Wednesday, December 11, 2019
Appeals in Philippines - by SyCip Salazar Hernandez & Gatmaitan
See - https://www.lexology.com/library/detail.aspx?g=bfe04fc9-6825-4526-b909-0fceb440be34&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2019-12-10&utm_term=
"x x x.
Appeals in Philippines
by SyCip Salazar Hernandez & Gatmaitan
Appeals in Court system
Outline and explain the general structure of your country’s court system as it relates to the commercial appellate process.
Philippine appellate courts may either be regional, for cases originating from municipal, city or regional courts; or national, for cases originating from regional courts or the Court of Appeals, Court of Tax Appeals, Sandiganbayan (anti-graft court) and Supreme Court. There are also multiple levels of appellate review, since the Philippines observes the principle of judicial hierarchy.
Regional trial courts exercise both original and appellate jurisdiction. They exercise appellate jurisdiction over all cases decided by metropolitan trial courts, municipal trial courts, municipal trial court in cities and municipal circuit trial courts in their respective territorial jurisdictions. Some regional trial courts are designated as special commercial courts to try to decide cases involving violations of intellectual property rights and of Presidential Decree No. 902-A (or the Securities and Exchange Commission Reorganisation Act), but special commercial courts retain their appellate jurisdiction.
The Court of Appeals and Supreme Court also exercise both original and appellate jurisdiction. The Court of Appeals exercises exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of regional trial courts and quasi-judicial agencies, instrumentalities, boards or commissions, except for certain cases provided by law. The Supreme Court exercises appellate jurisdiction by way of petition for review on certiorari over judgments, final orders or resolutions of the Court of Appeals, the anti-graft court (Sandiganbayan), the Court of Tax Appeals, the regional trial court or other courts, whenever authorised by the Philippine Constitution and by law.
The Court of Tax Appeals is an appellate court that exercises jurisdiction over civil and criminal tax cases, including appeals from rulings and assessments of the Bureau of Internal Revenue and Bureau of Customs.Civil matters
Are there appellate courts that hear only civil matters?
Philippine appellate courts entertain appeals for both civil and criminal cases.Appeals from administrative tribunals
Are appeals from administrative tribunals handled in the same way as appeals from trial courts?
Generally, appeals from administrative tribunals performing quasi-judicial functions are heard by the Court of Appeals and handled in the same manner as appeals in civil cases from the trial courts, except that appeals from such agencies are lodged through a petition and not a notice of appeal as in regular court cases. However, certain administrative agencies have their own rules governing periods for lodging an appeal and the form of the appellate pleading to be filed. Philippine courts also follow the rule on exhaustion of administrative remedies, which provides that all administrative remedies must be exhausted first before the courts’ judicial power may be sought (Republic v Transunion Corporation, G R No. 191590, 21 April 2014).Representation before appellate courts
Is there a separate appellate bar or other requirement for attorneys to be admitted before appellate courts?
There are no additional requirements for Philippine lawyers to engage in appellate practice. A person licensed to practise law in this jurisdiction may engage in any activity, in or out of court, which requires the application of law, legal procedures, knowledge, training and experience (Ulep v Legal Clinic, B M No. 553, 17 June 1993).Multiple jurisdictions
If separate jurisdictions exist for particular territorial subdivisions or subject matters, explain their main differences as to commercial appeals.
The Philippines has a uniform judicial system. Geographical subdivisions are only of consideration for purposes of determining the venue of civil and commercial cases. Generally, a regional trial court will have appellate jurisdiction over civil and commercial cases decided by municipal or metropolitan trial courts within its territorial jurisdiction. The Court of Appeals and Supreme Court have national appellate jurisdiction.
Bringing an appealDeadlines
What are the deadlines for filing an appeal in a commercial matter?
In civil and commercial cases, the appeal period is generally within 15 days from notice (ie, official receipt of service) of the award, judgment, final order or resolution to be appealed, or from the date of its last publication, if publication is required by law for its effectivity, or from notice of the denial of a motion for a new trial or reconsideration duly filed with the court of origin in accordance with the governing law of the court or agency. Certain modes of appeal, however, allow for longer periods, such as petitions for certiorari to appeal interlocutory orders (ie, orders that do not finally resolve or dispose of a case) under Rule 65 of the Rules of Court, which shall be 60 days from notice of the order or resolution.Procedural steps
What are the key steps a litigant must take to commence an appeal?
For ordinary civil or commercial appeals of final judgments or decisions of municipal or metropolitan trial courts to the regional trial court and final judgments and decisions of regional trial courts to the Court of Appeals, an appeal is made by:
filing a notice of appeal with the court of origin that rendered the judgment or final order appealed from within the applicable appeal period (generally, 15 days from notice of the judgment or decision);
paying, within the same period, to the clerk of said court the corresponding docket or appeal and other lawful fees; and
furnishing the adverse party with a copy of the notice of appeal and proof of payment of the appeal or docket fee.
For further appeals from decisions or judgments of the Court of Appeals, the anti-graft court, the Court of Tax Appeals, the regional trial court or other courts to the Supreme Court, an appeal is made by:
filing a verified petition for review on certiorari with the Supreme Court within 15 days from notice of the decision or judgment;
paying, within the same period, to the clerk of court of the Supreme Court the applicable appeal or docket fee; and
furnishing the lower court concerned and the adverse or opposing party of a copy of the appellate petition. Appellate petitions to the Supreme Court also provide for certain formal requirements that must be complied with.
For interlocutory appeals to the Court of Appeals or Supreme Court, an appeal is taken by:
filing a verified petition, accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto and a sworn certification of non-forum shopping;
paying the corresponding docket and other lawful fees; and
furnishing the court of origin and the adverse party with a copy of the petition.Documentation
How is the documentation for appeals prepared?
For ordinary appeals, the clerk of the trial court transmits to the appellate court the original record or the approved record on appeal within 30 days from the perfection of the appeal, together with the proof of payment of the appellate court docket and other lawful fees, a certified true copy of the minutes of the proceedings, the order of approval, the certificate of correctness, the original documentary evidence referred to therein, the original and three copies of the transcripts. For interlocutory appeals, the parties are required to attach certified true copies of the decisions or orders being appealed from, and in certain instances, even certified true copies of material records of the case.
Right of appealDiscretion to grant permission to appeal
In commercial matters, may litigants appeal by right or is appellate review discretionary?
Under Philippine law, an appeal may either be a matter of right or discretionary. An appeal as a matter of right, which refers to the right to seek the review by a superior court of the judgment rendered by the trial court, exists after the trial in the first instance (Heirs of Arturo Garcia v Municipality of Iba, G R No. 162217, 22 July 2015). Hence, a party to a case that originates from municipal trial courts, metropolitan trial courts or municipal circuit trial courts may appeal as a matter of right to the regional trial courts, and a party to a case that originates from a regional trial court may appeal as a matter of right to the Court of Appeals.
In contrast, a discretionary appeal may be taken from the decision or final order rendered by a court in the exercise of its primary appellate jurisdiction, may be taken to the Supreme Court or may be disallowed by the superior court in its discretion (Heirs of Arturo Garcia v Municipality of Iba, G R No. 162217, 22 July 2015). This would refer to a further appeal from the regional trial court, exercising its appellate jurisdiction, to the Court of Appeals or a further appeal to the Supreme Court.Judgments subject to appeal
Can litigants appeal any ruling from a trial court, or are they limited to appealing only final judgments?
Generally, only final judgments or orders of a court of law or quasi-judicial body are appealable, or those judgments and orders that leave nothing more for the court or quasi-judicial body to be done.
Interlocutory orders are not appealable until after the judgment’s completion on the merits. However, an interlocutory order may be brought up for review through a special civil action for certiorari if the interlocutory order was rendered without or in excess of jurisdiction or with grave abuse of discretion (Banez, Jr v Concepcion, G R No. 159508, 29 August 2012).
Security and interlocutory mattersSecurity to appeal
In a typical commercial dispute, must a litigant post a bond or provide security to appeal a trial court decision?
There is no requirement of an appeal bond. An appellant, however, must pay docket and other lawful fees as a jurisdictional requirement.
For indigent litigants, a party may be authorised to litigate his or her action, claim or defence as an indigent if the court, upon an ex parte application and hearing, is satisfied that the party is one who has no money or property sufficient and available for food, shelter and basic necessities for him or herself and his or her family. Such authority shall include an exemption from payment of docket and other lawful fees, and of transcripts of stenographic notes, which the court may order to be supplied.
However, should a litigant include an application for provisional remedy, in proper cases, a bond must be posted in the amount fixed by the court if the application is granted.Interlocutory appeals
Are there special provisions for interlocutory appeals?
As discussed above, the appellate remedy from an interlocutory order is not an appeal in the ordinary sense but a special civil action for certiorari, and the appellant or petitioner should allege and show that the interlocutory order is rendered without or in excess of jurisdiction or with grave abuse of discretion.Injunctions and stays
Are there special rules relating to injunctions or stays, whether entered in the trial court or on appeal?
Yes. The Philippines has special rules covering injunction, both as a provisional remedy and as a main relief. An injunction may be allowed provided the following requisites are present, which must be alleged in an application made under oath:
the existence of a right to be protected; and
the facts against which the injunction is to be directed are violative of the said right (Republic of the Philippines v Cortez, Sr, G R No. 197472, 7 September 2015).
Also, a bond is usually required before the issuance of the injunctive writ. As a provisional remedy, an injunction may be applied at any stage of the proceedings prior to the judgment or final order.
For commercial disputes within the exclusive jurisdiction of the Philippine Securities and Exchange Commission, only the Court of Appeals and the Supreme Court, and not the trial courts, can issue a restraining order or injunction for a case, dispute or controversy that directly or indirectly interferes with the Philippine Securities and Exchange Commission’s powers, duties and responsibilities.
Scope and effect of appellate proceedingsEffect of filing an appeal
If a litigant files an appeal in a commercial dispute, does it stay enforcement of the trial court judgment?
Yes. Filing an appeal stays the enforcement of a trial court judgment. The final judgment or decision of the trial court only becomes final and executory when no motion for reconsideration is filed with the court of origin or no appeal has been filed or perfected or after an appeal duly filed is decided with finality.
