Private copying levies in Spain and that new CJEU reference

Javier Ramirez

As reported by this blog, last week the Spanish Supreme Court referred two questions to the Court of Justice of the European Union (CJEU) asking whether fair compensation for private copying secured through annual public grants via the State budget is compliant with Article 5(2)(b) of the InfoSoc Directive. 

Invariably helpful Katfriend and private copying guru Javier Ramirez explains the preliminary views expressed by the Spanish Supreme Court at the time of making this reference. Here's what he writes:

“The Order of the Supreme Court dated on Sept 10 2014 was adopted in the context of an appeal filed by collecting societies EGEDA, DAMA and VEGAP against Royal Decree 1657/2012, of 7 December. This further developed the system of fair compensation that was enacted in Spain by virtue of the Additional Disposition 10ª of Royal Decree-Law 20/2011, of 30 December.

This alternative (publicly funded) system of fair compensation, which has been in effect since January 1^st 2012 in Spain is based on 2 key definitional factors:

o    First, compensation is no longer secured through copyright levies, which are phased out, but rather by means of direct payments to the representative collecting societies made by the State from its public budget;

o    Second, the annual amount of such compensation can be only determined based on the estimation of the harm caused by the private copying exception.

This alternative system has been challenged by some collecting societies based on a number of arguments relating to national and EU laws. As a result the Supreme Court has decided to seek guidance from the CJEU.

Some Spanish media outlets have reported that the Supreme Court considers that the Spanish system of fair compensation does not conform to EU law and that the legislative process to reform the Copyright Act has been suspended. However such reports are misguided, as can be clearly read in the press release (in Spanish) published by the General Council of the Judiciary, which suggests that the Spanish Supreme Court seems in principle more inclined towards  the legality of this alternative system of compensation.

Really? What did the Supreme Court say?

Yes, thinks the Spanish Supreme Court.
But, still, why not asking the CJEU?

The first issue was to determine the admissibility of any preliminary questions from a procedural perspective. The Supreme Court started by analysing the compatibility of the relevant Royal Decree with national laws (including claims of unconstitutionality), and concluded that there was no finding of incompatibility with the Spanish Constitution or other national laws.

Then, the Supreme Court assessed the different arguments raised by the parties to support the compatibility or incompatibility of new Spanish alternative system of fair compensation with article 5(2(b) of the InfoSoc Directive.

In this respect, first, the Supreme Court agreed with the public prosecutor that the bone of contention is whether the requirement provided by the CJEU that the financial burden of the fair compensation has to rely on the end-users making private copies (see Padawan, paragraphs 45 and ff.; Stichting de Thuiskopie, paragraphs 26 and ff; Amazon, paragraphs 23 and ff.; ACI Adam, paragraphs 51-52) is specific to compensation schemes based on levies or if, otherwise, such requirement would apply whatever the alternative system of compensation chosen by a Member State is.

Secondly, the Supreme Court found that a close reading of the judgments of the CJEU which have dealt with this requirement do not make it apparently clear or evident that such a requirement is only applicable to levy-based systems. This would result from the reasoning order followed by the CJEU in those decisions, when stating that requirement and assessing whether copyright levy systems established around device based levies meet the standard of the burden of fair compensation falling upon the end-users who make private copies.

Notwithstanding the foregoing and as a third point, the Supreme Court stated that none of the prior decisions of the CJEU dealt with a system of fair compensation other than levies. Therefore, the CJEU has not had the opportunity to declare whether a Member State may pay such compensation from its public budget. The Supreme Court also noted that the Directive does not prescribe levies to be the form or mechanism to determine and provide the fair compensation. Actually, levies are not even mentioned in the Directive. In the Supreme Court’s view, according with the Directive and case law of the CJEU, the compensation has to be fair, and consequently must be based on the harm suffered. Furthermore it must reflect a “fair balance” between the interest of the right-holders and the users.

A truly shocked Bruno has just found out that
the word 'levies' is not
mentioned once in the InfoSoc Directive

The Supreme Court acknowledged that paying the fair compensation through the State Budget may achieve those objectives, because the economic interest of the right-holders is satisfied and users also benefit.

Fourthly, the Supreme Court does not find that payment of the fair compensation through public budget has a negative impact on the internal market because (i) it cannot be deemed to be a public aid in favour of businesses and (ii) it is not evident that having levies in some Member States and a system of compensation through public budget in Spain will result in any market distortion, because after all other Member States may opt for not authorising private copying at all.

Consequently and because the issue of whether users of private copies must necessarily take the financial burden of the compensation is not “acte clair” and there is no judicial remedy under national law against its decision, the Supreme Court decided to seek clarification from the CJEU.

Legally speaking, no other consequences should be read from or into this Order. The Ministry of Education, Culture and Sport indicated the same position in the press release published in response to alarmist media news reporting.

However, the Spanish referral may potentially have a wider impact on the European Economic Area, because public funding has been also an established mechanism of private copying compensation for nearly a decade under the Norwegian Copyright Act (see section 12, as amended in 2005). Other EEA countries are also opting for alternatives to copyright levies (eg the United Kingdom, by considering that harm for right-holders of a narrow private copying exception is minimal and/or compensation can be factored in to the prices of original content).

Let’s now see how this new reference concerning the litigious subject of fair compensation for private copying [this one makes 9^th case to be resolved by CJEU on this subject since 2010!] progresses before the CJEU.”