Rappler takes case to CA, seeks to invalidate SEC decision

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Story updated to include statements from Rappler's petition.

Metro Manila (CNN Philippines, January 29) - Rappler is pushing against the revocation of its license by the Securities and Exchange Commission (SEC).

In a petition filed before the Court of Appeals on Monday, Rappler refuted the SEC's position saying it violated the Constitution by issuing Philippine Depositary Receipts (PDR) to foreign investor Omidyar Network and giving it control over the media outfit.

The SEC en banc on January 11 ruled that Rappler Inc. and Rappler Holdings Corp. (RHC) violated constitutional restrictions on foreign ownership, based on a provision that was equivalent to giving control to a foreign entity.

The clause requires Rappler to secure 2/3 of the votes of PDR holders before the company can amend its articles of incorporation or by-laws, or take action that would prejudice the rights of Omidyar as a PDR holder.

Rappler said the SEC's interpretation of the Omidyar PDR is wrong, adding Omidyar has never exercised control over the company.

A PDR is a financial instrument that corporations use to secure foreign investments.

"The clause does not give Omidyar the power to decide when and how the articles of incorporation or by-laws of Rappler, or any other corporate matter, are to be made. Therefore, Omidyar has no control over the actions of RHC, and also Rappler," the petition stated.

Rappler further said the SEC ruling is baseless, since it has no findings that Omidyar actually exercised control over the company.

"Thus, Rappler and RHC cannot be punished, in any way for a violation that never occured,"

Rappler also said it was deprived of its right to due process when the SEC hastily issued its decision to revoke its Certificates of Incorporation.

"A different procedure, which was not made known to Rappler and RHC, was applied in their case," the petition said, adding that the SEC en banc did not "consider the evidence presented" to counter the claims.

Rappler argued it should have been allowed to fix the questionable provision in Omidyar's PDR.

On the issue of violating the Constitution on foreign ownership limits, Rappler said it cannot be held liable as it is "not engaged in the business of mass media."

It referred to Section 11 of Article 16 of the Constitution that states "mass media" pertains only to print and broadcast media.

Rappler added that for the years 2012 to 2017, as stated in its SEC papers, the company's primary purpose is to "operate news, information and social network services." According to Rappler, it has distinguished itself from traditional mass media entities.

"The activities of Rappler are more akin to the way Facebook, Twitter, YouTube and blogs operate," it said.

The company also said it provides a public service of delivering credible news.

"Rappler has proven itself to be beneficial to society, and for this alone, it should be kept alive," it said, saying the penalty imposed by the SEC was too harsh, with no other intent but to silence Rappler and muzzle free expression

"Rappler's business is an example of how the Filipino intellect and talent may be at par or even greater than those in developed countries; it is but just to reverse and set aside the assailed decision," the petition read.

In a statement, Rappler's legal counsel Francis Lim raised legal issues that have implications on press freedom and the economy.

"Our petition raises legal issues that have far-reaching implications on business and press freedom," he said.

Lim said jurisprudence will guide the Court of Appeals in deciding the case.

"We fervently hope that the case will ultimately be decided for the broader interest of the country," he added.

Rappler's legal battle

On January 15, news broke that the SEC revoked Rappler's license to operate. The SEC cancelled Rappler's certificate of incorporation and referred its decision to the Department of Justice for "appropriate action." The decision covers Rappler Inc. and RHC.

READ: SEC cancels Rappler's license to do business

Also on the same day, Presidential Spokesperson Harry Roque denied Malacanang had a hand in the SEC decision.

In an interview with CNN Philippines on January 16, Ressa said they received information that the SEC could have been pressured into coming up with the decision.

READ: Rappler sees Malacañang hand in license revocation

SEC Chair Teresita Herbosa has challenged critics to prove that the body's decision to cancel Rappler's business registration was politically motivated.

READ: SEC chair to critics: Prove politics behind decision to revoke Rappler's license

CNN Philippines Correspondent Camille Abadicio and Digital Producer VJ Bacungan contributed to this report.