EXPLAINER: How SEC’s Rappler decision is a test case for press freedom

Lian Buan

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EXPLAINER: How SEC’s Rappler decision is a test case for press freedom
‘If Rappler can make out a case that this is actually malicious, the court cannot ignore that the government might be in violation of the constitutional guarantee to press freedom,’ says IBP national president Abdiel Dan Fajardo

MANILA, Philippines – Can the revocation of Rappler’s license on grounds of alleged corporate foreign control be a test case for press freedom?

Rappler may use circumstances and the prevailing political climate to argue that the government violated the Constitution in curtailing press freedom, according to two independent legal experts interviewed by Rappler.

“If Rappler can make out a case that this is actually malicious, the court cannot ignore that the government might be in violation of the constitutional guarantee to press freedom,” Integrated Bar of the Philippines (IBP) national president Abdiel Dan Fajardo said in a phone interview on Saturday, January 20.

SEC decision

The Securities and Exchange Commission (SEC) revoked Rappler’s license, saying that the terms of agreement between Rappler and foreign investor Omidyar Network violated the constitutional rule that media companies should have 0% foreign control.

Omidyar invested in Rappler through a financial instrument called Philippine Depositary Receipts (PDRs). The SEC found fault in the PDR agreement where Rappler committed to engage in a “good faith discussion” with Omidyar first before they can change their articles of incorporation or by-laws.

That is giving a foreign entity control, a violation of the 0% rule, the SEC en banc said in its decision.

For Sol Mawis, Dean of the Lyceum University of the Philippines Law School, there is basis for the SEC to say that the terms of agreement constitute control.

“What is there to dicuss? Why give Omidyar that option, when the articles of incorporation contains the primary purpose of the company?” Mawis said in a phone interview.

Curing period

Mawis believes, however that Rappler should have been given the chance to correct its mistake, or a “curing period.

“It sends a chilling effect, because there is precedent of a company being allowed time to comply,” Mawis said.

She was referring to an October 2012 resolution by the Supreme Court regarding a case on whether telecommunications company PLDT violated the 60-40 rule on foreign ownership.

In the landmark ruling, the SC held that the “capital” requirement in the Constitution refers only to shares of stock entitled to vote in the election of directors. In that case, High Court allowed PLDT to “cure” its structure.

“Under prevailing jurisprudence, public utilities that fail to comply with the nationality requirement under Section 11, Article XII and the Foreign Investments Act can cure their deficiencies prior to the start of the administrative case or investigation,” said the SC in a resolution penned by Senior Associate Justice Antonio Carpio.

Citing the case, Mawis said, “It involved a conglomorate and it was allowed by the SC to correct it, why must you not allow a small company that is just starting to do business?”

SEC Chairperson Teresita Herbosa said PLDT and Rappler are two different cases.

“PLDT’s case stemmed from a decision of the SC, changing the way it should compute foreign equity ownership in nationalized activities,” Herbosa said.

”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.

Rappler submitted in December 2017 a document waiving the provision SEC considered a violation. But it was not taken into consideration because the document submitted was only a photocopy, and not considered notarized.

Cyber libel complaint

The National Bureau of Investigation (NBI) was tasked to conduct the criminal case buildup against Rappler, not only for possible violation of the Constitution and the Anti-Dummy Law but “other laws” as well, according to Justice Secretary Vitaliano Aguirre II.

NBI’s Cybercrime Division is conducting an entirely separate investigation into a cyber libel complaint against Rappler, filed in October 2017 by a businessman who was the subject of an investigative report in 2012.

The report was published in May 2012, or 4 months before the Cybercrime Prevention Act of 2012 was signed into law, and more than 3 years before the law – which was questioned before the SC – was implemented. Criminal laws are not retroactive.

Cybercrime Division Chief Manuel Antonio Eduarte said the theory of continuous publication may apply in the Rappler case, and that the complainant may be presumed to have only seen the report after the law was implemented.

Mawis does not agree. “It cannot be a continuing crime because there’s only one criminal intent. If you published today, your criminal intent today would be different from your criminal intent tomorrow.”

Fajardo begged off from commenting because if the case evolves into an ethical question about lawyers pursuing “foolish” cases, the IBP would handle it.


Here is where the question of press freedom comes in.

Fajardo said Rappler can argue before the court that the SEC ruling, combined with other circumstances, prove that there is malice.

“The speech of the President in his State of the Nation Address, the fact that it was the Solicitor General himself who complained about Rappler. The punishment also, the revocation, the order of the Department of Justice to the NBI to investigate for other violations – these are facts that the court cannot ignore,” Fajardo said.

“The government does not openly declare that we will curtail your freedom, they will do it through other means like tax regulations, denial of business permit, to achieve indirectly what the Constitution prohibits,” Fajardo said.

Mawis said: “It is now enveloped with political color. I am not saying that the current political situation can clearly make a constitutional issue out of it. Whether it will be appreciated by the court or not is a justiciable issue; it’s for the court to say.”

Interesting case

It would make for an interesting test case because according to Fajardo, the court can both uphold SEC’s decision and also recognize the issue of press freedom.

“The court may sustain that the SEC was correct in saying that PDRs signified control and ownership and that it merely exercised its regulatory power, but Rappler may still prevail if the courts find that despite the correctness of the decision of the SEC, taken as a whole, the move actually amounted to government curtailment of the press,” Fajardo said.

What will that ruling look like? We don’t know yet.

“It’s possible that the court can be creative in saying that the penalty actually is not warranted, perhaps a directive to Rappler to correct the violation, when taken with other circumstances, it would amount to government curtailing the press,” Fajardo said.

“Would this really be constitutive of muzzling the press? There are others who might be similarly situated, so there is a need to address,” Mawis said.

Press freedom

Meanwhile, as Congress deliberates on Charter change proposals, a sub-committee at the House of Representatives is seeking limited protection for free speech. 

The Bill of Rights states that “no law shall be passed abridging the freedom of speech…” but in the proposed amendment, the provision will read: “No law shall be passed abridging the responsible exercise of the freedom of speech.”

How will this play out?

Fajardo said the principle of peremptory norm may be applied. Under the principle, a country cannot pass a law violating peremptory norm.

“The peremptory norm contained in the Universal Declaration of Human Rights, and in those cases, a state like the Philippines cannot by its own Constitution dilute universal human rights,” Fajardo said.

Simply said, the Philippines, as a signatory to the Universal Declaration of Human Rights which guarantees free speech, cannot pass its own law that violates the universal law. – Rappler.com

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Lian Buan

Lian Buan is a senior investigative reporter, and minder of Rappler's justice, human rights and crime cluster.