SC reorganizes 3 court divisions

MANILA -- Chief Justice Lucas Bersamin has ordered the reorganization of the
three divisions of the Supreme Court (SC) effective January 5, 2019.

Under Special Order No. 2629 issued Thursday, the SC's First Division will be
chaired by Bersamin and co-chaired by working chairperson, Associate Justice
Mariano C. Del Castillo with Justices Francis H. Jardeleza, Alexander G.
Gesmundo and Rosmari D. Carandang as members.

The Second Division, on the other hand, is chaired by Senior Associate Justice
Antonio T. Carpio, with Justices Estela M. Perlas Bernabe, Alfredo Caguioa, Jose
Reyes as members and Ramon Paul Hernando as an additional member.

The Third Division, chaired by Associate Justice Diosdado Peralta, will be

composed of Justices Hernando, Marvic Leonen, Andres B. Reyes Jr. as members
and Carandang as an additional member. (PNA)
Supreme Court reorganizes divisions, committees

MANILA—With the retirement of 3 members of the Supreme Court and Chief

Justice Diosdado Peralta’s appointment, the high court has reorganized its 3
divisions.

Peralta will now head the 1st Division, replacing retired Chief Justice Lucas
Bersamin.

Senior Associate Justice Estela Perlas-Bernabe will take over the 2nd Division to
take the place of retiring SAJ Antonio Carpio.

Associate Justice Marvic Leonen, meanwhile, will head the 3rd Division, which
Peralta used to lead.

Associate Justices Henri Jean Paul Inting, Rodil Zalameda and Amy Lazaro-
Javier are designated additional members of the 1st, 2nd and 3rd divisions
respectively. They are the most junior members of the court.

In addition, Bernabe will now head the Senate Electoral Tribunal and the En
Banc Raffle Committee while Leonen will lead the House of Representatives
Electoral Tribunal and Division Raffle Committee.

There are currently 3 vacancies in the high court: the first one vacated by retired
Associate Justice Francis Jardeleza who retired in September with 13 applicants
in the running.

The second one is to be vacated by Carpio when he retires.

The third one is the associate justice post vacated by Peralta. The Judicial and
Bar Council has yet to open the period for nomination for this vacancy.

Once President Rodrigo Duterte fully fills these vacancies, he will have 12
appointees in the current Supreme Court. Only 3 – Bernabe, Leonen and
Associate Justice Alfredo Benjamin Caguioa are Aquino appointees.

By the time Duterte’s term ends in June 2022, he could also name a 13th
appointee to take place of Bernabe who will retire on May 2022.
ABS-CBN case raffled off to former OSG member

A former member of the Office of the Solicitor General (OSG), who is now
a Supreme Court justice, will handle the quo warranto petition filed by Solicitor
General Jose Calida against media giant ABS-CBN.

The Manila Times learned from well-placed sources in the high court that
the case was raffled off last Monday to Justice Amy Lazaro Javier.Javier was with
the OSG for 24 years and was widely acknowledged in the agency for her legal
expertise.A day after the raffle, Javier submitted her recommendations to the
court en banc to order ABS-CBN to reply to the petition within 10 days after
receiving the court’s notification.

According to the Supreme Court website, Javier joined the OSG in 1983
as a trial lawyer. She rose up the ranks to become assistant solicitor general, the
post she held for 14 years before she was appointed to the Court of Appeals.

Javier graduated from the University of Santo Tomas (UST) Faculty of Civil
Law as class valedictorian (magna cum laude) and received the Rector’s Award
for Academic Excellence.She was a consistent university scholar, was editor in
chief of the UST Law Journal and a member of her college’s debating team.

Javier was also a teacher. She first taught at the Lakandula High School,
then at the Ramon Magsaysay High School and then at the Manila Science High
School.She will serve the Supreme Court until her 70th birthday on Nov. 16,
2026.

In the 54-page petition, Calida asked the Supreme Court to strip ABS-CBN
of its congressional franchise, citing violations including the sale of Philippine
Depositary Receipts to non-Filipino entities.Media entities must be 100 percent
Filipino corporations, the Constitution mandates.

The Manila Times also learned that Justice Mario Victor Leonen was so
excited about the ABS-CBN case that he asked the Judicial Records Office for a
copy of the petition.The Manila Times source said Leonen wanted to go ahead
with the oral arguments, as petitioned by Calida.
 Many of his fellow justices wondered during Tuesday’s en banc session
how Leonen was able to learn about the details of the case, not knowing he had
an advance copy of the petition.
OSG to ABS-CBN: Quo warranto filed to ‘correct public wrong’

Metro Manila (CNN Philippines, February 27)— ABS-CBN has commented on

the Solicitor General’s quo warranto plea to revoke the media giant’s franchise,
and the Office of the Solicitor General (OSG) answered back with a 71-page
consolidated reply.

For the OSG, the quo warranto petition filed against ABS-CBN is not a move to
restrain press freedom, but an action “to correct a public wrong” brought about
by the violations committed by the network.

The OSG commented on the reply of the broadcast media giant to the quo
warranto plea that was filed by Solicitor General Jose Calida on February 10,
moving to forfeit the conglomerate's television franchise.

According to ABS-CBN’s reply submitted to the Supreme Court, the allegations

of the government’s top lawyer were unfounded.

Is this a move to curtail the freedom of expression and of the press?

Among the many points raised by the media company is the “chilling effect” that
the petition will cause once it is granted. The revocation of the media company’s
franchise will “amount to a curtailment of the freedom of speech and of the
press,” according to ABS-CBN.

But OSG said that this is “far-fetched” and “unfounded,” pointing out that a
franchise is a privilege from the State, and it is "subject to regulation by the State
itself."

The petition for quo warranto is filed to “correct a public wrong,” the OSG argued.