On the other hand, interlocutory orders are immediately enforceable and cannot be stayed by a petition for certiorari unless a preliminary injunction is sought to stay the order. However, there are judgments or decisions from administrative or quasi-judicial agencies that are immediately executory unless execution is restrained in the meantime by the appellate court.
In the case of a final arbitral award by virtue of an arbitration agreement provided in a corporation’s articles of incorporation or bylaws, such award is executory after the lapse of 15 days from the parties’ receipt thereof and shall be stayed only by the filing of a bond or the issuance of an injunctive writ by an appellate court.Scope of appeal
On an appeal from a commercial dispute, may the first-level appellate court consider the facts and law anew, or is its power to review limited?
Generally, first-level appellate courts have the power to consider the facts and law de novo. However, when the appeal reaches the Supreme Court, review is generally limited to questions of law as it is not a trier of facts (Far Eastern Surety and Insurance Co Inc v People, G R No. 170618, 20 November 2013). But this rule is subject to certain exceptions, as provided in jurisprudence, taking into account the attendant circumstances (Spouses Sy v China Banking Corporation, G R No. 215954, 1 August 2016).Further appeals
If a party is dissatisfied with the outcome of the first-level appeal, is further appeal possible?
Yes, there are multiple levels of appellate review. The Philippines observes the principle of judicial hierarchy and such hierarchy is determinative of the venue of appeals. However, when it reaches the Supreme Court, as mentioned above, the appeal becomes discretionary.Duration of appellate proceedings
How long do appeals typically take from application to appeal to a final decision?
There is no expected or estimated timeline because period varies from case to case. However, based on experience, appellate proceedings usually take from one to three years from the date of filing of the first appellate pleading to when the appeal is either decided or deemed submitted for decision, depending on the complexity of the case, among other factors.
Submissions and evidenceSubmissions process
What is the briefing and argument process like in a typical commercial appeal?
Commercial appeals are generally decided on the basis of the evidence adduced and pleadings filed by the parties at the court of first instance. The appellate pleadings would usually consist of the brief or initiatory petition by the appellant; the brief or comment on the initiatory petition filed by the appellee; and other pleadings or submissions that the appellate court may allow or require, such as memoranda. The Court of Appeals, in certain cases, may also conduct hearings and receive evidence. The Court of Appeals and the Supreme Court may additionally hear the parties in oral argument on the merits of a case, or on any material incident in connection therewith.New evidence
Are appeals limited to the evidentiary record that was before the trial court, or can new evidence be introduced on appeal?
Generally, evidence introduced for the first time on appeal is not entertained by the appellate courts, since it is well established in Philippine jurisprudence that points of law, theories, issues and arguments not brought to the attention of the trial court will not be and ought not to be considered by a reviewing court, as these cannot be raised for the first time on appeal (Calanasan v Spouses Dolorito, G R No. 171937, 25 November 2013).
There are exceptions to the rule that no question may be raised for the first time on appeal. The issue of lack of jurisdiction over the subject matter may be raised at any stage of the proceedings and may be considered by the reviewing court. The said court may also consider an issue not properly raised during trial when there is plain error. Likewise, it may entertain such arguments when there are jurisprudential developments affecting the issues or when the issues raised present a matter of public policy (Del Rosario v Bonga, G R No. 136308, 23 January 2001).New evidence of wrongdoing
If litigants uncover new evidence of wrongdoing that they believe altered the outcome of a trial court judgment, can they introduce this evidence on appeal?
Under Philippine law, fraud, accident, mistake or excusable negligence that ordinary prudence could not have guarded against and by reason of which the aggrieved party has probably been impaired in his or her rights, or newly discovered evidence that he or she could not, with reasonable diligence, have discovered and produced at the trial and that if presented would probably alter the result, are not raised on appeal but are instead causes to move the trial court to set aside the judgment or final order and grant a new trial.New legal arguments
May parties raise new legal arguments on appeal?
As a rule, no question will be entertained on appeal unless it has been raised in the court below. Basic considerations of due process impel this rule. Stated differently, issues of fact and arguments not adequately brought to the attention of the lower courts will not be considered by the reviewing courts as they cannot be raised for the first time on appeal (Del Rosario v Bonga, G R No. 136308. 23 January 2001). There are, however, recognised exceptions to this rule (Logronio v Taleseo, G R No. 134602, 6 August 1999).
Costs, settlement and fundingCosts
What are the rules regarding attorneys’ fees and costs on appeal?
There are two commonly accepted concepts of attorneys’ fees: ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his or her client for the legal services he or she has rendered to the latter; while in its extraordinary concept, attorneys’ fees are deemed indemnity for damages ordered by the court to be paid by the losing party in litigation. The instances where these may be awarded are those enumerated in article 2208 of the Civil Code (Alva v High Capacity Security Force, Inc, G R No. 203328, 8 November 2017). An appellate court may affirm, modify or set aside a trial court’s award of extraordinary attorneys’ fees in the process of appellate review.
Meanwhile, costs shall be awarded in favour of the prevailing party as a matter of course, but the court has the power, for special reasons, to adjudge that either party shall pay the costs of an action or that the same be divided, as may be equitable. Likewise, where an action or appeal is found to be frivolous, double or treble cost may be imposed on the plaintiff or appellant, which shall be paid by his or her attorney, if so ordered by the court. Again, this imposition may be affirmed, modified or set aside on appeal.Settlement of first instance judgment after appeal lodged
Can parties enter into a settlement agreement to vacate the trial court judgment after an appeal has been taken?
Yes. Parties are allowed to enter into compromise or settlement agreements that cover cases pending trial, on appeal or even those that have already been finally decided. There is no time limitation as to when a compromise or settlement agreement may be entered into (Magbanua v Uy, G R No. 161003. 6 May 2005).Limits on settlement after commencement of appeal
Are there any limits on settlement once an appeal has been taken?
The filing of an appeal does not limit the parties’ ability to enter into compromise or settlement agreements as long as such agreements are not contrary to law, morals, good customs or public policy. Article 2935 of the Civil Code of the Philippines, however, provides that no compromise upon the following questions shall be valid:
the civil status of persons;
validity of a marriage or a legal separation;
any ground for legal separation;
future support;
jurisdiction of courts; or
future legitime.Third-party funding
May third parties fund appeals?
There are no specific rules in this jurisdiction that govern third-party litigation funders, and a litigant would ordinarily be free to source his or her litigation funds. However, an agreement whereby an attorney agrees to pay the expenses of proceedings to enforce the client’s rights is champertous (Roxas v Republic Real Estate Corp, G R No. 208205, 1 June 2016). A champertous contract is considered against public policy as it violates the fiduciary relations between the lawyer and his or her client, whose weakness or disadvantage may be exploited by the former (Nocom v Camerino, G R No. 182984, 10 February 2009).Disclosure of litigation funding
If litigation funding is permitted in an appeal, must funding sources be disclosed to the court or other parties to the litigation?
There are no express rules covering third-party litigation funders in this jurisdiction (see question 25).
Judgments, relief and non-partiesDecisions
Must appellate courts in your country write decisions explaining their rulings? Can the courts designate the precedential effect of their decisions?
Yes. The Philippine Constitution requires that no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. Further, the Rules of Court also emphasise that every decision or final resolution of the court in appealed cases shall clearly and distinctly state the findings of fact and the conclusions of law on which it is based, which may be contained in the decision or final resolution itself, or adopted from those set forth in the decision, order or resolution appealed from.
Only decisions of the Supreme Court are considered as judicial precedents to be followed in subsequent cases by all courts in the land, following the principle of stare decisis.Non-parties
Will the appellate courts in your country consider submissions from non-parties?
Yes. The Rules of Court provide that experienced and impartial attorneys may be invited by the Supreme Court to appear as amici curiae to help in the disposition of issues submitted to it.Relief
What are the ordinary forms of relief that can be rendered by an appellate court in a civil dispute?
The appellate court may affirm, reverse or modify the judgment or final order appealed from and may direct a new trial or further proceedings to be had. Reliefs may include the award of damages, attorneys’ fees, grant of provisional remedies and other relief.
x x x."
Outline and explain the general structure of your country’s court system as it relates to the commercial appellate process.
Philippine appellate courts may either be regional, for cases originating from municipal, city or regional courts; or national, for cases originating from regional courts or the Court of Appeals, Court of Tax Appeals, Sandiganbayan (anti-graft court) and Supreme Court. There are also multiple levels of appellate review, since the Philippines observes the principle of judicial hierarchy.
Regional trial courts exercise both original and appellate jurisdiction. They exercise appellate jurisdiction over all cases decided by metropolitan trial courts, municipal trial courts, municipal trial court in cities and municipal circuit trial courts in their respective territorial jurisdictions. Some regional trial courts are designated as special commercial courts to try to decide cases involving violations of intellectual property rights and of Presidential Decree No. 902-A (or the Securities and Exchange Commission Reorganisation Act), but special commercial courts retain their appellate jurisdiction.
The Court of Appeals and Supreme Court also exercise both original and appellate jurisdiction. The Court of Appeals exercises exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of regional trial courts and quasi-judicial agencies, instrumentalities, boards or commissions, except for certain cases provided by law. The Supreme Court exercises appellate jurisdiction by way of petition for review on certiorari over judgments, final orders or resolutions of the Court of Appeals, the anti-graft court (Sandiganbayan), the Court of Tax Appeals, the regional trial court or other courts, whenever authorised by the Philippine Constitution and by law.
The Court of Tax Appeals is an appellate court that exercises jurisdiction over civil and criminal tax cases, including appeals from rulings and assessments of the Bureau of Internal Revenue and Bureau of Customs.Civil matters
Are there appellate courts that hear only civil matters?
Philippine appellate courts entertain appeals for both civil and criminal cases.Appeals from administrative tribunals
Are appeals from administrative tribunals handled in the same way as appeals from trial courts?
