The Constitution is the basic and paramount law to which all other laws must conform and to which all persons, including the highest officials, must defer. (Cruz, Constitutional Law, 1998, ed., p.4)
Under the doctrine of Constitutional supremacy, if a law or contract violates any norm of the Constitution, that law or contract, whether promulgated by the legislative or by the executive branch or entered into by private persons for private purposes, is null and void and without any force and effect. Thus, since the Constitution is the fundamental, paramount and supreme law of the nation, it is deemed written in every statute and contract. (Manila Prince Hotel v. GSIS, G.R. No. 122156, Feb. 3, 1997)
The Supreme Court (SC) is discerning of any attempt to circumvent the Constitution since “as [its] ultimate guardian, the [SC] will never shun, under any reasonable circumstance, the duty of upholding the majesty of the Constitution which it is tasked to defend.” (ibid)
Foreign Equity Restriction
The foreign equity restriction for mass media in the Constitution, thus, is no exception from the provisions that shall be honored considering that we esteem mass media as the fourth estate. Being such, it has the power and influence to make or break national stability and development. Therefore, the State is duty-bound to protect mass media from any foreign influence or interference and to promote independent and unbiased journalism so that the people continue to enjoy it as one of the blessings of democracy.
SEC revoked the registration of Rappler, Inc., an online mass media organization, on the ground that it violated the Constitutional provision on foreign equity restriction for mass media.
In the dispositive portion, SEC decision states:
The En Banc hereby imposes the following administrative penalties:
2) REVOCATION OF CERTIFICATE OF INCORPORATION on each respondent – Rappler, Inc. being the mass media entity that sold control to foreigners, and Rappler Holdings Corporation being its alter ego, existing for no other purpose than to effect a deceptive scheme to circumvent the Constitution.
So what does the Constitution say? The Constitutional provision being referred to is Sec. 11, Art. XVI and it states:
Section 11. (1) The ownership and management of mass media shall be limited to citizens of the Philippines, or to corporations, cooperatives or associations, wholly-owned and managed by such citizens.
The Spirit behind the provision is to promote journalism free from foreign influence that might affect the nation’s independence.
It is crucial to understand, however, what the Constitution means by “ownership and management.” The contention of SEC is that the investment of foreign entity thru Philippine Depositary Receipt (PDR) is tantamount to ownership. Rappler, on the other hand, contends that since the PDR does not give the investor voting rights in the board or say in the daily operations of the news organization, then that cannot fall under ownership and management.
I find it helpful to quote Foreign Investment Act of 1991 Implementing Rules and Regulations (FIA-IRR), which states:
Compliance with the required Filipino ownership of a corporation shall be determined on the basis of outstanding capital stock whether fully paid or not, but only such stocks which are generally entitled to vote are considered.
For stocks to be deemed owned and held by Philippine citizens or Philippine nationals, mere legal title is not enough to meet the required Filipino equity. Full beneficial ownership of the stocks, coupled with appropriate voting rights is essential. Thus, stocks, the voting rights of which have been assigned or transferred to aliens cannot be considered held by Philippine citizens or Philippine nationals.
So my question is: Does the issuance of the PDR in favor of a foreign entity come with full beneficial ownership coupled with voting rights so that it violates the above-stated Constitutional provision? Rappler says otherwise.
However, the SEC Decision on the nature of the issued PDRs in favor of Omidyar Network, a Delaware-based company owned by eBay founder Pierre Omidyar, provides that they contain “repugnant provision.”
The main issues that I see here, as of now, are as follows:
- Whether or not the issuance of PDR with such provision constitute ownership and management;
- Whether or not the issuance of PDRs to foreign entities regardless of provision and conditions entails pecuniary interest that is sufficient to be the kind of influence tantamount to ownership and management by foreign entities of mass media and thus unconstitutional; and
- Whether or not such violation warrants involuntary dissolution.
I intend to wait for the argument of Rappler lawyers and the decision of the court. It’s going to be a long way to go as I see this being elevated to the Supreme Court. I mean, we are not just talking about foreign equity restriction but freedom of the press in a state still breathing trauma from the pains of martial law.
Independent and Unbiased Journalism
Speaking of independent and unbiased journalism, as much as I strongly stand against foreign interference, this is also to expressly manifest my position against local interference from the government (Oh, especially from a dictatorial government!). I stand for the freedom of the press from censorship or prior restraint and from subsequent punishment unduly curtailing expression. Mass media is the tangible first-layer of our democratic freedom. Any negligence on the part of the people to protect or support those who are genuinely in the frontline of our rights will eventually result to our own imprisonment. Far be it from us to respond a little too late.
Cover image not mine: retrieved here.