ABS-CBN also said that Calida’s quo warranto plea was misplaced, saying that
the Congress has the authority to revoke their legislative franchise and not the
high court.

Moreover, Calida has asked the Supreme Court to issue a gag order to stop ABS-
CBN and its representatives from discussing the quo warranto case which he
filed against the media company.

ABS-CBN argued that the issuance of a gag order will “allegedly impair the
people’s right to information on matters of public concern.”

But the office of the government’s top lawyer said that the petitioned gag order
only “seeks to restrict comments and disclosures” pertaining to pending court
proceedings to “avoid prejudging the issue.”

Another point of concern that was initially raised by the television network and
certain legal experts is the place where the petition should accordingly be filed.

READ: SC the wrong place for complaint vs ABS-CBN – legal expert

Is the SC the right place to hear the case?

The OSG reply, citing what it called the high court's "transcendental importance"
in relation to public interest, argued that the case is of paramount importance
to public interest.
ABS-CBN’s case, the OSG said, is of transcendental importance because the
franchise “mandates it to serve the public by its broadcast operations.” It added
that as the biggest broadcasting entity, the company has shaped the public’s
opinion on various issues.

ABS-CBN also argued that “the violations supposedly committed by ABS-CBN

and Convergence are within the jurisdiction of administrative agencies.” These
agencies include The Securities and Exchange Commission (SEC), the National
Telecommunications Commission (NTC), the Philippine Competition
Commission, and the Congress.

The OSG further said that the issues raised in the petition are "purely legal,
therefore a regular court of law has jurisdiction on the matter." There is also a
“misuse and abuse” of special privileges, the OSG said.

On PDRs and foreign ownership

ABS-CBN also explained that Philippine Depositary Receipts (PDRs) are not the
same as shares of stock and do not accord holders voting rights to control how
the company is run. Instead, holders just get cash distributions or dividends
through ABS-CBN Holdings Corporation, a separate entity from the actual TV
network.

But the OSG’s reply stated that ABS-CBN failed to dispute the facts of the
petition, insisting on its stand that ABS-CBN’s issuance of PDRs through ABS-
CBN Holdings Corporation violates the foreign ownership restriction of mass
media according to Section 11, Article XVI of the Constitution.
Point by point: ABS-CBN answers Solgen Calida's quo warranto

petition

MANILA, Philippines — The Philippines' chief government lawyer ran to the

Supreme Court this month in a bid to revoke the franchise of media giant ABS-
CBN, a network that has been at the bitter end of tongue-lashings from President
Rodrigo Duterte.

Solicitor General Jose Calida said in a statement upon filing the quo warrano
petition: “We want to put an end to what we discovered to be highly abusive
practices of ABS-CBN benefitting a greedy few at the expense of millions of its
loyal subscribers. These practices have gone unnoticed or were disregarded for
years.”

Replying to Calida's petition, ABS-CBN released a statement on the day of filing

and rebutted: "We reiterate that everything we do is in accordance with the law.

We did not violate the law. This case appears to be an attempt to deprive Filipinos

of the services of ABS-CBN."

On Monday, ABS-CBN answered Calida's allegations in a 58-page Comment Ad

Cautelam (Latin for "for security").

Here is a look at the allegations Calida made in his quo warranto petition and
ABS-CBN’s reply in its comment filed Monday:

Quo warranto as the proper remedy for ABS-CBN franchise woes

What Calida said:

The franchises of ABS-CBN Corporation and ABS-CBN Convergence have to be

revoked for the gross violations they have committed. A forfeiture of a franchise
will have to be declared in a direct proceeding for the purpose brought by he
State because a franchise is granted by law and its unlawful exercise is primarily
a concern of the Government. Quo warranto is specifically available as a remedy
if it is thought that a corporation has offended against its corporate charted or
misused its franchise.

What ABS-CBN said:

Rule 66 of the 1997 Rules of Civil Procedure is now limited to quo warranto
actions for usurpation of public office, position or franchise. Accordingly, nothing
in Rule 66 of the 1997 Rules of Civil Procedure pertains to misuse of abuse of
such public office, position or franchise.

Congress has the power to grant, amend, alter and repeal a franchise, as
provided by Section 11, Article XII of the Constitution.
The case is of ‘transcendental importance’

What Calida said:

The present petition involves a matter of transcendental importance, and is a

case of first impression, which are some of the exceptions to the doctrine of
hierarchy of courts cited above.

This case is of transcendental importance because ABS-CBN’s franchise

mandates it to serve the public by its broadcast operations. ABS-CBN
Corporation in fact earned the distinction of being the largest media
conglomerate in the country, reaching millions of viewers in all corners of the
country.

What ABS-CBN said:

[T]hese are not ‘special and important’ reasons which would justify a direct resort
to this Honorable Court. The issues involved, not the nature of the parties’
businesses and their size, determine whether a case is of transcendental
importance.

The Honorable Court is not a trier of fact.

EXPLAINER: Calida cites 'transcendental importance' in case vs ABS-CBN:

What is it?
Operation of pay-per-view channel through free-to-air signals

What Calida said:

It bears stressing that NTC found [Broadcast Service Division’s] report that “No
Encryption nor Conditional Access of programming content shall be allowed” to
be in order. Accordingly, the NTC imposed a condition on ABS-CBN Corporation
that “[t]he use of Conditional Access System (CAS) on DTTB service shall be
subject to Conditional Access Guidelines that the Commission or any other
relevant government agency may hereafter issue.” At present, there are no
Conditional Access Guidelines yet issued by NTC or any other government
agency. In the absence of any permit from NTC and guidelines on conditional
access, ABS-CBN Corporation has no authority to offer the KBO Channel.