Generally, appeals from administrative tribunals performing quasi-judicial functions are heard by the Court of Appeals and handled in the same manner as appeals in civil cases from the trial courts, except that appeals from such agencies are lodged through a petition and not a notice of appeal as in regular court cases. However, certain administrative agencies have their own rules governing periods for lodging an appeal and the form of the appellate pleading to be filed. Philippine courts also follow the rule on exhaustion of administrative remedies, which provides that all administrative remedies must be exhausted first before the courts’ judicial power may be sought (Republic v Transunion Corporation, G R No. 191590, 21 April 2014).Representation before appellate courts
Is there a separate appellate bar or other requirement for attorneys to be admitted before appellate courts?
There are no additional requirements for Philippine lawyers to engage in appellate practice. A person licensed to practise law in this jurisdiction may engage in any activity, in or out of court, which requires the application of law, legal procedures, knowledge, training and experience (Ulep v Legal Clinic, B M No. 553, 17 June 1993).Multiple jurisdictions
If separate jurisdictions exist for particular territorial subdivisions or subject matters, explain their main differences as to commercial appeals.
The Philippines has a uniform judicial system. Geographical subdivisions are only of consideration for purposes of determining the venue of civil and commercial cases. Generally, a regional trial court will have appellate jurisdiction over civil and commercial cases decided by municipal or metropolitan trial courts within its territorial jurisdiction. The Court of Appeals and Supreme Court have national appellate jurisdiction.
Bringing an appealDeadlines
What are the deadlines for filing an appeal in a commercial matter?
In civil and commercial cases, the appeal period is generally within 15 days from notice (ie, official receipt of service) of the award, judgment, final order or resolution to be appealed, or from the date of its last publication, if publication is required by law for its effectivity, or from notice of the denial of a motion for a new trial or reconsideration duly filed with the court of origin in accordance with the governing law of the court or agency. Certain modes of appeal, however, allow for longer periods, such as petitions for certiorari to appeal interlocutory orders (ie, orders that do not finally resolve or dispose of a case) under Rule 65 of the Rules of Court, which shall be 60 days from notice of the order or resolution.Procedural steps
What are the key steps a litigant must take to commence an appeal?
For ordinary civil or commercial appeals of final judgments or decisions of municipal or metropolitan trial courts to the regional trial court and final judgments and decisions of regional trial courts to the Court of Appeals, an appeal is made by:
filing a notice of appeal with the court of origin that rendered the judgment or final order appealed from within the applicable appeal period (generally, 15 days from notice of the judgment or decision);
paying, within the same period, to the clerk of said court the corresponding docket or appeal and other lawful fees; and
furnishing the adverse party with a copy of the notice of appeal and proof of payment of the appeal or docket fee.
For further appeals from decisions or judgments of the Court of Appeals, the anti-graft court, the Court of Tax Appeals, the regional trial court or other courts to the Supreme Court, an appeal is made by:
filing a verified petition for review on certiorari with the Supreme Court within 15 days from notice of the decision or judgment;
paying, within the same period, to the clerk of court of the Supreme Court the applicable appeal or docket fee; and
furnishing the lower court concerned and the adverse or opposing party of a copy of the appellate petition. Appellate petitions to the Supreme Court also provide for certain formal requirements that must be complied with.
For interlocutory appeals to the Court of Appeals or Supreme Court, an appeal is taken by:
filing a verified petition, accompanied by a certified true copy of the judgment, order or resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto and a sworn certification of non-forum shopping;
paying the corresponding docket and other lawful fees; and
furnishing the court of origin and the adverse party with a copy of the petition.Documentation
How is the documentation for appeals prepared?
For ordinary appeals, the clerk of the trial court transmits to the appellate court the original record or the approved record on appeal within 30 days from the perfection of the appeal, together with the proof of payment of the appellate court docket and other lawful fees, a certified true copy of the minutes of the proceedings, the order of approval, the certificate of correctness, the original documentary evidence referred to therein, the original and three copies of the transcripts. For interlocutory appeals, the parties are required to attach certified true copies of the decisions or orders being appealed from, and in certain instances, even certified true copies of material records of the case.
Right of appealDiscretion to grant permission to appeal
In commercial matters, may litigants appeal by right or is appellate review discretionary?
Under Philippine law, an appeal may either be a matter of right or discretionary. An appeal as a matter of right, which refers to the right to seek the review by a superior court of the judgment rendered by the trial court, exists after the trial in the first instance (Heirs of Arturo Garcia v Municipality of Iba, G R No. 162217, 22 July 2015). Hence, a party to a case that originates from municipal trial courts, metropolitan trial courts or municipal circuit trial courts may appeal as a matter of right to the regional trial courts, and a party to a case that originates from a regional trial court may appeal as a matter of right to the Court of Appeals.
In contrast, a discretionary appeal may be taken from the decision or final order rendered by a court in the exercise of its primary appellate jurisdiction, may be taken to the Supreme Court or may be disallowed by the superior court in its discretion (Heirs of Arturo Garcia v Municipality of Iba, G R No. 162217, 22 July 2015). This would refer to a further appeal from the regional trial court, exercising its appellate jurisdiction, to the Court of Appeals or a further appeal to the Supreme Court.Judgments subject to appeal
Can litigants appeal any ruling from a trial court, or are they limited to appealing only final judgments?
Generally, only final judgments or orders of a court of law or quasi-judicial body are appealable, or those judgments and orders that leave nothing more for the court or quasi-judicial body to be done.
Interlocutory orders are not appealable until after the judgment’s completion on the merits. However, an interlocutory order may be brought up for review through a special civil action for certiorari if the interlocutory order was rendered without or in excess of jurisdiction or with grave abuse of discretion (Banez, Jr v Concepcion, G R No. 159508, 29 August 2012).
Security and interlocutory mattersSecurity to appeal
In a typical commercial dispute, must a litigant post a bond or provide security to appeal a trial court decision?
There is no requirement of an appeal bond. An appellant, however, must pay docket and other lawful fees as a jurisdictional requirement.
For indigent litigants, a party may be authorised to litigate his or her action, claim or defence as an indigent if the court, upon an ex parte application and hearing, is satisfied that the party is one who has no money or property sufficient and available for food, shelter and basic necessities for him or herself and his or her family. Such authority shall include an exemption from payment of docket and other lawful fees, and of transcripts of stenographic notes, which the court may order to be supplied.
However, should a litigant include an application for provisional remedy, in proper cases, a bond must be posted in the amount fixed by the court if the application is granted.Interlocutory appeals
Are there special provisions for interlocutory appeals?
As discussed above, the appellate remedy from an interlocutory order is not an appeal in the ordinary sense but a special civil action for certiorari, and the appellant or petitioner should allege and show that the interlocutory order is rendered without or in excess of jurisdiction or with grave abuse of discretion.Injunctions and stays
Are there special rules relating to injunctions or stays, whether entered in the trial court or on appeal?
Yes. The Philippines has special rules covering injunction, both as a provisional remedy and as a main relief. An injunction may be allowed provided the following requisites are present, which must be alleged in an application made under oath:
the existence of a right to be protected; and
the facts against which the injunction is to be directed are violative of the said right (Republic of the Philippines v Cortez, Sr, G R No. 197472, 7 September 2015).
Also, a bond is usually required before the issuance of the injunctive writ. As a provisional remedy, an injunction may be applied at any stage of the proceedings prior to the judgment or final order.
For commercial disputes within the exclusive jurisdiction of the Philippine Securities and Exchange Commission, only the Court of Appeals and the Supreme Court, and not the trial courts, can issue a restraining order or injunction for a case, dispute or controversy that directly or indirectly interferes with the Philippine Securities and Exchange Commission’s powers, duties and responsibilities.
Scope and effect of appellate proceedingsEffect of filing an appeal
If a litigant files an appeal in a commercial dispute, does it stay enforcement of the trial court judgment?
Yes. Filing an appeal stays the enforcement of a trial court judgment. The final judgment or decision of the trial court only becomes final and executory when no motion for reconsideration is filed with the court of origin or no appeal has been filed or perfected or after an appeal duly filed is decided with finality.
On the other hand, interlocutory orders are immediately enforceable and cannot be stayed by a petition for certiorari unless a preliminary injunction is sought to stay the order. However, there are judgments or decisions from administrative or quasi-judicial agencies that are immediately executory unless execution is restrained in the meantime by the appellate court.
In the case of a final arbitral award by virtue of an arbitration agreement provided in a corporation’s articles of incorporation or bylaws, such award is executory after the lapse of 15 days from the parties’ receipt thereof and shall be stayed only by the filing of a bond or the issuance of an injunctive writ by an appellate court.Scope of appeal
On an appeal from a commercial dispute, may the first-level appellate court consider the facts and law anew, or is its power to review limited?
Generally, first-level appellate courts have the power to consider the facts and law de novo. However, when the appeal reaches the Supreme Court, review is generally limited to questions of law as it is not a trier of facts (Far Eastern Surety and Insurance Co Inc v People, G R No. 170618, 20 November 2013). But this rule is subject to certain exceptions, as provided in jurisprudence, taking into account the attendant circumstances (Spouses Sy v China Banking Corporation, G R No. 215954, 1 August 2016).Further appeals
If a party is dissatisfied with the outcome of the first-level appeal, is further appeal possible?
Yes, there are multiple levels of appellate review. The Philippines observes the principle of judicial hierarchy and such hierarchy is determinative of the venue of appeals. However, when it reaches the Supreme Court, as mentioned above, the appeal becomes discretionary.Duration of appellate proceedings
How long do appeals typically take from application to appeal to a final decision?
There is no expected or estimated timeline because period varies from case to case. However, based on experience, appellate proceedings usually take from one to three years from the date of filing of the first appellate pleading to when the appeal is either decided or deemed submitted for decision, depending on the complexity of the case, among other factors.
Submissions and evidenceSubmissions process
What is the briefing and argument process like in a typical commercial appeal?
Commercial appeals are generally decided on the basis of the evidence adduced and pleadings filed by the parties at the court of first instance. The appellate pleadings would usually consist of the brief or initiatory petition by the appellant; the brief or comment on the initiatory petition filed by the appellee; and other pleadings or submissions that the appellate court may allow or require, such as memoranda. The Court of Appeals, in certain cases, may also conduct hearings and receive evidence. The Court of Appeals and the Supreme Court may additionally hear the parties in oral argument on the merits of a case, or on any material incident in connection therewith.New evidence
Are appeals limited to the evidentiary record that was before the trial court, or can new evidence be introduced on appeal?
