The plight of ABS-CBN: Of dual citizenship and foreign ownership of mass media

The plight of ABS-CBN: Of dual citizenship and foreign ownership of mass media

| Finale |

By Justice Noel Gimenez Tijam (Ret.)

The perils of dual citizenship and dual allegiance

Justice Noel Gimenez Tijam (Ret.)

Because dual citizenship is not formally recognized under the Constitution and R.A. No. 9225 denies reference to dual citizenship, it is difficult to propose dual citizenship as a right which must be entitled to absolute recognition. At best, dual citizenship is a private interest which brings advantages to its holder – ease of travel, increased voting power, double opportunities for social benefits, higher chances of employment – to name a few. In addition, dual citizens are proposed to be likewise equally entitled to all benefits including those especially reserved only to Filipinos. This very real possibility of dual benefits, increased opportunities, privilege, and advantage violate the core value underlying citizenship which is equality before the law.  

If we are willing to cede easily and effortlessly our national sovereignty, economy, and patrimony to dual citizens, like Gabby Lopez III, we are likely to open a Pandora’s box. If we recklessly do so, we are obliged to grant equal or similar rights to other permutations of dual citizens. Granting parity or equal rights to dual citizens solely based on the goodness of their heart, their good reputation, and the expected contribution to our national coffers will endear us to the international community but will disenfranchise and disillusion countless Filipinos born and raised in the Philippines from availing and benefitting from the fruits of the motherland.

On the other end of the spectrum, dual citizenship and dual allegiance result to diluted civic ties. A dual citizen follows different traditions and immerse in different cultures. The possibility of conflict of interests and attachments is apparent. To brush aside the notion that citizenship would always necessarily and indispensably include allegiance on technicality and perceived vast polarity between them is to permit an “accidental” submission of allegiance by our own citizen to another country, offending the basic tenets of our Constitution.

Ownership requirement of nationalized industries

 This discourse on dual citizenship and dual allegiance is relevant in the plight of ABS-CBN because of the Constitutional policy to limit the ownership and management of mass media to “citizens of the Philippines.” Going back to the basic postulate that the Constitution is to be interpreted as a whole, this Constitutional provision is to be interpreted not only in the light of who are defined as citizens of the Philippines but also in relation to the Constitutional policy of ensuring that the national economy is effectively controlled by Filipinos.15 

To place the national economy in the effective control of Filipinos, the Constitution further mandates the regulation of foreign investments16 and imposes upon the State the duty to “conserve and develop our patrimony”17 and ensure “a selfreliant and independent national economy effectively controlled by Filipinos.”18 Such State regulation pervades in the grant of franchise to public utilities. Article XII, Section 11 of the Constitution states that:

Section 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines, at least sixty per centum of whose capital is owned by such citizens; nor shall such franchise, certificate, or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers

  1. Section 19.The State shall develop a self-reliant and independent national economy effectively controlled by Filipinos.
  2. Section 10. The Congress shall, upon recommendation of the economic and planning agency, when the national interest dictates, reserve to citizens of the Philippines or to corporations or associations at least sixty per centum of whose capital is owned by such citizens, or such higher percentage as Congress may prescribe, certain areas of investments. The Congress shall enact measures that will encourage the formation and operation of enterprises whose capital is wholly owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national economy and patrimony, the State shall give preference to qualified Filipinos. 

The State shall regulate and exercise authority over foreign investments within its national jurisdiction and in accordance with its national goals and priorities. 

  1. Gamboa v. Finance Secretary Teves, G.R.No. 176579, June 28, 2011. Citing Preamble, 1987 Constitution; De Leon, Hector, Philippine Constitutional Law (Principles and Cases), Volume 2, 1999 Ed., p. 788.
  2. Id., citing Section 19, Article II, Constitution.

of such corporation or association must be citizens of the Philippines. 

            The above is an express recognition of the sensitive and vital position of public utilities both in the national economy and for national security.[1]

Consistently, legislations were enacted reserving certain areas of investments to Filipino citizens or to corporations at least sixty percent of the “capital” of which is owned by Filipino citizens. Some of these laws are: (1) Regulation of Award of Government Contracts or R.A. No. 5183; (2) Philippine Inventors Incentives Act or R.A. No. 3850; (3) Magna Carta for Micro, Small and Medium Enterprises or R.A. No. 6977; (4) Philippine Overseas Shipping Development Act or R.A. No. 7471; (5) Domestic Shipping Development Act of 2004 or R.A. No. 9295; (6) Philippine Technology Transfer Act of 2009 or R.A. No. 10055; and (7) Ship Mortgage Decree or P.D. No. 1521.[2] The Foreign Investments Act (FIA) of 1991 or R.A. No. 7042, as amended by R.A. 8179, was particularly enacted to regulate and limit foreign investments in the Philippines.

