Introduction
In January 2019, Recorded Artists Actors Performers Ltd (RAAP) challenged the legality of the Irish copyright act regarding the distribution of the equitable remuneration in the Irish High Court, alleging that the Irish law was contrary to EU law. The case was referred to the European Court of Justice (CJEU), which oversees the implementation of EU law. On 8 September 2020, the CJEU confirmed that EU law gives all recording artists the right to a share of the payments generated when their music is played on radio or in public premises in the EU, thereby inviting the Irish legislator to rewrite its law.
Background – what is equitable remuneration?
Equitable remuneration is a sum paid by broadcasters and other users of sound recordings (like shops and pubs) to “performers, or to the producers of the [sound recordings], or to both”1 for their use of those recordings.2 In practice, collecting societies representing labels and/or performers collect the remuneration from broadcasters before distributing it to the stakeholders they represent.
Equitable remuneration is a legal concept that derives from the 1961 Rome Convention. Upon its signing, the Rome Convention allowed a contracting state to declare that it would not apply the equitable remuneration system, entirely or in part, for certain uses, certain states or subject to certain reciprocity provisions. These are known as reservations. Other international treaties on copyright, including the WIPO Performers and Phonogram Treaty of 1996 (the WPPT), have since fine-tuned the concept, but all subsequent treaties continued to let contracting states apply reservations to this right.3
Equitable remuneration in the European Union
Subsequently, the concept of equitable remuneration was imported from International law into EU law. This was chiefly done by mirroring the concept in the copyright treaties mentioned above, within an EU directive: the Rental/Lending Directive.4
In terms of scope, the Rental/Lending Directive provides that equitable remuneration shall be paid when a recording, published for commercial purposes, is used for broadcasting wirelessly or for any communication to the public, and that it shall be shared between artists and record producers. Crucially, the Rental/Lending Directive makes several references to the Rome Convention but never refers to the possibility of making reservations under the Rome Convention.
The key issue
The issue that the CJEU had to examine was fundamental to intellectual property law because it required an analysis of the relationship between an international IP system and a European one. This is no easy task, especially where the rules emerging from both systems are sophisticatedly entangled. Further, the rules are also the legal basis used for over 40 years by European collecting societies to deny equitable remuneration to certain non EU-based performers, particularly to those based in the United States. Outside of Europe, Japan, Argentina and Australia also deny royalties to U.S. musicians on the basis that they don’t receive royalties for their music artists from U.S. FM or AM radio play, nor from U.S. businesses playing their songs in public.
The decision of the CJEU effectively hinged on the following question: what effect should the existence or the absence of reservations in international copyright treaties have under EU law? Further to a detailed analysis, the Court concluded that the existence or the absence of reservations was unable to produce any effect in the European legal system because the instrument having implemented the concept of equitable remuneration at EU level (the Rental/Lending Directive) is silent on this issue.
The ruling recognised the existence of the principle of proportionality under International law, according to which a state could refuse to share equitable remuneration with certain nationals, but determined that it had not been mirrored in EU law, thereby making its application impossible within the EU, save for a decision of the EU legislator to rectify this oversight.
What does this mean for the music industry?
The Court’s decision has positive consequences for all performers, especially those based in the United States whose music is very popular in Europe, as they will now be able to share in the public performance, broadcast and webcast royalties generated by their music in the EU.
The decision is also likely to have a significant effect on record companies and labels based in the EU, which, until now, had shared undistributed revenue in ways that tended to enhance their investment capacity, according to their market share. By way of example, in Ireland, PPL primarily shares undistributed revenue to its members, and also donates a share towards funding new music and talent development.5 In the UK, the Performing Right Society adds undistributed revenue to the overall amount available for distribution to its members.6 In practical terms, this is likely to mean that collecting societies in EU countries will have to adjust their distribution rules to accommodate the new rights. In some European markets, it will mean significant changes to how the previously undistributed payments are allocated with some collecting societies acknowledging that the loss, for local players, will be in the millions.
What happens next?
The next step is for the governments of individual EU member countries – not including the UK, which left the EU on 31 January – to adapt their laws in response to the Court’s decision.
Given the CJEU’s nod to the EU legislature, there is also scope for the introduction of a new EU law that allows member states to limit the right to equitable remuneration in situations where another state has made a reservation under the WPPT. However, the EU may be reluctant to produce a new EU-wide copyright text, given that the European Copyright Directive7 has only recently been introduced.
- Article 12 of the Rome Convention 1961: “If a phonogram published for commercial purposes, or a reproduction of such phonogram, is used directly for broadcasting or for any communication to the public, a single equitable remuneration shall be paid by the user to the performers, or to the producers of the phonograms, or to both. Domestic law may, in the absence of agreement between these parties, lay down the conditions as to the sharing of this remuneration.”
- In the UK, it is the Copyright, Designs and Patents Act 1988 (UK Copyright Act) that accorded performers the right to receive equitable remuneration when a sound recording is communicated to the public by broadcasting or otherwise.
- By way of example, according to article 15, section 3 of the WPPT, any contracting party can declare that it will apply these provisions only in respect of certain uses, or that it will limit their application in some other way, or that it will not apply these provisions at all.
- Article 8(2) of the Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006: “Member States shall provide a right in order to ensure that a single equitable remuneration is paid by the user, if a phonogram published for commercial purposes, or a reproduction of such phonogram, is used for broadcasting by wireless means or for any communication to the public, and to ensure that this remuneration is shared between the relevant performers and phonogram producers. Member States may, in the absence of agreement between the performers and phonogram producers, lay down the conditions as to the sharing of this remuneration between them.”
- Phonographic Performance Limited – Transparency Report 2019.
- Rules and Regulations of the Performing Right Society Limited 2020.
- Directive (EU) 2019/790.
Client Alert 2020-549