ABS-CBN Corporation cannot deny that it has no permit or authority from the
government, specifically [National Telecommunications Commission], before it
launched its [Kapamilya Box Office] Channel. Despite being aware of the absence
of such a permit or authority, ABS-CBN remains undeterred and continuously
operates the KBO Channel in violation of its franchise, the NTC directive and
Order, and the [Department of Information and Communications Technology]
Framework.

What ABS-CBN said:

Convergence was registered with the NTC to provide value-added services... KBO
was therefore a Convergence service. In fact, before the launch of all its KBO
offerings, Convergence sought and obtained NTC approvals.
That the Broadcast Service Division recommended that “[n]o Encryption of
Conditional Access of programming content shall be allowed” is beside the point.
The NTC did not adopt such recommendation in its Order and did not state that
“no CAS shall be allowed.” Rather, it imposed among the conditions that ABS-
CBN should comply with future guidelines which government may impose.

EXPLAINER: Calida says ABS-CBN's KBO service illegal, but network says it
has permits
On the transfer of Multi-Media Telephony's franchise to Convergence

What Calida said:

ABS-CBN Convergence violated Section 15 of R.A. 7907, as amended by R.A.

8332, when the controlling interest in Multi-Media Telephony, the grantee, was
transferred to ABS-CBN. As explained above, the majority of the shares of ABS-
CBN Convergence was acquired by ABS-CBN Corporation or Sapientis through
[Columbus Technology Inc.], and this transfer of the legislative franchise or the
rights and privileges thereunder was made without Congressional approval. The
web of corporate layering employed by Respondents is plainly intended to go
around the congressional approval requirement in the subject legislative
franchise.

What ABS-CBN said:

First, there was never any transfer of shares in the grantee, MTI. The controlling
interest in MTI has always been, and still remains with Columbus, even after
Sapientis subscribed to 70% of Columbus’ increased capital stock in 2011.

The Main and SME Board Listing Rules adopted by the Philippine Stock
Exchange and approved by the Securities and Exchange Commission...require
that the applicant must have a ‘cumulative consolidated earnings before interest,
taxes, depreciation and amortization..” ... Convergence has incurred losses in
every fiscal year from 1997 to present... Since Convergence cannot comply with
the requirements under PSE’s Main and SME Board Listing Rules, it cannot list
and offer its shares to the public.

On foreign ownership of the company

What Calida said:

The figures above show that the number of ABS-CBN Corporation shares were
transferred to ABS Holdings and subsequently, ABS Holdings issued financial
securities in the form of [Philippine Depositary Receipts], which are then issued
to both Filipino and non-Filipino nationals.

ABS-CBN Corporation’s issuance of PDRs to non-Filipino citizens is therefore a

contravention of Section11, Section XVI of the Constitution which provides that
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.

ABS Holding’s issuance of PDRs to non-Filipino citizens is a scheme employed

making it appear that the shares remain with the Filipino corporation while
granting influence over the mass media enterprise to foreign investors. A foreign
investor in this case may validly profit from a mass media corporation with a
foreign equity restriction.

What ABS-CBN said:

ABS-CBN PDRs were issued subsequently and these PDRs were also registered
with, and approved by the SEC in 2014.

The PDR holders’ rights are not equivalent to the full beneficial ownership rights
of the shareholders of ABS-CBN... The PDRs do not grant any of the foregoing
rights to PDR Holders as against ABS-CBN.

Since the voting power of the ABS-CBN shares remains with Philippine
stockholders, dividends accruing to investors, of whatever nationality, is [sic]
irrelevant. Hence even assuming that the PDRs are shares (they are not), and
that what PDR holders receive are dividends from ABS-CBN this right to receive
dividends is not per se determinative of that stocks’ full ‘beneficial ownership.’

EXPLAINER: ABS-CBN's Philippine Depositary Receipt holders not owners,

lawyer says
TIMELINE: ABS-CBN franchise
By Melissa Luz Lopez, CNN Philippines

Metro Manila (CNN Philippines) — TV network ABS-CBN faces an uncertain

future beyond March 30.

The Lopez-owned network’s franchise is yet to be renewed by Congress, while its

current authority to broadcast has been put in peril after Solicitor General Jose
Calida asked the Supreme Court to void it.

Apart from its flagship ABS-CBN channel, the media conglomerate also operates
other brands such as ABS-CBN Sports and Action, DZMM Teleradyo, cable
channels ABS-CBN News Channel or ANC, Cinema One, Jeepney TV, Knowledge
Channel, Metro Channel, Myx, and global channel TFC.

The network also started offering digital TV boxes which carries KBO, a channel
airing Filipino movies. This was one of the two issues raised by Calida in asking
the high court to revoke ABS-CBN’s franchise.

This is the first time for the oldest TV station in the country to go through
problems with franchise renewal. Here’s a timeline of events:

June 14, 1950: Republic Act No. 511 is passed giving a temporary permit for
Bolinao Electronics Corporation to operate a television station in the Philippines.
The firm is renamed Alto Broadcasting System in 1953, patterned after the first
names of its new owners Aleli and Tony Quirino, the brother of former President
Elpidio Quirino.

February 24, 1957: Lawyer and businessman Eugenio Lopez Sr. buys the
company from the Quirinos. This leads to the merger of ABS and Chronicle
Broadcasting Network or CBN.

June 21, 1969: RA 5730 becomes law, which converts Bolinao Electronics
Corporation’s franchise into ABS-CBN.

September 21, 1972: ABS-CBN, along with other networks and affiliate
stations, are told to go off the air while media assets are seized as then-President
Ferdinand Marcos puts the entire nation under martial law. Media content is
controlled by the state.

September 16, 1986: ABS-CBN resumes daily broadcasts nearly seven months
after a "people power" revolt toppled the Marcos regime.