While both citizenship and Philippine nationality escaped definition under the Constitution, the Omnibus Investments Code of 1987 and the FIA define a Philippine national, as follows:

Omnibus Investments Code:

 Article 15. “Philippine national” shall mean a citizen of the Philippines or a diplomatic partnership or association wholly-owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty per cent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty per cent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stock in a registered enterprise, at least sixty per cent (60%) of the capital stock outstanding and entitled to vote of both corporations must be owned and held by the citizens of the Philippines and at least sixty per cent (60%) of the members of the Board of Directors of both corporations must be citizens of the Philippines in order that the corporation shall be considered a Philippine national. 

             The FIA of 1991:

                               SEC. 3. Definitions. — As used in this Act:

a. The term “Philippine national” shall mean a citizen of the Philippines; or a domestic partnership or association wholly owned by citizens of the Philippines; or a corporation organized under the laws of the Philippines of which at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by citizens of the Philippines; or a corporation organized abroad and registered as doing business in the Philippines under the Corporation Code of which one hundred percent (100%) of the capital stock outstanding and entitled to vote is wholly owned by Filipinos or a trustee of funds for pension or other employee retirement or separation benefits, where the trustee is a Philippine national and at least sixty percent (60%) of the fund will accrue to the benefit of Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent (60%) of the capital stock outstanding and entitled to vote of each of both corporations must be owned and held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of Directors of each of both corporations must be citizens of the Philippines, in order that the corporation, shall be considered a “Philippine national.” 

  Echoing Constitutional mandate, Executive Order No. 65, series of 2018, lists the following investment areas and/or activities specifically reserved for Philippine nationals and where no foreign equity is allowed:

  1. Mass media, except recording (Art. XVI, Sec. 11 of the 1987 Constitution; Presidential Memorandum dated 05 May 1994) and internet business (DOJ Opinion No. 40, s. 1998);
  • Practice of professions (Art. XII, Sec. 14 of the Constitution, Sec. 1 of RA No. 5181, Sec. 7 [j] of RA No. 8981), including Radiologic and x-ray technology (RA No. 7431), Criminology (RA No. 6506), Law (Art. VIII, Section 5 of the Constitution; Rule 138, Sec. 2 of the Rules of Court of the Philippines), and Marine deck officers and marine engine officers (RA No. 10635), subject to the Annex on Professions attached herewith and forming an integral part of this document, indicating the professions where (a) foreigners are allowed to practice in the Philippines subject to reciprocity; and (b) where corporate practice is allowed. Foreigners may teach at higher education levels (RA No. 8292), provided the subject being taught is not professional subject (i.e., included in a government board or bar examination);
  • Retail trade enterprises with paid-up capital of less than US$2,500,000 (Sec. 5 of RA No. 8762);
  • Cooperatives (Ch. III, Art. 26 of RA No. 6938, as amended by Ch. II, Art. 10 of RA No. 9520);
  • Organization and operation of private detective, watchmen or security guards agencies (Sec. 4 of RA No. 5487);
  • Small-scale mining (Sec. 3 of RA No. 7076);
  • Utilization of marine resources in archipelagic waters, territorial sea and exclusive economic zone as well as small-scale utilization of natural resources in rivers, lakes, bays and lagoons (Art. XII, Sec. 2 of the Constitution);
  • Ownership, operation and management of cockpits (Sec. 5 of PD No. 449);
  • Manufacture, repair, stockpiling and/or distribution of nuclear weapons

(Art. II, Sec. 8 of the Constitution);

  1. Manufacture, repair, stockpiling and/or distribution of biological, chemical and radiological weapons and anti-personnel mines (various treaties to which the Philippines is a signatory and conventions supported by the Philippines); and
  1. Manufacture of firecrackers and other pyrotechnic devices (Sec. 5 of RA No. 7183)

Foremost from this negative list is mass media. Mass media is defined as any medium of communication designed to reach the masses and that tends to set the standards, ideals and aims of the masses, the distinctive feature of which being the dissemination of information and ideas to the public, or a portion thereof.[3] R.A. No. 7394 or the Consumer Act of the Philippines defines mass media as the means or methods used to convey advertising messages to the public such as television, radio, magazines, cinema, billboards, posters, streamers, hand bills, leaflets, mails and the like. The Rules and Regulations for Mass Media in the Philippines contains an identical definition of mass media as means of communication that reach and influence large numbers of people including print media, radio, television, and movies and involves the gathering, transmission and distribution of news, information, messages, signals and all forms of written, oral and visual communications. R.A. No.