Generally, evidence introduced for the first time on appeal is not entertained by the appellate courts, since it is well established in Philippine jurisprudence that points of law, theories, issues and arguments not brought to the attention of the trial court will not be and ought not to be considered by a reviewing court, as these cannot be raised for the first time on appeal (Calanasan v Spouses Dolorito, G R No. 171937, 25 November 2013).
There are exceptions to the rule that no question may be raised for the first time on appeal. The issue of lack of jurisdiction over the subject matter may be raised at any stage of the proceedings and may be considered by the reviewing court. The said court may also consider an issue not properly raised during trial when there is plain error. Likewise, it may entertain such arguments when there are jurisprudential developments affecting the issues or when the issues raised present a matter of public policy (Del Rosario v Bonga, G R No. 136308, 23 January 2001).New evidence of wrongdoing
If litigants uncover new evidence of wrongdoing that they believe altered the outcome of a trial court judgment, can they introduce this evidence on appeal?
Under Philippine law, fraud, accident, mistake or excusable negligence that ordinary prudence could not have guarded against and by reason of which the aggrieved party has probably been impaired in his or her rights, or newly discovered evidence that he or she could not, with reasonable diligence, have discovered and produced at the trial and that if presented would probably alter the result, are not raised on appeal but are instead causes to move the trial court to set aside the judgment or final order and grant a new trial.New legal arguments
May parties raise new legal arguments on appeal?
As a rule, no question will be entertained on appeal unless it has been raised in the court below. Basic considerations of due process impel this rule. Stated differently, issues of fact and arguments not adequately brought to the attention of the lower courts will not be considered by the reviewing courts as they cannot be raised for the first time on appeal (Del Rosario v Bonga, G R No. 136308. 23 January 2001). There are, however, recognised exceptions to this rule (Logronio v Taleseo, G R No. 134602, 6 August 1999).
Costs, settlement and fundingCosts
What are the rules regarding attorneys’ fees and costs on appeal?
There are two commonly accepted concepts of attorneys’ fees: ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his or her client for the legal services he or she has rendered to the latter; while in its extraordinary concept, attorneys’ fees are deemed indemnity for damages ordered by the court to be paid by the losing party in litigation. The instances where these may be awarded are those enumerated in article 2208 of the Civil Code (Alva v High Capacity Security Force, Inc, G R No. 203328, 8 November 2017). An appellate court may affirm, modify or set aside a trial court’s award of extraordinary attorneys’ fees in the process of appellate review.
Meanwhile, costs shall be awarded in favour of the prevailing party as a matter of course, but the court has the power, for special reasons, to adjudge that either party shall pay the costs of an action or that the same be divided, as may be equitable. Likewise, where an action or appeal is found to be frivolous, double or treble cost may be imposed on the plaintiff or appellant, which shall be paid by his or her attorney, if so ordered by the court. Again, this imposition may be affirmed, modified or set aside on appeal.Settlement of first instance judgment after appeal lodged
Can parties enter into a settlement agreement to vacate the trial court judgment after an appeal has been taken?
Yes. Parties are allowed to enter into compromise or settlement agreements that cover cases pending trial, on appeal or even those that have already been finally decided. There is no time limitation as to when a compromise or settlement agreement may be entered into (Magbanua v Uy, G R No. 161003. 6 May 2005).Limits on settlement after commencement of appeal
Are there any limits on settlement once an appeal has been taken?
The filing of an appeal does not limit the parties’ ability to enter into compromise or settlement agreements as long as such agreements are not contrary to law, morals, good customs or public policy. Article 2935 of the Civil Code of the Philippines, however, provides that no compromise upon the following questions shall be valid:
the civil status of persons;
validity of a marriage or a legal separation;
any ground for legal separation;
future support;
jurisdiction of courts; or
future legitime.Third-party funding
May third parties fund appeals?
There are no specific rules in this jurisdiction that govern third-party litigation funders, and a litigant would ordinarily be free to source his or her litigation funds. However, an agreement whereby an attorney agrees to pay the expenses of proceedings to enforce the client’s rights is champertous (Roxas v Republic Real Estate Corp, G R No. 208205, 1 June 2016). A champertous contract is considered against public policy as it violates the fiduciary relations between the lawyer and his or her client, whose weakness or disadvantage may be exploited by the former (Nocom v Camerino, G R No. 182984, 10 February 2009).Disclosure of litigation funding
If litigation funding is permitted in an appeal, must funding sources be disclosed to the court or other parties to the litigation?
There are no express rules covering third-party litigation funders in this jurisdiction (see question 25).
Judgments, relief and non-partiesDecisions
Must appellate courts in your country write decisions explaining their rulings? Can the courts designate the precedential effect of their decisions?
Yes. The Philippine Constitution requires that no decision shall be rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based. Further, the Rules of Court also emphasise that every decision or final resolution of the court in appealed cases shall clearly and distinctly state the findings of fact and the conclusions of law on which it is based, which may be contained in the decision or final resolution itself, or adopted from those set forth in the decision, order or resolution appealed from.
Only decisions of the Supreme Court are considered as judicial precedents to be followed in subsequent cases by all courts in the land, following the principle of stare decisis.Non-parties
Will the appellate courts in your country consider submissions from non-parties?
Yes. The Rules of Court provide that experienced and impartial attorneys may be invited by the Supreme Court to appear as amici curiae to help in the disposition of issues submitted to it.Relief
What are the ordinary forms of relief that can be rendered by an appellate court in a civil dispute?
The appellate court may affirm, reverse or modify the judgment or final order appealed from and may direct a new trial or further proceedings to be had. Reliefs may include the award of damages, attorneys’ fees, grant of provisional remedies and other relief.
x x x."
Prudential regulation of banks in Philippines - By Morales & Justiniano
See - https://www.lexology.com/library/detail.aspx?g=bbf3617d-b81d-44a7-931a-f39443de0e17&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2019-12-10&utm_term=
"x x x.
Prudential regulation of banks in Philippines
By Morales & Justiniano
Prudential regulationi Relationship with the prudential regulator
An effective prudential regulator is central to a safe and sound banking system. In the Philippines, that role is fulfilled entirely by the BSP. Section 4 of the GBL expressly states that the 'operations and activities of banks shall be subject to supervision of the Bangko Sentral'. Supervision, as defined in Section 4, not only contemplates the promulgation by the BSP of rules of conduct and standards of operations for banks (now set out in the Manual of Regulations for Banks, as supplemented or modified by the BSP from time to time), but also visitorial powers, that is, the conducting of examinations and investigations of the activities of banks with a view to determining their compliance with those rules and standards, and enforcing prompt and corrective action in cases of breaches of the same. Ultimately, the aim is to ensure the continued solvency and liquidity of banks.
As a rule, the BSP conducts regular investigations of banks not more than once a year. However, the Monetary Board, by an affirmative vote of five members, may order a special examination of a bank. In this regard, the BSP is required to immediately address findings of irregularities or deficiencies. When examining a bank, the BSP also has the authority to examine an enterprise that is wholly or majority owned by the bank.
Under the PDIC Charter, the PDIC can also examine banks once a year with the prior approval of the BSP. To avoid the overlapping of efforts, the PDIC has to 'maximise the efficient use of relevant reports, information and findings of the Bangko Sentral which it shall make available to the [PDIC]'. Under the amendments to the PDIC Charter made by Republic Act No. 10846, if the PDIC has submitted to the Monetary Board a report of examination asking that corrective action be taken against a bank determined by the PDIC to be conducting unsafe and unsound banking practices, and no corrective action is taken by the Monetary Board within 45 days of submission of the report, then the PDIC can, motu proprio, institute the necessary corrective action and thereafter inform the Monetary Board of the action taken.ii Management of banks
The management of a locally incorporated bank (such as a subsidiary of a foreign bank) is vested in a board of directors with five to 15 members, at least two of whom must be independent directors. Foreign nationals may become directors to the extent of the foreign equity in the bank concerned.
The Monetary Board has prescribed the criteria for individuals to be elected as bank directors, in line with the fit and proper rule, to maintain the quality of bank management, and better protect depositors and the public in general. Here, the Monetary Board considers the integrity, experience, education, training and competence of the individual concerned. The election of bank directors must be confirmed by the Monetary Board.
Board meetings may be conducted via teleconferencing or videoconferencing. Accordingly, directors of a bank need not all be physically present in one room to hold a valid meeting. A bank director must, however, participate in at least 50 per cent of all board meetings every year and physically attend at least 25 per cent of all such meetings.
As in other domestic corporations, all corporate powers of a locally incorporated bank are exercised by its board of directors. After the election of the directors, the shareholders can participate in the management of the bank only in certain fundamental matters, such as the amendment of the articles of incorporation or by-laws of the bank, its dissolution, or its merger or consolidation with another bank.
The BSP published the Handbook on Corporate Governance 'to improve corporate governance in the Philippine banking system'. The BSP also issued the rules of procedure on administrative cases involving directors and officers of banks. It is also aligning its rules with international best practices that foster good corporate governance in the banking sector, such as the Principles for Enhancing Corporate Governance promulgated by the Basel Committee on Banking Supervision. In this regard, the BSP has required each bank to appoint a full-time chief compliance officer to manage a compliance system designed to identify and mitigate business risks that may erode the franchise value of the bank.
To protect the funds of the depositors and creditors of banks, the Monetary Board may regulate the payment of compensation, allowances, fees, bonuses, stock options, profit-sharing and fringe benefits to bank directors and officers, in exceptional cases and when circumstances warrant, such as when a bank is under comptrollership or conservatorship, when it is found to be conducting business in an unsafe and unsound manner, or when it is in an unsatisfactory financial condition. Towards this end, the Monetary Board requires that the total amount of unbooked valuation reserves and deferred charges be deducted from the net income of the bank in the event of profit sharing. Further, when the total compensation package (including salaries, allowances, fees and bonuses) of directors and officers is significantly excessive when compared with peer group averages, the Monetary Board may order a reduction of the package to a more reasonable level. It must also be noted that the compensation of directors in general is regulated by Section 30 of the Corporation Code, which mandates that the total annual compensation of directors must not exceed 10 per cent of the bank's net income before tax during the preceding year.
