Rappler asks CA to revoke SEC shutdown order

MANILA, Philippines (UPDATED) – Rappler filed on Friday, August 17, a partial motion for reconsideration with the Court of Appeals (CA), asking it to annul and set aside the January 2018 decision of the Securities and Exchange Commission (SEC).

Essentially it is asking the CA to make a definitive ruling that would revoke the SEC’s shutdown order which was based on its finding that Rappler is not 100% Filipino-owned.

Although the Court of Appeals (CA) said Rappler must be given a period to correct its structure, the appellate court still said the company’s Philippine Depositary Receipts (PDRs) to Omidyar Network amounted to “some foreign control.”

Rappler filed the partial motion for reconsideration to have the company declared 100% Filipino-owned.

In the decision of the CA Special 12th Division on July 26, the appellate court directed the SEC to reconsider its shutdown order with a nudge that Rappler’s latest move should already cure its deficiency.

Omidyar Network, the foreign investor who owns the questionable PDRs, donated the PDRs to Rappler’s Filipino staff. The CA said that by doing so, the supposed deficiency of having some foreign control “appears to have been permanently removed.”

On foreign control. PDRs are a well-recognized mechanism to get foreign investment without violating the constitutional rule on foreign ownership.

Media entities, according to the Constitution, should be 100% Filipino-owned.

The PDR agreement with Omidyar Network states that Rappler should engage in a prior discussion with the investor should it amend its constitution and by-laws in a way that would prejudice ON's rights. 

Does that consitute foreign control? The CA said yes because “the capacity to control a corporation may also exist without owning shares of stock or voting rights in that corporation through corporate control-enhancing mechanisms that limit voting powers or reduce the voting shares of a shareholder.”

Rappler disputed this interpretation, citing a Supreme Court decision that says control only exists when there are voting rights. Omidyar Network does not have voting rights in Rappler.

Rappler insisted that according to the Civil Code, it cannot be punished for something that has not yet happened. Omidyar Network has never exercised - and has waived - this controversial clause. 

“Article 1158 of the Civil Code is the foundation for the principle that, if an act punishable by law has not been performed, then, the corresponding penalty under the law cannot be applied to one accused of violating it,” said Rappler.

Rappler again pointed out that the prior discussion is a protection clause that is normally given to investors, such as what other network giants like ABS-CBN and GMA have.

“Even the PDRs of GMA Holdings and ABS Holdings, and other agreements containing similar negative covenants entered into by corporations with foreign equity restrictions and foreign entities such as banks and financial institutions would be at risk of being struck down,” said Rappler.

On due process. The CA decision was a nuanced one. It upheld the SEC findings, but it essentially told the agency that the revocation order was too harsh a punishment.

In the end, the SEC would still have to make another finding after the CA remanded the case back to the SEC.

Rappler wants a revocation of the SEC shutdown order, citing the violation of its right to due process when the SEC revoked the company’s license even though rules say revocation should be the last resort.

The CA also observed that while SEC did not go by the book, it made a substantial compliance to proper procedure.

Rappler disagreed, saying that “the summary revocation of their certificates of incorporation was a violation of their Constitutional rights to due process.”

Is it a press freedom issue? The CA said the revocation was not meant to trample on Rappler’s rights and duty to report the news.

Rappler said that it was “very telling” that the SEC first issued a show cause order a week after President Rodrigo Duterte ranted about the company in his 2017 State of the Nation Address no less. There, the President called Rappler “American-owned.”

“The sham nature of the SEC investigation, the SEC’s haste and prejudgment coupled with the harsh penalties imposed lead to no other conclusion than that the SEC’s real purpose is to silence RAPPLER and muzzle freedom of speech,” Rappler said.

Rappler asked the CA to take notice that after the SEC’s shutdown order, the government filed a tax evasion complaint against Rappler; as well as a non-related cyberlibel complaint that was revived after initially saying there was no legal basis to continue the investigation.

The National Bureau of Investigation (NBI) is also investigating Rappler for alleged possible violations of the anti-dummy law.

Rappler appealed to the CA, “the Judicial Branch of Government, a co-equal body of the Executive Branch, to ensure that their constitutionally guaranteed freedoms are protected and their work imbued with public interest remain unhampered.”

Not applicable. Rappler also argued that it cannot be held liable for alleged violation of foreign equity restrictions because its implementing law, P.D. 1018, only applies to "print and or broadcast media."

It argued that in its latest Articles of Incorporation, it says that its primary purpose is to "...operate news, information and social network services xxx via web, internet, mobile, and other delivery formats..."

By characterizing itself as an "all-digital news organization" and "online news site" that "merges traditional broadcasting with the internet" and "combines the discipline and credibility of traditional print and TV journalists" so it can "join broadcasting network giants", it actually showed its business was different from print or broadcast media. 

It has emphasized that its news organization is "all-digital" and "through the "internet". 

Rappler has held that its business is unique. It is media but it is not engaged in the business of traditional mass media alone (e.g., print or broadcast). Rappler.com

 

Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email lian.buan@rappler.com or tweet @lianbuan.

image