9211 expanded the definition of mass media to include electronic media. To state the obvious, ABS-CBN falls squarely within the definition of mass media.

The role of mass media is at once unique and precarious as it disseminates information configured to condition manners of thinking, living, feeling, and behaving. The purpose of the limitation is self-evident – to prevent mass media, with its indelible reach, from being utilized or exploited to influence and sway public opinion in a manner detrimental to national interest. 

Foreign participation via dual citizenship

 Following rudimentary Constitutional construction, when the fundamental law speaks of reserving the ownership and management of mass media to citizens of the Philippines, it does so in an absolute, restrictive, and exclusive manner. Again, conspicuously missing is the express reference to dual citizens and whether they should be granted the same right and privilege as those with singular Filipino citizenship. 

 Those who are willing to extend the same right to dual citizens argue along the lines that when the Constitution does not expressly prohibit, it thereby allows. This argument, however, labors under short-sightedness. The restrictive language of the Constitution should be sufficient indication that it admits of no further exposition, that the phrase “citizens of the Philippines,” should not be unduly enlarged as to encompass other variations of citizenship.

 Aside from the lingual clues, the very reason behind the restriction enlightens as to why dual citizens could not have qualified. Mass media provides largely unrestricted avenue to influence and, later, control perception. Absent empirical evidence to the contrary, the presumption is that dual citizens are capable of advancing double or as many interests as the number of states the citizenship of which he or she carries and enjoys. Worse, a dual citizen may opt to advance the interest of the foreign country, instead of that of the Philippines. To recall, it is not the wielding of any kind of influence that is countenanced by the Constitutional restriction but such influence as to be detrimental to national interest. It is a possibility that dual citizens who are politically active in foreign jurisdictions will promote and advance foreign systems and inject such ideas into the Filipino psyche which they can successfully do so through the management of mass media. 

 The cure enunciated in Mercado that dual citizenship has to be terminated by those seeking any elective post apply with equal rigor to those seeking to own and manage mass media. Both concern and affect public interest. Both are manifestations of allegiance. Dual citizenship of those wanting to own and manage mass media has to be abrogated and cannot be indefinitely propagated. Dual citizens who refuse to terminate or abrogate their status as such clearly suffer from a Constitutional disqualification.

Foreign participation via PDRs

 The operation and management of mass media is susceptible of foreign interference not only through overt ownership, but also through investments when there is opportunity for control. 

Allegedly compelled by finances and economy, the mass media industry, much like several industries and outfits, have resorted to diversification strategies to obtain foreign investments. Among the strategy used is the issuance of Philippine Depositary Receipts (PDRs) which, unfortunately, had become a vehicle to circumvent foreign equity restrictions.

A PDR is a security which grants the holder the right to the delivery of sale of the underlying share.22 A PDR consists of a deposit price and an option price, which is considered as payment when the buyer opts to exercise his option of converting said PDRs to a corporation’s share. While PDRs are not evidence or statements nor certificates of ownership of a corporation,23 each PDR nevertheless represents a share, even in a restricted company, and when bought by a foreign entity, gives the buyer the right to all the dividends due from the shares of stock acquired.24

Under international accounting standards, a financial instrument is an equity instrument only if (a) the instrument includes no contractual obligation to deliver cash or another financial asset to another entity, and (b) if the instrument will or may be settled in the issuer’s own equity instruments, it is either: (i) a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own

  • “Philippine Depositary Receipts: Mass Media’s Existing or Emerging Loophole To Constitutionally

Mandated Full Filipino Ownership?” by Lorenzo E. Delgado. Citing Philippine Stock Exchange, Glossary <;

  • Id.
  • Supra, note 15 citing The Manila Times: An Indonesian tycoon’s media empire in the Philippines exposed, April 12, 2016.

equity instruments; or (ii) a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments.25  

Based on the above definitions, a PDR is considered an equity instrument and the holders thereof have the right to receive all dividends and economic interest due to the shares acquired therein.