March 30, 1995: President Fidel Ramos signs RA 7966 granting a 25-year
franchise to ABS-CBN Broadcasting Corporation. The renewal comes five years
ahead of the expiry of its franchise.

September 11, 2014: Isabela Representative Giorgidi Aggabao files House Bill
4997 under the 16th Congress, in the first attempt to renew ABS-CBN’s
franchise ahead of its March 2020 expiration. This does not get past the
committee level.
May 6, 2016: Former Senator Alan Peter Cayetano, President Rodrigo Duterte’s
running mate for the presidential elections, gets a Taguig court to issue a
temporary restraining order stopping ABS-CBN from airing TV commercials
against Duterte. The said ads are supposedly paid for by members of the
opposition.

RELATED: Presidential, VP bets spend ₱6.7 billion on pre-election

campaign ads - PCIJ

November 10, 2016: Rep. Micaela Violago of the second district of Nueva Ecija
files House Bill 4349 seeking to renew the network’s franchise, followed by a
similar bill drafted by brothers Davao City Rep. Karlo Nograles and PBA Party-
List Rep. Jericho Nograles. Both remain at the committee level.

November 8, 2018: Duterte unleashes one of his public rants against ABS-CBN
for failing to air his campaign advertisements for the May 2016 elections. He
curses the network’s chairman emeritus Gabby Lopez and called him a thief,
saying he will reject the renewal of ABS-CBN’s franchise.

Duterte previously slammed the media conglomerate for its supposedly unfair
labor practices, and earlier challenged the network to accompany him to the
central bank to open his bank accounts, amid reports that he had undeclared
wealth.

July 1, 2019: Violago refiles her bill for the franchise renewal on the second day
of the 18th Congress, with 20 other House members signing up as co-authors of
the measure. Ten other bills are filed to give ABS-CBN a fresh legal mandate.

July 28, 2019: Senator Ralph Recto files a similar bill to extend ABS-CBN’s
franchise for another 25 years. Sen. Leila De Lima later asked to be co-author of
the measure.

December 3, 2019: Duterte says he will personally “see to it” that ABS-CBN will
be out of business by 2020. He later tells the Lopezes to just sell the network to
a new owner.

December 4, 2019: Palawan Rep. Franz Alvarez, chairman of the House

Committee on Legislative Franchises, says they would not tackle the bills on
ABS-CBN until the end of that year. House Speaker Alan Peter Cayetano says
the measures can be taken up early 2020.

February 10, 2020: Calida heads to the high court with a quo warranto
petition against ABS-CBN, saying it committed two grave violations of its existing
franchise. He claims the network allowed foreign owners to control the company
by selling Philippine Depositary Receipts to them, and offering KBO as an entirely
new TV channel.

The network refutes Calida’s claim, saying it did not violate the law. The court
asks ABS-CBN to respond to the points raised in 10 days.

Media groups denounce the petition as a direct attack on freedom of speech and
of the press.

February 12, 2020: Committee Vice Chairman Isabela Rep. Antonio Albano Jr.
apologizes to the estimated 11,000 workers of ABS-CBN for delays in discussing
the franchise renewal. He says the pending measures are already being
discussed among solons behind closed doors.

Cayetano vows that the House will be “impartial” in tackling ABS-CBN’s

franchise.

The House committee tackling the measure still has no scheduled hearings on
the bills as of Thursday, February 13.

February 18, 2020: Calida asks the Supreme Court to issue a gag order to stop
ABS-CBN and its representatives from discussing the quo warranto case which
he filed against the network.

In his "very urgent motion," he asks the high court to issue the order that bans
"parties and persons acting on their behalf" from releasing statements discussing
the merits of his plea to forfeit ABS-CBN's existing franchise. He said this violates
the sub judice rule, which prohibits anyone from publicly assessing an ongoing
case to avoid pre-judgment.

ABS-CBN Corporation and ABS-CBN Convergence, Inc. were given up to five

days from receipt of the new petition to submit their response to the gag order
plea.

February 20, 2020: ABS-CBN CEO and president Carlo Katigbak admits the
media company's shortcomings and vows to correct them.

February 24, 2020: The Senate Committee on Public Services is set to hold a
public hearing on ABS-CBN's franchise renewal. The panel will also tackle the
status of six other broadcast franchises: Golden Broadcast Professional Inc.,
Gold Label Broadcasting System Inc., Broadcast Enterprises and Affiliated Media
Inc., First United Broadcasting Corp., Crusaders Broadcasting System Inc., and
Bicol Broadcasting System Inc.
REPUBLIC ACT NO. 7966

REPUBLIC ACT NO. 7966 - AN ACT GRANTING THE ABS-CBN

BROADCASTING CORPORATION A FRANCHISE TO CONSTRUCT, INSTALL,
OPERATE AND MAINTAIN TELEVISION AND RADIO BROADCASTING
STATIONS IN THE PHILIPPINES, AND FOR OTHER PURPOSES

Section 1. Nature and Scope of Franchise. — Subject to the provisions of the

Constitution and applicable laws, rules and regulations, the ABS-CBN
Broadcasting Corporation, hereunder referred to as the grantee, its successors
or assigns, is hereby granted a franchise to construct, operate and maintain, for
commercial purposes and in the public interest, television and radio
broadcasting stations in and throughout the Philippines, through microwave,
satellite or whatever means including the use of any new technologies in
television and radio systems, with the corresponding technological auxiliaries
or facilities, special broadcast and other broadcast distribution services and
relay stations.

Sec. 2. Manner of Operation of Stations or Facilities. — The existing and future

stations or facilities of the grantee shall be constructed in a manner as will at
most result only in the minimum interference on the wavelengths or frequencies
of the other existing station or stations which may be established by law without
in any way diminishing its own right to use its selected wavelengths or
frequencies and the quality of transmission or reception thereon as should
maximize rendition of the grantee's services and/or the availability thereof.