Philippine branches of foreign banks are bound by the pertinent provisions of the GBL and the Manual of Regulations for Banks, except those providing for (1) the creation, formation, organisation or dissolution of corporations, and (2) the fixing of the relations, liabilities, responsibilities or duties of shareholders, directors or officers of corporations. These excluded matters will be governed by the applicable law in the jurisdiction of the foreign bank. Apart from the aforementioned in items (1) and (2), branches of foreign banks are required to conduct their operations subject to the same standards required of domestic banks. A branch does not have a board of directors. It is usually managed by an individual appointed by the head office, and his or her authority is normally set out in a power of attorney from the head office.iii Regulatory capital and liquidity
Section 34 of the GBL enjoins the BSP to conform the 'minimum ratio which the net worth of a bank must bear to its total risk assets' to 'internationally accepted standards, including those of the Bank of International Settlements relating to risk-based capital requirements'.
In the case of non-compliance by a bank with the prescribed minimum ratio, the Monetary Board may, until that ratio is met or restored by the bank:
limit or prohibit the distribution of net profits by the bank, and require that those profits be used, in full or in part, to increase the capital accounts of the bank;
restrict or prohibit the acquisition of major assets by the bank; and
restrict or prohibit the making of new investments by the bank, with the exception of purchases of readily marketable evidence of indebtedness of the government and the BSP, and other evidence of indebtedness or obligations, the servicing and the repayment of which are fully guaranteed by the government.
Universal and commercial banks are subject to the capital adequacy standards under Basel III. The Basel Committee on Banking Supervision has outlined a staggered implementation of Basel III up to the end of 2018 to allow internationally active banks time to raise capital organically. However, the BSP decided to adopt Basel III-based capital standards in full on 1 January 2014 on a non-staggered basis. This is in recognition of the strong capital position of the Philippine banking industry. Under the rules, the risk capital ratio, expressed as a percentage of qualifying capital to risk-weighted assets, is 10 per cent for solo bases (head office plus branches) and consolidated bases (parent bank plus subsidiary financial allied undertakings, but excluding insurance companies). The Common Equity Tier 1 (CET1) ratio is 6 per cent, while the Tier 1 capital ratio is 7.5 per cent. Moreover, there is a capital conservation buffer of 2.5 per cent, composed of CET1 capital. In addition, the BSP subjects domestically systematically important banks to a higher loss absorbency by requiring them to have a higher share of their balance sheets funded by instruments that increase their resilience as a going concern. To restrict the build-up of leverage, banks must meet a leverage ratio of not less than 5 per cent on both a solo and consolidated basis. Finally, there is a required liquidity coverage ratio, which is the ratio of high-quality liquid assets to total net cash outflows. As a minimum, the stock of liquid assets should enable the bank to withstand significant liquidity shocks that last 30 calendar days, which would give time for corrective actions to be taken by the bank management or the BSP, or by both.
Thrift banks, rural banks and cooperative banks, which are not subsidiaries of universal and commercial banks, are covered by a separate risk-based capital adequacy system labelled by the BSP as the Basel 1.5 framework – a simplified version of Basel II that takes into account the simple operations of those banks.iv Recovery and resolution
Under Section 29 of the New Central Bank Act, the Monetary Board may appoint a conservator for a bank that is in a 'state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors'. The conservator will:
have such powers as the Monetary Board deems necessary to take charge of the assets and liabilities of the bank;
manage the bank or reorganise its management;
collect all monies and debts due to the bank; and
exercise all powers necessary to restore its viability.
The conservator must be competent and knowledgeable in bank operations and management. There is a one-year limit to conservatorship.
The Monetary Board will terminate the conservatorship when the bank can continue to operate on its own. Termination is also an option if the Monetary Board determines that the continuance in business of the bank would involve probable loss to the depositors and other creditors of the bank, in which case Section 30 of the New Central Bank Act would apply.
Under Section 30, the Monetary Board may summarily forbid a bank from doing business and designate the PDIC as a receiver of the bank if that bank 'has insufficient realisable assets, as determined by the Bangko Sentral, to meet its liabilities'. The appointment of a receiver is also warranted without prior hearing in the event that the Monetary Board finds that a bank is unable to pay its liabilities as they become due in the ordinary course of business; cannot continue in business without involving probable losses to its depositors or creditors; or has wilfully violated a final BSP cease-and-desist order involving acts or transactions that amount to fraud or dissipation of bank assets.
The receiver must determine, as soon as possible but not later than 90 days after the takeover, whether the bank may be rehabilitated or otherwise placed in a condition that would permit it to resume business with safety to its depositors and other creditors, and the general public. Any such determination for the resumption of business is subject to prior Monetary Board approval. In the event that the receiver determines that the bank cannot be rehabilitated or permitted to resume business, the Monetary Board will notify the board of directors of the bank accordingly, and instruct the receiver to liquidate the bank. The receiver will then file an ex parte petition in court for assistance in the liquidation of the bank pursuant to a liquidation plan adopted by the PDIC for general application to all closed banks and convert the assets of the bank to money, disposing of the same to creditors and other parties, for the purpose of paying the debts of the bank in accordance with the rules on concurrence and preference of credits under the Civil Code of the Philippines, and institute actions to collect and recover accounts and assets of, or defend any action against, the bank.
The actions of the Monetary Board taken under Section 30 of the New Central Bank Act are final and executory, and may not be restrained or set aside by a court, save on petition for certiorari on the ground that the action in question was in excess of jurisdiction or done with such grave abuse of discretion as to amount to lack or excess of jurisdiction.
Under the amended PDIC Charter, a bank ordered to be closed by the Monetary Board will no longer be rehabilitated. The PDIC, as the designated receiver, will proceed with the takeover and liquidation of the closed bank, without the consent of the stockholders, board of directors, depositors and the other creditors of the closed bank.
x x x."
Prudential regulationi Relationship with the prudential regulator
An effective prudential regulator is central to a safe and sound banking system. In the Philippines, that role is fulfilled entirely by the BSP. Section 4 of the GBL expressly states that the 'operations and activities of banks shall be subject to supervision of the Bangko Sentral'. Supervision, as defined in Section 4, not only contemplates the promulgation by the BSP of rules of conduct and standards of operations for banks (now set out in the Manual of Regulations for Banks, as supplemented or modified by the BSP from time to time), but also visitorial powers, that is, the conducting of examinations and investigations of the activities of banks with a view to determining their compliance with those rules and standards, and enforcing prompt and corrective action in cases of breaches of the same. Ultimately, the aim is to ensure the continued solvency and liquidity of banks.
As a rule, the BSP conducts regular investigations of banks not more than once a year. However, the Monetary Board, by an affirmative vote of five members, may order a special examination of a bank. In this regard, the BSP is required to immediately address findings of irregularities or deficiencies. When examining a bank, the BSP also has the authority to examine an enterprise that is wholly or majority owned by the bank.
Under the PDIC Charter, the PDIC can also examine banks once a year with the prior approval of the BSP. To avoid the overlapping of efforts, the PDIC has to 'maximise the efficient use of relevant reports, information and findings of the Bangko Sentral which it shall make available to the [PDIC]'. Under the amendments to the PDIC Charter made by Republic Act No. 10846, if the PDIC has submitted to the Monetary Board a report of examination asking that corrective action be taken against a bank determined by the PDIC to be conducting unsafe and unsound banking practices, and no corrective action is taken by the Monetary Board within 45 days of submission of the report, then the PDIC can, motu proprio, institute the necessary corrective action and thereafter inform the Monetary Board of the action taken.ii Management of banks
The management of a locally incorporated bank (such as a subsidiary of a foreign bank) is vested in a board of directors with five to 15 members, at least two of whom must be independent directors. Foreign nationals may become directors to the extent of the foreign equity in the bank concerned.
The Monetary Board has prescribed the criteria for individuals to be elected as bank directors, in line with the fit and proper rule, to maintain the quality of bank management, and better protect depositors and the public in general. Here, the Monetary Board considers the integrity, experience, education, training and competence of the individual concerned. The election of bank directors must be confirmed by the Monetary Board.
Board meetings may be conducted via teleconferencing or videoconferencing. Accordingly, directors of a bank need not all be physically present in one room to hold a valid meeting. A bank director must, however, participate in at least 50 per cent of all board meetings every year and physically attend at least 25 per cent of all such meetings.
As in other domestic corporations, all corporate powers of a locally incorporated bank are exercised by its board of directors. After the election of the directors, the shareholders can participate in the management of the bank only in certain fundamental matters, such as the amendment of the articles of incorporation or by-laws of the bank, its dissolution, or its merger or consolidation with another bank.
The BSP published the Handbook on Corporate Governance 'to improve corporate governance in the Philippine banking system'. The BSP also issued the rules of procedure on administrative cases involving directors and officers of banks. It is also aligning its rules with international best practices that foster good corporate governance in the banking sector, such as the Principles for Enhancing Corporate Governance promulgated by the Basel Committee on Banking Supervision. In this regard, the BSP has required each bank to appoint a full-time chief compliance officer to manage a compliance system designed to identify and mitigate business risks that may erode the franchise value of the bank.
To protect the funds of the depositors and creditors of banks, the Monetary Board may regulate the payment of compensation, allowances, fees, bonuses, stock options, profit-sharing and fringe benefits to bank directors and officers, in exceptional cases and when circumstances warrant, such as when a bank is under comptrollership or conservatorship, when it is found to be conducting business in an unsafe and unsound manner, or when it is in an unsatisfactory financial condition. Towards this end, the Monetary Board requires that the total amount of unbooked valuation reserves and deferred charges be deducted from the net income of the bank in the event of profit sharing. Further, when the total compensation package (including salaries, allowances, fees and bonuses) of directors and officers is significantly excessive when compared with peer group averages, the Monetary Board may order a reduction of the package to a more reasonable level. It must also be noted that the compensation of directors in general is regulated by Section 30 of the Corporation Code, which mandates that the total annual compensation of directors must not exceed 10 per cent of the bank's net income before tax during the preceding year.