During the Congressional hearings, ABS-CBN denied having issued PDRs and conveniently passed the buck to an investment company known as the ABS-CBN Holdings Corporation. Nevertheless, it was admitted that ABS-CBN Holdings Corporation owns shares in ABS-CBN.26 Link between the two is, thus, unmistakable. In fact, ABS-CBN’s 2014 Financial Statement reflects the PDRs as part of its equity.27 These indicate that the holders of the PDRs benefit from the activities of ABS-CBN.

There is likewise continuous representation that the PDR holders would not own shares or exercise any form of control in ABS-CBN. It is naivety to take at face value such representation when investors would naturally and logically demand something in return for “providing funding and adding value to the business.”

At any rate, there is jurisprudence providing guides to determine compliance with foreign equity restriction. The tests used are the voting control test as well as the full beneficial ownership test. These tests, in a nutshell, provide the litmus for the presence of control.

In particular, Gamboa v. Teves explains that for stocks to be deemed owned and held by citizens of the Philippines, mere legal title is not enough; there must be a concurrence of full beneficial ownership of the stocks and appropriate voting rights. In turn, Roy v. Herbosa,[4] defined beneficial owner or beneficial ownership as any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power (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). 

  • Roy v. Herbosa, G.R. No. 207246, November 22, 2016. 
  • See Article of Manila Times entitled: PDR Holders can’t own ABS-CBN by Divina Nova Joy Dela Cruz,

June 12, 2020, <; 27 Supra, note 15 citing the ABS-CBN 2014 Annual Report – Financial Statement <;

The import of the rulings in Gamboa and Roy is that, in order to be compliant with the foreign equity restriction, 100% of the total outstanding capital stock and the shares with voting rights must be owned by Filipinos and the right to receive dividends and the right to vote must belong to Filipino shareholders owning 100% of the shares with voting rights.[5]

At this point, we harken back to the words of the Constitution which refer to “ownership and management” of mass media. The words “ownership and management” mean no less than control. Hence, no amount of foreign control may be introduced insofar as mass media is concerned. In corporate parlance, there is control when there is a right to vote in the election of directors, as the board of directors controls or manages the corporation, as in Gamboa. 

Nevertheless (and this, perhaps, is the more important), the presence of control is not limited within the context of voting rights. Control is not limited to stock ownership but includes “other schemes that grant influence over corporate policy, actions and structure”[6] irrespective of frequency and extent. Control is likewise present when the “power to determine the financial and operating policies of an entity in order to benefit from its activities” is manifest.[7] Meaning, it is not only the ownership of voting shares per se that equates to control and this is especially true when there are control-enhancing mechanisms that are designed to limit the voting powers or reduce the voting shares of a shareholder.[8]

Let’s appropriate the above understanding on the situation of ABS-CBN. ABSCBN secures funding from ABS-CBN Holdings Corporation which, in turn, sold PDRs to foreigners, such as PCD Nominee Corporation (a PDR holder of 60.42%) and Prudential Singapore Holdings Pte. Limited, a Singaporean corporation which is also a substantial PDR holder. Recalling that a PDR instrument is an equity derivative since its value is dependent on the underlying equity, there is logic in the assumption that the legal and economic rights of the PDR holder can ultimately be traced to the legal and economic rights of ABS-CBN which are supposedly reserved only to its shareholders. Further, ABS-CBN itself admits that a PDR holder can trigger the transaction to sell the share, but was silent on whether ABS-CBN or ABS-CBN Holdings Corporation can trigger the transaction solely by themselves, without the PDR holders’ participation. These instances are clearly indicative that the actions of

ABS-CBN Holdings Corporation and ABS-CBN itself concern, if not subservient, to

those of the PDR holders. When there is indication of subservience, even the slightest, the 100% Filipino effective control is compromised and diminished. Anything less than 100% Filipino is already a violation. Any appearance of foreign control is already a violation.

The perils of allowing foreign participation

We are naive if we think that foreign holders of PDRs are not interested in the management and decision-making process of ABS-CBN. If policies, decisions, and actions of the company are inimical to their interest, foreign holders will withdraw their investments. Even if it is successfully argued that PDR holders do not enjoy voting rights, it does not follow that the company can already contradict the personal interests of said foreign holders. It is a reality, even in international trade and foreign business transactions, that foreign creditors always have a say in decision-making. Accordingly, to allow the issuance of PDRs by mass media corporations to foreign corporations and nationals, is to expose said industry to foreign control – in deliberate disregard of the intent of the Constitution.