Sec. 3. Prior Approval of the National Telecommunications Commission. —

The grantee shall secure from the National Telecommunications Commission
the appropriate permits and licenses for its station and shall not use any
frequency in the television or radio spectrum without having been authorized
by the Commission. The Commission, however, shall not unreasonably
withhold or delay the grant of any such authority.

Sec. 4. Responsibility to the Public. — The grantee shall provide adequate

public service time to enable the government, through the said broadcasting
stations, to reach the population on important public issues; provide at all times
sound and balanced programming; promote public participation such as in
community programming; assist in the functions of public information and
education; conform to the ethics of honest enterprise; and not use its stations
for the broadcasting of obscene and indecent language, speech, act or scene, or
for the dissemination of deliberately false information or willful
misrepresentation to the detriment of the public interest, or to incite, encourage,
or assist in subversive or treasonable acts.

Sec. 5. Right of Government. — A special right is hereby reserved to the

President of the Philippines, in times of rebellion, public peril, calamity,
emergency, disaster or disturbance of peace and order, to temporarily take over
and operate the stations of the grantee, to temporarily suspend the operation of
any station in the interest of public safety, security and public welfare, or to
authorize the temporary use and operation thereof by any agency of the
government, upon due compensation to the grantee, for the use of the said
stations during the period when they shall be so operated.
Sec. 6. Term of Franchise. — This franchise shall be for a term of twenty-five
(25) years from the date of effectivity of this Act.

Sec. 7. Acceptance and Compliance. — Acceptance of this franchise shall be

given in writing to Congress within sixty (60) days from the effectivity of this
Act. Upon giving such acceptance, the grantee shall exercise the privileges
granted under this Act.

Sec. 8. Tax provisions. — The grantee, its successors or assigns, shall be liable
to pay the same taxes on their real estate, buildings and personal property,
exclusive of this franchise, as other persons or corporations are now or hereafter
may be required by law to pay. In addition thereto, the grantee, its successors
or assigns, shall pay a franchise tax equivalent to three percent (3%) of all gross
receipts of the radio/television business transacted under this franchise by the
grantee, its successors or assigns, and the said percentage shall be in lieu of all
taxes on this franchise or earnings thereof: provided, that the grantee, its
successors or assigns, shall continue to be liable for income taxes payable under
Title II of the National Internal Revenue Code pursuant to Sec. 2 of Executive
Order No. 72 unless the latter enactment is amended or repealed, in which case
the amendment or repeal shall be applicable thereto.

The grantee shall file the return with and pay the tax due thereon to the
Commissioner of Internal Revenue or his duly authorized representatives in
accordance with the National Internal Revenue Code, and the return shall be
subject to audit by the Bureau of Internal Revenue.

Sec. 9. Self-regulation by and Undertaking of Grantee. — The grantee shall

not require any previous censorship of any speech, play, act or scene, or other
matter to be broadcast and/or telecast from its stations: provided, that the
grantee, during any broadcast and/or telecast, shall cut off from the air the
speech, play, act or scene, or other matter being broadcast and/or telecast if
the tendency thereof is to propose and/or incite treason, rebellion or sedition;
or the language used therein or the theme thereof is indecent or immoral, and
willful failure to do so shall constitute a valid cause for the cancellation of this
franchise.

SECTION 10. Warranty in Favor of National and Local Governments. — The

grantee shall hold the national, provincial, and municipal governments of the
Philippines harmless from all claims, accounts, demands or actions arising out
of accidents or injuries, whether to property or to persons, caused by the
construction or operation of the stations of the grantee.

SECTION 11. Sale, Lease, Transfer, Usufruct, etc. — The grantee shall not
lease, transfer, grant the usufruct of, sell nor assign this franchise or the rights
and privileges acquired thereunder to any person, firm, company, corporation
or other commercial or legal entity, without the approval of the Congress of the
Philippines. Any person or entity to which this franchise is sold, transferred or
assigned shall be subject to all the same conditions, terms, and limitations of
this Act.

SECTION 12. General Broadcast Policy Law. — The grantee shall comply with
a general broadcast policy law which Congress may hereafter enact.

SECTION 13. Separability Clause. — If any of the sections or provisions of

this Act is held invalid, all the other provisions not affected thereby shall remain
valid.

SECTION 14. Repealability and Non-exclusivity Clauses. — This franchise

shall be subject to amendment, alteration or repeal by the Congress of the
Philippines when the public interest so requires and shall not be interpreted as
an exclusive grant of the privileges herein provided for.

SECTION 15. Effectivity. — This Act shall take effect fifteen (15) days from the
date of its publication in at least two (2) newspapers of general circulation in
the Philippines.
SC the wrong place for complaint vs ABS-CBN – legal expert

Metro Manila (CNN Philippines, February 11) — The Supreme Court will likely
dismiss the petition to cancel ABS-CBN's franchise as the complaint had "no
factual basis" and was filed at the wrong venue, a legal expert said.

Constitutional lawyer Tony La Viña said Solicitor General Jose Calida's quo
warranto plea asking the high court to revoke the network's existing
franchise and to take the KBO channel off the air should be dismissed if the SC's
rules are strictly followed.

"In my view, the petition is a wrong petition in the wrong venue. There's no basis
for the petition and it should not be in the Supreme Court," La Viña, also a law
professor at the Ateneo Law School, told CNN Philippines' Newsroom.

Calida filed the petition against ABS-CBN Corporation and its subsidiary, ABS-
CBN Convergence Inc., claiming violations after the network supposedly allowed
foreign investors gain control over the company through Philippine Deposit
Receipts or PDRs. The network has denied violating its current franchise.