Philippine branches of foreign banks are bound by the pertinent provisions of the GBL and the Manual of Regulations for Banks, except those providing for (1) the creation, formation, organisation or dissolution of corporations, and (2) the fixing of the relations, liabilities, responsibilities or duties of shareholders, directors or officers of corporations. These excluded matters will be governed by the applicable law in the jurisdiction of the foreign bank. Apart from the aforementioned in items (1) and (2), branches of foreign banks are required to conduct their operations subject to the same standards required of domestic banks. A branch does not have a board of directors. It is usually managed by an individual appointed by the head office, and his or her authority is normally set out in a power of attorney from the head office.iii Regulatory capital and liquidity
Section 34 of the GBL enjoins the BSP to conform the 'minimum ratio which the net worth of a bank must bear to its total risk assets' to 'internationally accepted standards, including those of the Bank of International Settlements relating to risk-based capital requirements'.
In the case of non-compliance by a bank with the prescribed minimum ratio, the Monetary Board may, until that ratio is met or restored by the bank:
limit or prohibit the distribution of net profits by the bank, and require that those profits be used, in full or in part, to increase the capital accounts of the bank;
restrict or prohibit the acquisition of major assets by the bank; and
restrict or prohibit the making of new investments by the bank, with the exception of purchases of readily marketable evidence of indebtedness of the government and the BSP, and other evidence of indebtedness or obligations, the servicing and the repayment of which are fully guaranteed by the government.
Universal and commercial banks are subject to the capital adequacy standards under Basel III. The Basel Committee on Banking Supervision has outlined a staggered implementation of Basel III up to the end of 2018 to allow internationally active banks time to raise capital organically. However, the BSP decided to adopt Basel III-based capital standards in full on 1 January 2014 on a non-staggered basis. This is in recognition of the strong capital position of the Philippine banking industry. Under the rules, the risk capital ratio, expressed as a percentage of qualifying capital to risk-weighted assets, is 10 per cent for solo bases (head office plus branches) and consolidated bases (parent bank plus subsidiary financial allied undertakings, but excluding insurance companies). The Common Equity Tier 1 (CET1) ratio is 6 per cent, while the Tier 1 capital ratio is 7.5 per cent. Moreover, there is a capital conservation buffer of 2.5 per cent, composed of CET1 capital. In addition, the BSP subjects domestically systematically important banks to a higher loss absorbency by requiring them to have a higher share of their balance sheets funded by instruments that increase their resilience as a going concern. To restrict the build-up of leverage, banks must meet a leverage ratio of not less than 5 per cent on both a solo and consolidated basis. Finally, there is a required liquidity coverage ratio, which is the ratio of high-quality liquid assets to total net cash outflows. As a minimum, the stock of liquid assets should enable the bank to withstand significant liquidity shocks that last 30 calendar days, which would give time for corrective actions to be taken by the bank management or the BSP, or by both.
Thrift banks, rural banks and cooperative banks, which are not subsidiaries of universal and commercial banks, are covered by a separate risk-based capital adequacy system labelled by the BSP as the Basel 1.5 framework – a simplified version of Basel II that takes into account the simple operations of those banks.iv Recovery and resolution
Under Section 29 of the New Central Bank Act, the Monetary Board may appoint a conservator for a bank that is in a 'state of continuing inability or unwillingness to maintain a condition of liquidity deemed adequate to protect the interest of depositors and creditors'. The conservator will:
have such powers as the Monetary Board deems necessary to take charge of the assets and liabilities of the bank;
manage the bank or reorganise its management;
collect all monies and debts due to the bank; and
exercise all powers necessary to restore its viability.
The conservator must be competent and knowledgeable in bank operations and management. There is a one-year limit to conservatorship.
The Monetary Board will terminate the conservatorship when the bank can continue to operate on its own. Termination is also an option if the Monetary Board determines that the continuance in business of the bank would involve probable loss to the depositors and other creditors of the bank, in which case Section 30 of the New Central Bank Act would apply.
Under Section 30, the Monetary Board may summarily forbid a bank from doing business and designate the PDIC as a receiver of the bank if that bank 'has insufficient realisable assets, as determined by the Bangko Sentral, to meet its liabilities'. The appointment of a receiver is also warranted without prior hearing in the event that the Monetary Board finds that a bank is unable to pay its liabilities as they become due in the ordinary course of business; cannot continue in business without involving probable losses to its depositors or creditors; or has wilfully violated a final BSP cease-and-desist order involving acts or transactions that amount to fraud or dissipation of bank assets.
The receiver must determine, as soon as possible but not later than 90 days after the takeover, whether the bank may be rehabilitated or otherwise placed in a condition that would permit it to resume business with safety to its depositors and other creditors, and the general public. Any such determination for the resumption of business is subject to prior Monetary Board approval. In the event that the receiver determines that the bank cannot be rehabilitated or permitted to resume business, the Monetary Board will notify the board of directors of the bank accordingly, and instruct the receiver to liquidate the bank. The receiver will then file an ex parte petition in court for assistance in the liquidation of the bank pursuant to a liquidation plan adopted by the PDIC for general application to all closed banks and convert the assets of the bank to money, disposing of the same to creditors and other parties, for the purpose of paying the debts of the bank in accordance with the rules on concurrence and preference of credits under the Civil Code of the Philippines, and institute actions to collect and recover accounts and assets of, or defend any action against, the bank.
The actions of the Monetary Board taken under Section 30 of the New Central Bank Act are final and executory, and may not be restrained or set aside by a court, save on petition for certiorari on the ground that the action in question was in excess of jurisdiction or done with such grave abuse of discretion as to amount to lack or excess of jurisdiction.
Under the amended PDIC Charter, a bank ordered to be closed by the Monetary Board will no longer be rehabilitated. The PDIC, as the designated receiver, will proceed with the takeover and liquidation of the closed bank, without the consent of the stockholders, board of directors, depositors and the other creditors of the closed bank.
x x x."
Data Privacy Act of 2012 - Employee data protection in Philippines - Villaraza & Angangco
See - https://www.lexology.com/library/detail.aspx?g=85d24b94-2974-4984-a30d-16f77f8c347e&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email&utm_campaign=Lexology+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2019-12-10&utm_term=
"x x x.
Employee data protection in Philippines
Requirements for registration
The collection and processing of personal information, including employee data, is governed by the Data Privacy Act of 2012. Data privacy regulations are implemented by the National Privacy Commission (NPC).
An employer is a personal information controller under the Data Privacy Act when it is involved in controlling the collection, holding, processing and use of the information of its employees. It is required to implement 'reasonable and appropriate organizational, physical, and technical security measures for the protection of personal data'. Employers must register with the NPC if any of the following conditions are met: it employs at least 250 employees; the processing includes sensitive personal information (as defined in subsection iii, below) of at least 1,000 individuals; the processing is likely to pose a risk to the rights and freedoms of data subjects; or the processing is not occasional.
As a general rule, a current or prospective employee's consent must be secured prior to the collection of any personal information. However, provided that sensitive personal information is not involved, an employee's personal data may be processed even without their consent when it is necessary or desirable in the context of an employer–employee relationship. An employee must be informed of the following prior to the processing of his or her personal information:
the description of the personal data to be entered into the system;
the purposes for which they are being or will be processed;
the basis of processing, when processing is not based on the consent of the data subject;
the scope and method of the personal data processing;
the recipients or classes of recipients to whom the personal data are or may be disclosed;
the methods utilised for automated access, if allowed by the data subject, and the extent to which such access is authorised;
the identity and contact details of the personal data controller or its representative;
the period for which the information will be stored; and
the existence of the employee's rights as data subjects, including the right to access, correct and object to the processing, as well as the right to lodge a complaint before the NPC.
ii Cross-border data transfers
Cross-border data transfers are allowed under Philippine law. A cross-border data transfer is considered data sharing under the Data Privacy Act. The employee's consent is required even when the data is to be shared with an affiliate or mother company, or similar relationships. In addition, the employer should execute a data sharing agreement that establishes adequate safeguards for data privacy and security, and upholds the data privacy rights of the employees. The data sharing agreement is subject to review by the NPC on its own initiative or upon the complaint of an employee.
There is no specific requirement to register a cross-border data transfer with the NPC subject to the registration requirements discussed in subsection i.
iii Sensitive data
The implementing rules and regulations of the Data Privacy Act define sensitive personal information as personal information:
about an individual's race, ethnic origin, marital status, age, colour, and religious, philosophical or political affiliations;
about an individual's health, education, genetics or sexual life, or to any proceeding for any offence committed or alleged to have been committed by the individual, the disposal of such proceedings or the sentence of any court in such proceedings;
issued by government agencies peculiar to an individual, which includes, but is not limited to, social security numbers, previous or current health records, licences or their denials, suspension or revocation, and tax returns; and
that is specifically established by an executive order or an act of Congress to be kept classified.
Generally, the processing of sensitive personal information is prohibited unless the employee has given prior consent to the processing for a declared, specified and legitimate purpose, or under the specific circumstances provided by the Implementing Rules and Regulations of the Data Privacy Act. Higher criminal penalties are also imposed for the unlawful processing of or data breaches relating to sensitive personal information.
iv Background checks
Background checks are legally permissible in the Philippines and may be required by an employer prior to hiring an employee as a valid exercise of its management prerogative. Employers commonly conduct background checks to determine a potential employee's prior criminal records and credit history. The processing of information gathered through background checks may be considered as necessary or desirable in the context of an employer–employee relationship. However, processing the employee's information may require the employee's express prior consent if it involves the processing of sensitive personal information.
However, if an employee who has attained the status of a regular employee fails a background check, he or she may be disciplined by the employer only upon complete compliance with the employee's rights to substantive and procedural due process.
x x x."
The collection and processing of personal information, including employee data, is governed by the Data Privacy Act of 2012. Data privacy regulations are implemented by the National Privacy Commission (NPC).
An employer is a personal information controller under the Data Privacy Act when it is involved in controlling the collection, holding, processing and use of the information of its employees. It is required to implement 'reasonable and appropriate organizational, physical, and technical security measures for the protection of personal data'. Employers must register with the NPC if any of the following conditions are met: it employs at least 250 employees; the processing includes sensitive personal information (as defined in subsection iii, below) of at least 1,000 individuals; the processing is likely to pose a risk to the rights and freedoms of data subjects; or the processing is not occasional.