Necessarily, for all the reasons discussed above, interpreting the express constitutional provision of mass media ownership to Filipino citizens should not diminish that right through the legal fiction of corporate ownership and control.33  It is immaterial how the shares or investments are classified or called, and any arrangement, device or scheme which defeats the Constitutional policy and purpose should be eluded. The Filipino people should be mindful and it is the State’s duty to protect what the Constitution has expressly reserved to Filipinos, and not to allow foreign nationals to take ownership and control of mass media.

Granting the privilege to own and manage public utilities to a dual citizen, who is also a foreigner, is a disproportionate response as it would disenfranchise countless 100% Filipinos from exclusively availing of that privilege. It is wise to remember that the People Power Revolution gave birth to the Freedom Constitution and paved the way for the Constitution, as we know it today. If the learned Framers intended to grant parity or equal rights to dual citizens, who are also foreign nationals, with respect to nationalized industries, public utilities, and businesses exclusively reserved for Filipino nationals, they would have expressly done so without hesitation, ambivalence, or ambiguity. To impute to the Framers, tacit approval without consultation and without referendum with the Filipino people who brought them to power, would have been a

33            Supra, note 19. 

fundamental betrayal of the public trust. The Constitution is ordained by the Filipino people. No waiver of Constitutional rights and privileges may be secured without their informed knowledge, express acceptance, and reasoned approval. 

A primary choice

 The advantage of entertaining a variety of views on a feverishly debated topic is that it gives birth to solutions that may address the difficult situation. A fault, especially in the absence of malice, is susceptible to rectification.  

 This discourse was opened with the basic suggestion that empirical data is admissible and may tilt one perception to the other. There is also the idea that allegiance, although palpable, is demonstrable. Given its uncompromising text, the burden is on ABS-CBN to show that it complies with the requirement of the Constitution. Since the dual citizenship of Gabby Lopez III was questioned and the business he is engaged in is imbued with public interest, he is obliged to make a primary choice between his two citizenships and, in the words of Mercado, to renounce his foreign citizenship. It is not sufficient to utter words of affection for the Philippines for she is a “jealous spouse” who demands nothing less than full and complete allegiance. Gabby Lopez III must solidify his attachments to the Philippines, and voting in the 2016 US elections does not achieve this purpose. He must demonstrate that he is bound to the Philippines, and to no other. 

 Conversely, Gabby Lopez III should demonstrate that he has no effective ties with the US. The US Constitution requires not only “birth on United States soil” but, more importantly, that the citizen is “subject to [its] jurisdiction.” Proof that he is not subject to US jurisdiction, by being far removed from it, politically, culturally, socially, civilly, may support negative allegiance to the US.

 ABS-CBN should also review the terms of its PDR agreements with its foreign investors, cease from issuing such or modify the terms accordingly. The foreign investors should divest themselves of the PDRs in favor of Filipinos. Whether this will cure the violation is another matter but, at least, prospectively, will rid ABS-CBN of Constitutional perplexity.

 Failure to renounce US citizenship and to strip itself of foreign participation forecloses the privilege of engaging in a mass media enterprise. The only remedy is a  Constitutional amendment, to be submitted to the Filipino people on a plebiscite for ratification. This is the equivalent of a constitutional imprimatur. Resort to an incomplete and vague interpretation of the Constitution to tailor-fit a disqualified enterprise is equivalent to a Constitutional shortcut that should not be encouraged but denounced as infidelity and treachery.

[1] Gamboa v. Teves, G.R. No. 176579, June 28, 2011.

[2] Heirs of Gamboa v. Teves, 696 Phil. 276-485, 2012.

[3] DOJ Opinion No. 40, series of 1998.

[4] Supra, note 18, G.R. No. 207246, November 22, 2016.

[5] See Rappler, Inc. and Rappler Holdings Corporation v. SEC, C.A. G.R. SP. No. 154292, July 26, 2018.

[6] Id., citing SEC Ruling.

[7] Id., citing Rule 3.1.8, 2015 IRR of the Securities Regulation Code.

[8] Id.

Leave a Reply