In an interview with CNN Philippines' The Source, Cagayan de Oro

Representative Rufus Rodriguez agreed that Calida's petition had "no basis at
all," saying that a quo warranto only applies to a person who "intrudes, usurps,
unlawfully holds or exercises" a position or franchise. He said these do not apply
to the network.

Calida used the same petition to remove Chief Justice Ma. Lourdes Sereno from
office by proving that she did not qualify for the post because she did not file her
Statements of Assets, Liabilities, and Net Worth or SALNs for 10 years before she
applied to be chief justice in 2012.

Per SC rules, La Viña said the highest court in the land would outrightly dismiss
cases where facts have not been established, as well as when the complaint did
not go through concerned government agencies and lower courts for redress first.

"If he (Calida) has issues with respect to how ABS-CBN has exercised its
franchise, it should go to the National Telecommunications Commission. If it has
issues about the ownership of ABS-CBN which is the other basis for the quo
warranto, it should go to the Securities and Exchange Commission," the lawyer
added.

La Viña noted that the question on PDRs has no factual basis, as these are
"standard" investment tools that allow a media company to raise funding.

READ: House hearing not yet set for ABS-CBN franchise bill renewal

Questions on whether the Lopez-owned network violated provisions of its 1995

franchise should be something for Congress to resolve, as it issued the 25-year
franchise which allowed the network to continue broadcasting.

The House of Representatives and Senate are yet to start discussing ABS-CBN's
franchise renewal at the committee level, with barely two months left before the
existing franchise expires by March 30.
La Viña also warned that this apparent intimidation is a threat to press freedom,
even if Calida and Malacañang claimed that the petition is not motivated by
politics.

"This has a chilling effect on the media organizations to stay critical about the
President. We have to fight against this from a point of view as well," he said,
adding that the network cannot be considered anti-government at all as a
number of its news commentators are supporters of the administration.

President Rodrigo Duterte has repeatedly slammed the network for supposedly
failing to air his presidential campaign advertisements in 2016. ABS-CBN has
over 10,000 employees and talents as of end-2018, who may lose their jobs if the
network is forced to cease operations.
EXPLAINER: ABS-CBN's defense in the Supreme Court quo
warranto case

MANILA, Philippines – "We did not violate the law," was ABS-CBN's blanket
defense when Solicitor General Jose Calida filed a quo warranto case against the
network seeking to take away its franchise.

In a 58-page comment submitted to the Supreme Court on Monday, February

24, ABS-CBN answered the accusations point-by-point as it fights for its
franchise on all fronts.

At the Supreme Court, ABS-CBN hopes the justices would junk the petition
outright for being the wrong venue, citing hierarchy of courts. The Supreme
Court is not a trier of facts, and ABS-CBN said Calida's case deals heavily with
factual issues that should be resolved by either lower courts or different
administrative agencies, and not the High Tribunal.

Take a look at ABS-CBN's answers to all of Calida's accusations:

ACCUSATION #1: Kapamilya Box Office (KBO) is illegal because ABS-CBN

offered it as a pay-per-view product without the proper permits from the National
Telecommunications Commission (NTC), therefore a violation of its franchise.

ANSWER: It was ABS-CBN Convergence that offered KBO as a value-added-

service. Convergence, the comment said, "sought and obtained NTC approvals."

KBO is a pay-per-view movie channel that subscribers pay for every week on top
of a one-time fee to buy the ABS-CBN TV Plus Digital Box.

ACCUSATION #2: The NTC ordered ABS-CBN in 2019 to refrain from offering
pay-per-view services.

Calida said in his petition that the NTC told ABS-CBN on April 29, 2015, to
"refrain from offering any pay television service...until such time that the
Commission has come up with appropriate guidelines for the same."

Calida said the NTC reiterated that order on May 14, 2019.

ANSWER: The NTC actually "approved" its pay-per-view service in the said 2019
order, but imposed a condition that its service "shall be subject to such
Conditional Access guidelines that the Commission or any other relevant
government agency may hereafter issue."

In the comment, ABS-CBN said that the NTC order did not prohibit pay-per-view
before the issuance of a guideline, only that it required companies to comply with
guidelines if, and when, the government comes up with one.
"Even assuming that there was a violation....the potential penalty would only be
a fine not exceeding two hundred pesos per day for every day during which such
default or violation continues," said the comment, citing the Public Service Law.

At the Senate, NTC Commissioner Gamaliel Cordoba said that the violation
involved was ABS-CBN proceeding with a pay-per-view service even without
guidelines.

Senator Ralph Recto said that if there was a violation, penalties should just be
imposed on ABS-CBN instead of it being shut down. "I don’t think that this
warrants a death penalty or a capital punishment na papatayin natin 'yung
kumpanya (that we will kill the company)," said Recto.

ACCUSATION #3: Pay-per-view is in itself illegal because franchise holders are

not allowed to derive income other than from its paid advertisements.

ANSWER: ABS-CBN cited Justice Secretary Menardo Guevarra's legal opinion

issued to NTC upon request in 2018, saying that "we find it clear enough that
broadcast companies can engage in Conditional Access (CA) or Conditional
Access System (CAS) and, for the same reason, can offer TV pay-per-view
services."

"There is nothing in said provisions that would give any impression that
'commercial purposes' are limited only to income derived by TV broadcast
companies from paid advertisements," the legal opinion added, as cited by ABS-
CBN's comment.

ABS-CBN said in its comment that if franchise grantees were to be disallowed

from offering pay-per-view, they would be at a disadvantage because the likes of
Netflix are charging a fee for their content.

ACCUSATION #4: ABS-CBN skirted franchise rules when it acquired and

merged with two companies which had their own franchises, and used those
franchises as their own.

Calida said ABS-CBN resorted to corporate layering to avoid the tedious process
of applying for a franchise when it aired its content using the franchises of Multi-
Media Telephony Inc and Amcara, which ABS-CBN eventually bought.

