC was already waived by Omidyar before [the] SEC decision. We believe there is no factual basis for the SEC to revoke the Omidyar PDRs, much less articles of incorporation of Rappler Inc," Lim said.
But Herbosa said what was submitted was just a photocopy of the waiver and not a document subscribed by a notary or a Philippine consulate.
"Therefore, the purported waiver is of no substantial value to the formal proceedings against the respondents," the SEC decision states.
A show-cause order was issued only in August 2017 to Rappler, after the SEC conducted an "internal, inter-departmental investigation" between December 2016 and July 2017. The SEC decision to revoke Rappler's license to do business and to nullify the Omidyar PDRs was issued last January 11.
Rappler will exhaust all legal means to challenge the decision, which it views as pure harassment. Various media groups and human rights advocates in the Philippines and abroad have also condemned the decision as an attack on freedom of the press. (READ: Stand with Rappler, defend press freedom) – Rappler.com