As a general rule, a current or prospective employee's consent must be secured prior to the collection of any personal information. However, provided that sensitive personal information is not involved, an employee's personal data may be processed even without their consent when it is necessary or desirable in the context of an employer–employee relationship. An employee must be informed of the following prior to the processing of his or her personal information:
the description of the personal data to be entered into the system;
the purposes for which they are being or will be processed;
the basis of processing, when processing is not based on the consent of the data subject;
the scope and method of the personal data processing;
the recipients or classes of recipients to whom the personal data are or may be disclosed;
the methods utilised for automated access, if allowed by the data subject, and the extent to which such access is authorised;
the identity and contact details of the personal data controller or its representative;
the period for which the information will be stored; and
the existence of the employee's rights as data subjects, including the right to access, correct and object to the processing, as well as the right to lodge a complaint before the NPC.
ii Cross-border data transfers
Cross-border data transfers are allowed under Philippine law. A cross-border data transfer is considered data sharing under the Data Privacy Act. The employee's consent is required even when the data is to be shared with an affiliate or mother company, or similar relationships. In addition, the employer should execute a data sharing agreement that establishes adequate safeguards for data privacy and security, and upholds the data privacy rights of the employees. The data sharing agreement is subject to review by the NPC on its own initiative or upon the complaint of an employee.
There is no specific requirement to register a cross-border data transfer with the NPC subject to the registration requirements discussed in subsection i.
iii Sensitive data
The implementing rules and regulations of the Data Privacy Act define sensitive personal information as personal information:
about an individual's race, ethnic origin, marital status, age, colour, and religious, philosophical or political affiliations;
about an individual's health, education, genetics or sexual life, or to any proceeding for any offence committed or alleged to have been committed by the individual, the disposal of such proceedings or the sentence of any court in such proceedings;
issued by government agencies peculiar to an individual, which includes, but is not limited to, social security numbers, previous or current health records, licences or their denials, suspension or revocation, and tax returns; and
that is specifically established by an executive order or an act of Congress to be kept classified.
Generally, the processing of sensitive personal information is prohibited unless the employee has given prior consent to the processing for a declared, specified and legitimate purpose, or under the specific circumstances provided by the Implementing Rules and Regulations of the Data Privacy Act. Higher criminal penalties are also imposed for the unlawful processing of or data breaches relating to sensitive personal information.
iv Background checks
Background checks are legally permissible in the Philippines and may be required by an employer prior to hiring an employee as a valid exercise of its management prerogative. Employers commonly conduct background checks to determine a potential employee's prior criminal records and credit history. The processing of information gathered through background checks may be considered as necessary or desirable in the context of an employer–employee relationship. However, processing the employee's information may require the employee's express prior consent if it involves the processing of sensitive personal information.
However, if an employee who has attained the status of a regular employee fails a background check, he or she may be disciplined by the employer only upon complete compliance with the employee's rights to substantive and procedural due process.
x x x."
Australia’s New Laws on Foreign Interference in Domestic Politics By Evelyn Douek
See - https://www.lawfareblog.com/whats-australias-new-laws-foreign-interference-domestic-politics
"x x x.
FOREIGN INTERFERENCE
"x x x.
FOREIGN INTERFERENCE
What’s in Australia’s New Laws on Foreign Interference in Domestic Politics
By Evelyn Douek Wednesday, July 11, 2018, 8:00 AM
Australia passed national security and foreign interference laws at the end of June that Attorney General Christian Porter has called the country’s biggest counterintelligence overhaul in decades. The legislation includes tougher penalties for traditional espionage activities—such as leaking classified information and interfering with public infrastructure—along with sweeping provisions aimed at combating foreign interference and a registration scheme for agents of foreign political actors.
The laws are part of a package: The National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018 amends Australia’s Federal Criminal Code to introduce the new national security offenses, and the Foreign Influence Transparency Scheme Act 2018 establishes a registration scheme for communications activities undertaken on behalf of or in collaboration with certain foreigners. The Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, which has yet to be passed, would ban foreign political donations along with other changes to electoral laws. The laws come at a time when governments worldwide are considering how to combat foreign interference in domestic politics. Australia’s legislation represents an aggressive approach, potentially covering a wide range of political expression without presenting any proof of harm or illegitimate foreign interests. Notably, in contrast to many efforts in other countries, the Australian legislation does not directly address the role of social media in spreading foreign interference and disinformation.
Background
First introduced into Parliament in December, the draft bills came under heavy criticism for broad definitions within the text that threatened to impose on journalists, charities, protesters and possibly academics new duties to register and disclose foreign contacts and potential liabilities for failure to do so. International human rights observers argued that the legislation would stifle legitimate political expression and chill efforts to hold government accountable. The American Chamber of Commerce in Australia even expressed concerns it would no longer be able to hold events in the country aimed at members of Parliament. Following these criticisms, an unusually large number of amendments were made through the committee process before the legislation was rushed through Parliament with bipartisan support in advance of special elections scheduled for the end of July. (The National Security Legislation Amendment and the Foreign Influence Transparency Scheme Act are law; the funding and disclosure reform, however, appears to be on the backburner.) The unusually compressed timeline has created additional uncertainty about the scope of the laws and their implementation.
As part of a media campaign to pressure the opposition to pass the legislation quickly, the attorney general warned that foreign agents were increasingly “causing general chaos in the context of elections” around the world and urged that the laws be put in place before Australia’s next large democratic event. He referred to Russian interference in the 2016 U.S. elections, as did Prime Minister Malcolm Turnbull when the legislation was first introduced.
Of course, neither the Russian troll factory that interfered in the U.S. presidential election nor the gatherings of the Chamber of Commerce are the legislation’s key targets. The legislation was drafted amid a political storm about Chinese influence in Australia after top-secret intelligence reports detailed extensive influence operations at all levels of government for the past decade, revelations in 2016 about millions of dollars in Chinese political donations, a scandal involving a senator’s relationship with a Chinese businessman, and concerns about the Chinese Communist Party monitoring and manipulating Chinese nationals in Australia.
Foreign Interference Offenses
Under the legislation, it is illegal for a person to knowingly engage in covert conduct or deception on behalf of a “foreign principal” (which is defined to include any foreign government, foreign political organization, or related entities or persons) with the intention of influencing an Australian political process, the exercise of a vote or prejudicing national security. The maximum penalty is 20 years imprisonment if the conduct was intentional or 15 years if done recklessly. Although an amendment clarified that mere “embarrassment” is not sufficient to prejudice national security, the terms used in the legislation are otherwise broad. National security is defined not only as the defense of the country but also its “political, military or economic relations” with other countries. This capacious definition could cover almost any political matter in which a foreign power might be interested.
It is also illegal to attempt to influence a target in relation to any political process or exercise of an Australian democratic right (which the legislation leaves undefined) on behalf of or in collaboration with a foreign principal if this foreign connection is not disclosed to the target. Again, the maximum penalty is 20 years’ imprisonment if done intentionally and 15 years if done recklessly. It is not necessary that the agent “have in mind a particular foreign principal” when engaging in the conduct. Here, too, the provision’s reach may be vast. It could potentially cover any attempt to persuade an Australian on a matter of policy if there is an undisclosed relationship with foreign principals or someone acting on their behalf.
Registration Scheme
A person who undertakes any general political lobbying or any kind of communications activity for the purpose of political influence on behalf of a foreign principal—that includes any foreign political organization—must register with the government within 14 days. Failure to do so is punishable by two to five years imprisonment, depending on whether the person knew she had to register. Again, the definitions are broad. Activities covered by the statute include those directed to any section of the public, and influence includes “affect in any way.” There is no requirement that actual harm or influence is shown before the offenses can be charged.
This scheme is modeled on the U.S. Foreign Agents Registration Act (FARA). The Australian scheme is narrower than FARA in some ways: The Australian definition of a foreign principal only includes foreign governments, political organizations, and related entities and individuals, whereas FARA defines a foreign principal as any non-U.S. person. But in other ways, the Australian scheme is considerably broader. This legislation does not include a FARA-style exemption from registration for those already registered as political lobbyists, and includes greater powers to ensure compliance, including powers to compel the production of information. This follows a recent U.S. Justice Department inspector general’s report on FARA, studied and referred to by the Australian Attorney-General’s Department, that found that evidentiary hurdles and lack of powers to compel production of records has significantly hampered enforcement of the act.
The Australian government has been quite open that the registration scheme is intended to be prophylactic—it aims not merely to catch people engaged in foreign interference (who are the targets of the new criminal offenses) but also to inform the public when foreign powers lobby politicians or engage in political influence through arrangements with agents that might otherwise be hidden. Throughout the progress toward passage of the legislation, the Attorney-General’s Department has affirmed Australia’s commitment to freedom of expression, saying that transparency requirements in the bills do not infringe it. The intention, the department has said, is to provide a “suite of investigative options.”
With such a broad reach, however, the potential chilling effect of the registration requirements is an obvious concern. Australia is the only Western democracy without a bill of rights. Although the High Court has found that there is an implied freedom of political communication inherent in the Australian Constitution, it is more limited than U.S. free speech jurisprudence. A recent case suggested that the High Court will not consider chilling effects as a prima facie breach of that freedom. The court may confront the question again, however, if a constitutional challenge is brought against the new legislation, as seems likely.
Australia’s Take on a Global Issue
As Australian politicians repeatedly emphasized while the legislation moved toward passage, foreign interference in democracies is a growing global challenge. Russian interference in the 2016 U.S. election prompted governments around the world to give the issue greater attention and provoked a raft of legislative proposals. In many countries, however, the focus has been on intermediaries such as Facebook, pressuring social media platforms to stem the tide of fake news and to provide greater insight into political communications during elections.