ANSWER: ABS-CBN said that the Supreme Court made a clear distinction
between a sale of a franchise and sale of shares of stock of a corporation
possessing such franchise.

"The former is prohibited while the latter is not," the comment said.

ABS-CBN cited the case PLDT vs NTC (G.R No. 8404), which said: "In other
words, even if the original stockholders had transferred their shares to another
group of shareholders, the franchise granted to the corporation subsists as long
as the corporation, as an entity, continues to exist. The franchise is not thereby
invalidated by the transfer of the shares."

What ABS-CBN is simply saying is that while transfer of franchise through sale
is prohibited, it was not barred from buying shares of stock of a franchise
grantee.

Accusation #5: ABS-CBN violated the franchise law of Multi-Media Telephony

because Section 15 of such law said "the grantee shall not lease, transfer, grant,
the usufruct of, sell nor assign this franchise or the rights and privileges acquired
thereunder to any person, firm, company, corporation or other commercial or
legal entity, nor merge with any corporation or entity, nor shall the controlling
interest in the grantee be transferred..."

Answer: There must be more relaxed rules for Multi-Media Telephony by virtue
of Republic Act 7925 or the Public Telecommunications Policy Act enacted on
March 17, 1995. Multi-Media Telephony Inc was first granted franchise on
February 23, 1995.

Section 23 of RA 7925 says "any advantage, favor, privilege, exemption or

immunity granted under existing franchises, or may hereafter be granted, shall
ipso facto become part of previously granted telecommunication franchises and
shall be accorded immediately and unconditionally to the grantees of such
franchises."

On March 30, 1995, Congress granted a company called Maranao Telephone

Company a franchise and prohibited it from selling but only within 5 years. ABS-
CBN said that because of Section 23 of RA 7925, the advantage given to Maranao
must also be given to Multi-Media Telephony.

"Such requirement must be deemed to apply only for a period of 5 years from the
effectivity of Multi-Media Telephony's franchise (March 17, 1995), or only until
March 17, 2000," their comment said.

ABS-CBN bought into Multi-Media Telephony in 2015.

Accusation #6: ABS-CBN Convergence violated RA 7908, the original franchise

law of Multi-Media Telephony, when it didn't publicly offer shares. RA 7908 says
that the company must offer at least 30% of its outstanding capital stock within
5 years of starting its operations, in this case within 5 years since 2015.

In 2011, Sapientos bought a company called Columbus Technology, which owns

95% of Multi-Media Telephony. In 2015, ABS-CBN Corporation entered into a
merger with Sapientis. Sapientis then became a wholly-owned subsidiary of ABS-
CBN Corporation.
Answer: Convergence never qualified to publicly offer its shares. ABS-CBN said
that for a company to be allowed to list its shares, it must submit proof of
profitable operations, and that it must satisfy a certain financial situation.

ABS-CBN said Convergence had a "capital deficiency of over P6 billion as of the

end of 2018."

"Since Convergence cannot comply with the requirements under the Philippine
Stock Exchange or PSE's Main and SME Board Listing Rules, it cannot list and
offer its shares to the public," said ABS-CBN.

"The law does not require that the impossible be done," said ABS-CBN.

ACCUSATION #7: ABS-CBN's issuance of Philippine Depositary Receipts (PDR)

to foreign investors is illegal because it effectively cedes control to a foreign entity
when the Constitution requires that media companies be 100% Filipino-owned
and controlled.

Answer: ABS-CBN cited the Supreme Court case Gamboa vs Teves that said the
foreign restriction is only on effective control of the company. Effective control,
the Supreme Court said, comes with the grant of power to elect the Board of
Directors and the right to full beneficial ownership of the shares.

"PDR holders' rights are not equivalent to the full beneficial ownership rights of
the shareholders of ABS-CBN," said the network, listing down all the rights of a
shareholder vis-a-vis the very limited benefits of a PDR holder.

For example, a shareholder has the right to vote on certain matters but a PDR
holder does not.

The Supreme Court will meet en banc Wednesday, February 26, and is expected
to tackle by then the ABS-CBN quo warranto case. – Rappler.com
IN THE KNOW: What’s a quo warranto petition?

A quo warranto (Latin for “by what warrant or authority?”) is a legal procedure
used to challenge an individual’s right to or authority over the position he or she
holds.
Under Rule 66 of the Rules of Court, a quo warranto petition may be filed by the
government or an individual against “a person who usurps, intrudes into, or
unlawfully holds or exercises a public office, position or franchise.”

The government may also bring a quo warranto petition to court against “a public
officer who does or suffers an act that, by the provision of law, constitutes a
ground for the forfeiture of his office.”
A solicitor general or public prosecutor may file a quo warranto petition upon
the order of the President.
An individual also has the right to question someone’s position as long as the
petitioner is the one claiming authority over that position.
A quo warranto case may only be brought within one year from the time the
cause of action or ouster arose.
In the concurring opinion by Associate Justice Roberto Abad on Liban, et al. v.
Richard Gordon in 2011, the high court held that the petitioners had no standing
to file the quo warranto petition as they did not claim entitlement to Gordon’s
seat in the Senate. —Compiled by Kathleen de Villa
What are PDRs?

The recent decision of the Securities and Exchange Commission (SEC) revoking
the certificates of incorporation of Rappler, Inc. and Rappler Holdings
Corporation has placed Philippine Depositary Receipts or “PDRs” into the
limelight.

What are PDRs?

The typical PDR is a security that grants the holder the right to the delivery or
sale of the underlying shares of stock, and is usually not an evidence of
ownership of a corporation.

It is essentially a derivative, which is a security that derives its value from an

underlying asset. Common examples of underlying assets are shares of stocks,
bonds, interest rates or currency exchange rates.

