ABS-CBN'S Nationality and its compliance with the Constitutional Requirement of Ownership

Mass media plays a vital role in the daily lives of every Filipino people and the State recognizes the importance of such in the nation's development. Thus, with the State's interests over mass media, it provides a requirement under its own constitution reserving the right of ownership of the same to Filipino citizens. 

The Constitution provides that:

ARTICLE XVI. 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.

Congress shall regulate or prohibit monopolies in commercial mass media when the public interests so require. No combinations in restraint of trade or unfair competition therein shall be allowed.

Pursuant to the constitutional mandate regarding the share ownership of mass media, the Revised Corporation Code of the Philippines under section 176, Executive Order No. 65 or the 11th Foreign Investment Negative List and the Foreign Investment Act as amended as well as its implementing rules and regulations reiterated the said requirement.

One of the corporations that are regulated by these laws is the mass media giant ABS-CBN which recently ceases to operate due to the expiration of its franchise. Prior to the said cessation, the ABS-CBN was challenged by a quo warranto petition filed by Solicitor General Calida, praying for the revocation of its legislative franchise for violation of the constitutional requirement of full Filipino ownership of mass media. Calida assails that ABS-CBN has been allowing foreign investments to partake in the ownership of the said mass media in violation of the constitution. The investment is made through Philippine Depositary Receipts (PDR). ABS-CBN, as well as other mass media, practices the issuance of PDR to foreign investors.

Aside from this, the nationality of Mr. Eugenio Lopez III, the owner of ABS-CBN was also questioned by Deputy Speaker Rodante Marcoleta. He assails the dual citizenship of Lopez which is also in violation of the constitutional mandate of full Filipino ownership of mass media.

The main issue now to be discussed is whether the ABS-CBN, as a corporation, complied with the nationality requirements under the Constitution and under relevant laws.

On the first issue of violation by means of allowing foreign investments through PDR, the Philippine Stock Exchange explains that PDR is a security that grants the holder the right to the delivery of sale of the underlying share. It is not evidence or statements nor certificates of ownership of a corporation. PDR represents a share and thus gives the holder the right to acquire the dividends corresponding to the shares of stock held. In this case, the legal title remains to the owner of the share; however, the benefit such as dividends accruing to the shares belongs to the PDR holder.

The question now is whether full ownership as mandated under the constitution means only the legal title to the corporate shares of stock. 

Under the implementing rules and regulation of the Foreign Investment Act:

SECTION 1. (b) par. 3.

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.

Further, in the case of Roy III vs. Herbosa GR No. 207246, 2016, the court held that:

"Mere legal title is not enough to meet the required Filipino equity, which means that it is not sufficient that a share is registered in the name of a Filipino citizen or national, i.e., he should also have full beneficial ownership of the share. If the voting right of a share held in the name of a Filipino citizen or national is assigned or transferred to an alien, that share is not to be counted in the determination of the required Filipino equity. In the same vein, if the dividends and other fruits and accessions of the share do not accrue to a Filipino citizen or national, then that share is also to be excluded or not counted."

Hence, it is not enough that the owner of a share has only the legal title but also has economic rights to have full beneficial ownership. Having the full beneficial ownership of the share complies with the constitutional mandate. If the economic rights belong to the foreign investor through PDR then it cannot be said that the owner of the share has full beneficial ownership.

Relying on the above bases, ABS-CBN as well as other mass media like GMA Network should refrain from issuing PDR's because the same contradicts the constitutional mandate of full ownership of mass media by Filipino citizens. Thus, not complying with the constitution and violating their legislative franchise. However, the Securities and Exchange Commission said that it will not investigate the PDR's of ABS-CBN because the latter offered their PDR's to the public and that it had to submit details of the securities for SEC approval before it can be offered. ABS-CBN stated that its PDR's were evaluated and approved by SEC and Philippine Stock Exchange before they offered the same to the public.

On the second issue of violation which involves the nationality of Mr. Eugenio Lopez III, the owner of ABS-CBN, the constitution provides:

ARTICLE IV. Section 1.

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(2) Those whose fathers or mothers are citizens of the Philippines;

Lopez was born in US to Filipino parents, making him a Filipino citizen. This is because the Philippines adhere with the Jus Sanguinis Principle which declares as Filipino Citizens "those whose fathers or mothers are citizens of the Philippines". Further, he is considered a natural-born citizen for he has acquired his citizenship from birth without having to perform any act to acquire or perfect the same.

Lopez doesn't need to acquire Filipino citizenship because, in the first place, he never lost it nor renounced it. He was born in the US and under the law of the latter, he is also a US citizen. Thus, it makes him possess dual citizenship. Having dual citizenship doesn't mean that he is not a Filipino. The law does not require him to renounce his US citizenship to be considered Filipino for purposes of knowing the nationality of the shares he held. The renunciation of foreign citizenship is necessary for those who run for public office, which is not the instant case. 

Hence, Lopez, the owner of ABS-CBN is a Filipino citizen and in compliance with the citizenship requirement under the constitution.