While charges have been filed against 13 Russians for interference in the U.S. election as part of the Mueller investigation, public efforts to prevent similar activities—within the U.S. and elsewhere—have largely aimed at getting social media companies to better police the content on their platforms. There have been no big moves to amend FARA, but legislation has been drafted to require greater transparency for political advertising on social media. Public pressure has prompted Facebook, Google and Twitter to adopt transparency schemes and to devote more resources to cleaning up foreign interference on their platforms. The European Union has similarly targeted the social media platforms, threatening regulation if they fail to satisfactorily tackle the problem of disinformation on their sites. Germany has passed laws that expose these companies to steep fines if they fail to remove certain offending material within 24 hours.
By contrast, the Australian legislation, on its face, seems not to target social media companies. This may be because little is known about the extent of misinformation on social media platforms in the country—the companies are notoriously reticent about data sharing, and extensive academic studies in the U.S. have shed light only on small slivers of the problem. But if little is known about how misinformation spreads in the U.S., there has been even less study of it in smaller markets such as Australia. The recent report by Australian intelligence agencies that apparently stoked fears of Chinese influence operations and triggered the legislation has not been made public.
Australia may also lack leverage. Efforts to pressure multinational internet giants have not always proven successful—a recent dispute with Amazon about local tax rules resulted in Amazon restricting Australian customers’ access to its global stores.
It is possible, though, that the laws might cover social media companies. Some have suggested that in certain cases, social media companies or some users may have to register under the new laws. Submissions from the Law Council of Australia during the public consultation process suggested this was a viable reading of the legislation, and the Labor Party highlighted this as a potential unintended consequence. It is unclear whether this is how things will operate. The uncertainty might be the result of lax drafting or strategic ambiguity. In one estimate, the government said it had budgeted for 500 registrations under the scheme. This would seem to be an underestimate if meant to cover all social media communications in Australia for the purpose of political influence in collaboration with any foreign political organization. But even if everyone liable fails to register, the “suite of investigative options” will remain on the books, ready to be used in cases the government decides warrant it.
x x x."
Australia passed national security and foreign interference laws at the end of June that Attorney General Christian Porter has called the country’s biggest counterintelligence overhaul in decades. The legislation includes tougher penalties for traditional espionage activities—such as leaking classified information and interfering with public infrastructure—along with sweeping provisions aimed at combating foreign interference and a registration scheme for agents of foreign political actors.
The laws are part of a package: The National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018 amends Australia’s Federal Criminal Code to introduce the new national security offenses, and the Foreign Influence Transparency Scheme Act 2018 establishes a registration scheme for communications activities undertaken on behalf of or in collaboration with certain foreigners. The Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, which has yet to be passed, would ban foreign political donations along with other changes to electoral laws. The laws come at a time when governments worldwide are considering how to combat foreign interference in domestic politics. Australia’s legislation represents an aggressive approach, potentially covering a wide range of political expression without presenting any proof of harm or illegitimate foreign interests. Notably, in contrast to many efforts in other countries, the Australian legislation does not directly address the role of social media in spreading foreign interference and disinformation.
Background
First introduced into Parliament in December, the draft bills came under heavy criticism for broad definitions within the text that threatened to impose on journalists, charities, protesters and possibly academics new duties to register and disclose foreign contacts and potential liabilities for failure to do so. International human rights observers argued that the legislation would stifle legitimate political expression and chill efforts to hold government accountable. The American Chamber of Commerce in Australia even expressed concerns it would no longer be able to hold events in the country aimed at members of Parliament. Following these criticisms, an unusually large number of amendments were made through the committee process before the legislation was rushed through Parliament with bipartisan support in advance of special elections scheduled for the end of July. (The National Security Legislation Amendment and the Foreign Influence Transparency Scheme Act are law; the funding and disclosure reform, however, appears to be on the backburner.) The unusually compressed timeline has created additional uncertainty about the scope of the laws and their implementation.
As part of a media campaign to pressure the opposition to pass the legislation quickly, the attorney general warned that foreign agents were increasingly “causing general chaos in the context of elections” around the world and urged that the laws be put in place before Australia’s next large democratic event. He referred to Russian interference in the 2016 U.S. elections, as did Prime Minister Malcolm Turnbull when the legislation was first introduced.
Of course, neither the Russian troll factory that interfered in the U.S. presidential election nor the gatherings of the Chamber of Commerce are the legislation’s key targets. The legislation was drafted amid a political storm about Chinese influence in Australia after top-secret intelligence reports detailed extensive influence operations at all levels of government for the past decade, revelations in 2016 about millions of dollars in Chinese political donations, a scandal involving a senator’s relationship with a Chinese businessman, and concerns about the Chinese Communist Party monitoring and manipulating Chinese nationals in Australia.
Foreign Interference Offenses
Under the legislation, it is illegal for a person to knowingly engage in covert conduct or deception on behalf of a “foreign principal” (which is defined to include any foreign government, foreign political organization, or related entities or persons) with the intention of influencing an Australian political process, the exercise of a vote or prejudicing national security. The maximum penalty is 20 years imprisonment if the conduct was intentional or 15 years if done recklessly. Although an amendment clarified that mere “embarrassment” is not sufficient to prejudice national security, the terms used in the legislation are otherwise broad. National security is defined not only as the defense of the country but also its “political, military or economic relations” with other countries. This capacious definition could cover almost any political matter in which a foreign power might be interested.
It is also illegal to attempt to influence a target in relation to any political process or exercise of an Australian democratic right (which the legislation leaves undefined) on behalf of or in collaboration with a foreign principal if this foreign connection is not disclosed to the target. Again, the maximum penalty is 20 years’ imprisonment if done intentionally and 15 years if done recklessly. It is not necessary that the agent “have in mind a particular foreign principal” when engaging in the conduct. Here, too, the provision’s reach may be vast. It could potentially cover any attempt to persuade an Australian on a matter of policy if there is an undisclosed relationship with foreign principals or someone acting on their behalf.
Registration Scheme
A person who undertakes any general political lobbying or any kind of communications activity for the purpose of political influence on behalf of a foreign principal—that includes any foreign political organization—must register with the government within 14 days. Failure to do so is punishable by two to five years imprisonment, depending on whether the person knew she had to register. Again, the definitions are broad. Activities covered by the statute include those directed to any section of the public, and influence includes “affect in any way.” There is no requirement that actual harm or influence is shown before the offenses can be charged.
This scheme is modeled on the U.S. Foreign Agents Registration Act (FARA). The Australian scheme is narrower than FARA in some ways: The Australian definition of a foreign principal only includes foreign governments, political organizations, and related entities and individuals, whereas FARA defines a foreign principal as any non-U.S. person. But in other ways, the Australian scheme is considerably broader. This legislation does not include a FARA-style exemption from registration for those already registered as political lobbyists, and includes greater powers to ensure compliance, including powers to compel the production of information. This follows a recent U.S. Justice Department inspector general’s report on FARA, studied and referred to by the Australian Attorney-General’s Department, that found that evidentiary hurdles and lack of powers to compel production of records has significantly hampered enforcement of the act.
The Australian government has been quite open that the registration scheme is intended to be prophylactic—it aims not merely to catch people engaged in foreign interference (who are the targets of the new criminal offenses) but also to inform the public when foreign powers lobby politicians or engage in political influence through arrangements with agents that might otherwise be hidden. Throughout the progress toward passage of the legislation, the Attorney-General’s Department has affirmed Australia’s commitment to freedom of expression, saying that transparency requirements in the bills do not infringe it. The intention, the department has said, is to provide a “suite of investigative options.”
With such a broad reach, however, the potential chilling effect of the registration requirements is an obvious concern. Australia is the only Western democracy without a bill of rights. Although the High Court has found that there is an implied freedom of political communication inherent in the Australian Constitution, it is more limited than U.S. free speech jurisprudence. A recent case suggested that the High Court will not consider chilling effects as a prima facie breach of that freedom. The court may confront the question again, however, if a constitutional challenge is brought against the new legislation, as seems likely.
Australia’s Take on a Global Issue
As Australian politicians repeatedly emphasized while the legislation moved toward passage, foreign interference in democracies is a growing global challenge. Russian interference in the 2016 U.S. election prompted governments around the world to give the issue greater attention and provoked a raft of legislative proposals. In many countries, however, the focus has been on intermediaries such as Facebook, pressuring social media platforms to stem the tide of fake news and to provide greater insight into political communications during elections.
While charges have been filed against 13 Russians for interference in the U.S. election as part of the Mueller investigation, public efforts to prevent similar activities—within the U.S. and elsewhere—have largely aimed at getting social media companies to better police the content on their platforms. There have been no big moves to amend FARA, but legislation has been drafted to require greater transparency for political advertising on social media. Public pressure has prompted Facebook, Google and Twitter to adopt transparency schemes and to devote more resources to cleaning up foreign interference on their platforms. The European Union has similarly targeted the social media platforms, threatening regulation if they fail to satisfactorily tackle the problem of disinformation on their sites. Germany has passed laws that expose these companies to steep fines if they fail to remove certain offending material within 24 hours.
By contrast, the Australian legislation, on its face, seems not to target social media companies. This may be because little is known about the extent of misinformation on social media platforms in the country—the companies are notoriously reticent about data sharing, and extensive academic studies in the U.S. have shed light only on small slivers of the problem. But if little is known about how misinformation spreads in the U.S., there has been even less study of it in smaller markets such as Australia. The recent report by Australian intelligence agencies that apparently stoked fears of Chinese influence operations and triggered the legislation has not been made public.
Australia may also lack leverage. Efforts to pressure multinational internet giants have not always proven successful—a recent dispute with Amazon about local tax rules resulted in Amazon restricting Australian customers’ access to its global stores.
It is possible, though, that the laws might cover social media companies. Some have suggested that in certain cases, social media companies or some users may have to register under the new laws. Submissions from the Law Council of Australia during the public consultation process suggested this was a viable reading of the legislation, and the Labor Party highlighted this as a potential unintended consequence. It is unclear whether this is how things will operate. The uncertainty might be the result of lax drafting or strategic ambiguity. In one estimate, the government said it had budgeted for 500 registrations under the scheme. This would seem to be an underestimate if meant to cover all social media communications in Australia for the purpose of political influence in collaboration with any foreign political organization. But even if everyone liable fails to register, the “suite of investigative options” will remain on the books, ready to be used in cases the government decides warrant it.
x x x."
Subscribe to:
Posts (Atom)