As a derivative, the value of a PDR depends on the value its underlying asset –
which is the shares of stock of a corporation. Thus, the value of the PDR may
increase or decrease as the value of the underlying shares increases or
decreases.

Subject to the terms of the PDR, the issuing corporation ordinarily grants the
holder of a PDR the right (but not the obligation) to buy the underlying shares at
a specified price or to require the sale, and delivery of the proceeds, of the
underlying shares. This is the “exercise right” in a PDR.

Aside from this, PDR holders may also be entitled to certain rights, such as cash
payments equivalent to the amount of cash dividends to which the underlying
shares may be entitled to.

The issuance of PDRs by corporations became popular in the 1990s, as a way to

raise additional capital and acquire investments from Filipinos and foreigners
alike, without having to issue any shares.

According to the Philipine Stock Exhange (PSE), PDRs listed and traded in the
exchange are not considered as “evidence or statements nor certificates of
ownership of a corporation”.

Thus, a person who purchases a PDR from the PSE does not buy the stock of
the issuing company. A PDR holder becomes a stockholder once he elects the
option to have the equivalent number of shares delivered or sold to him. It is
only upon the issuance of the shares when he becomes a stockholder of record
of the corporation.

Even with the recent SEC decision, PDRs remain to be among the financial
instruments which may be used to raise capital so long as these are not used to
circumvent legal restrictions such as Filipino onwnership and control
requirements under the Constitution on certain industries like mass media and
public utilities.
In the end, the determination of the validity of PDRs by a corporation would have
to be made on a case-to-case basis depending largely on the true arrangement
among the parties involved which may be reflected in or inferred from the terms
and conditions of the PDRs.
ABS-CBN's Philippine Depositary Receipt holders not owners,
lawyer says

MANILA, Philippines — Corporate lawyer Francis Lim said that there is nothing
wrong with ABS-CBN having Philippine Depositary Receipts—an issue that
Solicitor General Jose Calida has raised against the network before the Supreme
Court.

In an interview with ANC’s "Early Edition" Wednesday, Lim, a senior partner at

ACCRA Law, explained that PDRs give their holders “the right to own a share,
but that right is subjected to law.”

“If you are a foreigner, you cannot convert it into a share for example into a share
of ABS-CBN Corporation because you’re disqualified from owning shares of ABS-
CBN Corporation,” he added.

ADVERTISING
The Constitution prohibits foreign ownership of mass media.

Section 11, Article XVI of the 1987 Constitution provides: “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.”

Lim, a former president of the Philippine Stock Exchange, also said that PDRs
merely gives their owners “the right to receive dividends from the issuer.”

He likened ownership of PDRs into betting on a horse: “[You] buy a ticket to bet
on a horse. You don’t own the horse, if that horse wins, you have a share in the
winning.”

Calida's allegations
Calida, in his quo warranto plea, argued that the ABS-CBN’s issuance of PDRs
to foreigners is “a scheme employed making it appear that the shares remain
with the Filipino corporation while granting influence over the mass media
enterprise to foreign investors.”

“This scheme is not only prohibited by the 1987 Constitution but criminal
liability is also imposed on those who violate foreign equity restrictions and evade
nationalization laws of the Philippines though various modes of proxy
arrangement, making appear as legal, but the entirety of the arrangement is to
accomplish transaction not allowed under Philippines laws,” he added.

Calida argued that foreigners who are PDR holders of ABS-CBN have “beneficial
ownership” of the company because they receive dividends.

He pointed to 2015 Implementing Rules and Regulations of the Securities

Regulation Code that holds:

Beneficial owner or beneficial ownership means any person who, directly or

indirectly, through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting (which includes the power to vote or direct the
voting of such security) and/or investment returns or power (which includes the
power to dispose of, or direct the disposition of such security)
Calida said that by the IRR, a person may be directly or indirectly the beneficial
owner of any equity security with respect to which he has voting power or
“investment power, which includes the power to dispose of, or to direct the
disposition of such security.”

Lim: ABS-CBN's PDR holders cannot vote, are not stockholders

According to Lim, the PDRs issued by ABS-CBN do not even come from the
corporation itself, but from ABS-CBN Holdings, which own shares in the network
together with other stockholders.

The PDR “gives the holder to receive dividends from ABS-CBN Holdings if it
receives dividends from ABS-CBN Corporation,” it said.

“PDR holder is neither stockholder of ABS-CBN Corporation or stockholder of

ABS-CBN Holdings,” he added.

Lim also stressed that PDR holders do not have the power to vote at all. They
may convert it to share, if qualified and without violating restrictions.

In ABS-CBN’s case, holders of PDRs cannot be shareholders, following the

constitution.

READ: 'We did not violate the law': ABS-CBN says Calida allegations have no
merit
Rappler case 'essentially the same'
Lim, who represented Rappler in one of its cases, said that the SEC case of
Rappler may be considered “essentially the same.”

In 2018, the SEC revoked the incorporation papers of Rappler saying the news
site violated the constitutional prohibition of foreign ownership of mass media.
Central to the case is Rappler’s issuance of PDRs to Omidyar Network.

Lim explained in Rappler’s case “there is a clause there which says that the PDR
holder shall be consulted in case there are amendments in the articles.”

He said that the SEC cited the “special provision” in Rappler’s SEC case.

Meanwhile, ABS-CBN’s PDRs, according to an ABS-CBN "World Tonight" report,

include a clause that: “the Issuer has agreed to cause the Company [n]ot to alter,
modify, or otherwise change its Articles of Incorporation or By-Laws or take any
other action so as to materially prejudice the Right in relation to the PDRs.”

Omidyar has since donated its PDRs to the staff and employees of Rappler. The
SEC, upon order of the Court of Appeals, is reviewing the legal effects of
Omidyar’s donation.