What you should know about the Court of Appeals decision on Rappler

Did the court agree with Rappler that it was wrong for the Securities and Exchange Commission to order the revocation of its license?

Rappler.com

4:32:36am July 28, 2018

4:45:42am July 28, 2018

BUSINESS AS USUAL. A photo of the Rappler newsroom. Photo by Charles Salazar/Rappler

BUSINESS AS USUAL. A photo of the Rappler newsroom. Photo by Charles Salazar/Rappler

MANILA, Philippines – The Court of Appeals (CA) on Thursday, July 26, issued a decision concerning the revocation of Rappler's certificate of incorporation by the Securities and Exchange Commission (SEC) in January 2018.

What does the ruling mean?

Here are answers to some frequently asked questions.

Did the Court of Appeals uphold the SEC decision to put Rappler out of business by revoking its certificate of incorporation?

No.

The Court of Appeals agreed with Rappler that the decision of the SEC to put it out of business by revoking its certificate of incorporation is wrong. 

More importantly, the Court of Appeals pointed out to the SEC that the revocation of certificates of incorporation should be the “last resort” as the law mandates it to give corporations the opportunity to first rectify any act of non-compliance.

In denying Rappler’s petition for review, did the Court of Appeals rule that Rappler violated the “zero foreign control standard” stipulated in the Philippine Constitution concerning mass media?

No.

The Court of Appeals acknowledged that Rappler is not foreign-owned. It said the issuance per se of Philippine Depositary Receipts (PDRs) is not illegal and does not grant ownership or control to a foreigner.   

The Court of Appeals merely noted that “…while the Omidyar PDR states that the right to vote on the Rappler shares is retained by Rappler Holdings Corporation, said right to vote is being shared with or exercised jointly by RHC, as the owner of the shares, and Omidyar, through Clause 12.2.2. Thus, under a ‘zero’ foreign control standard, it would appear that this is tantamount to some foreign control.”  

Nonetheless, the CA found that the parties to the PDR acted in good faith and that the clause was “never exercised.”  

Did the Court of Appeals issue any order to the SEC?

Yes.

The Court of Appeals decision, in fact, is directed at the SEC. It said: “Thus, it is incumbent upon the SEC to evaluate the terms and conditions of said alleged supervening donation and its legal effect, particularly, whether the same has the effect of mitigating, if not curing, the violation it found petitioners to have committed. If so, this may warrant a re-examination of the sanction of revocation of petitioners’ Certificates of Incorporation imposed by the SEC En Banc in the assailed decision.”

Did the Court of Appeals say that the SEC followed due process in its decision to revoke the license of Rappler?

Yes.

Although the Court of Appeals agrees with Rappler that “the administrative procedure under 2016 SEC Rules was not observed to the letter by the SEC in this case,” it ruled that a “substantial compliance with the requirements of due process was observed by the SEC.” 

Did the Court of Appeals take into account the waiver by Omidyar of the questionable clause and its eventual donation of all of its PDRs in Rappler Holdings Corporation to Rappler staff in February 2018?

Yes.

The Court of Appeals made a finding of good faith on the part of the parties on account of Omidyar’s waiver of rights under the questionable clause and subsequent donation of all its PDRs.  The Court of Appeals also noted that “[i]n view of the donation made by Omidyar of all the Omidyar PDR to the Rappler staff, the negative foreign control found objectionable by the SEC appears to have been permanently removed.”

Did the Court of Appeals make any ruling concerning Rappler’s claim that the case involves a press freedom issue?

No.

Although the Court of Appeals said that the decision of the SEC to put Rappler out of business is wrong and noted that the SEC did not follow its own rules of procedure in this case, it refrained from making a determination as to whether such acts were made by the SEC to curtail press freedom. (EXPLAINER: How SEC's Rappler decision is a test case for press freedom)

The Court of Appeals stated that “…the exercise of press freedom is not an issue in this case. Rather, the issue involves the exercise of the regulatory powers by the SEC over domestic corporations duly registered with it.”

What’s next for Rappler?

For now, the ball is in the hands of the SEC. Rappler, for its part, is studying all its legal options. – Rappler.com