CJEU rules on CMOs and freedom to provide services under EU law

Last week, the Court of Justice of the European Union (CJEU) delivered its ruling in LEA, C‑10/22. It held that the legislation of a Member State that completely prohibits independent management entities established in another Member State from offering their copyright management services within the former is incompatible with Article 56 TFEU read alongside Directive 2014/26.

Background 

Jamendo's cat is feeling left out...

Liberi editori e autori (LEA) is an Italian collective management organisation (CMO) authorized to conduct copyright intermediation within Italy. Jamendo SA, a Luxembourg-based company, functions inter alia as an independent management entity, authorising the use of musical works within its repertoire solely for the purpose of ambient background music in various settings, including shops, open spaces, and audiovisual productions. Jamendo's licensing operations are exclusively online and have included Italy since 2004.

LEA initiated legal proceedings against Jamendo before the Rome Court of First Instance (Tribunale di Roma) seeking to halt Jamendo's copyright intermediation activities in Italy. In its defence, Jamendo argued that Italy erroneously transposed Directive 2014/26, by providing that only designated organisations like SIAE have the right to engage in intermediation activities. 

According to Article 180 of Law No 633 on the protection of copyright and related rights: 

The activity of intermediary, however implemented, by any direct or indirect form of intervention, mediation, mandate, representation and even assignment for the exercise of rights of representation, execution, performing, broadcasting including communication to the public via satellite and mechanical and cinematic reproduction of protected works, shall be exclusively reserved to the Società italiana degli autori ed editori (SIAE, Italian Society of Authors and Publishers) and to the other collective management organisations referred to in [decreto legislativo n. 35 – Attuazione della direttiva 2014/26/UE sulla gestione collettiva dei diritti d’autore e dei diritti connessi e sulla concessione di licenze multiterritoriali per i diritti su opere musicali per l’uso online nel mercato interno (Legislative Decree No 35 transposing [Directive 2014/26/EU]) of 15 March 2017 (GURI No 72 of 27 March 2017; ‘Legislative Decree No 35/2017’)] […]

The court decided to stay the proceedings and refer to the CJEU for a preliminary ruling concerning the interpretation of Directive 2014/26.

AG Szpunar’s Opinion

In his Opinion, Advocate General (AG) Szpunar reasoned that Directive 2014/26 merely acknowledges the existence of independent management entities by way of defining them and imposing a set of obligations on them towards both rightholders and users, yet the Directive lacks any provision regarding the freedom of such entities to access the copyright management market. Thus, in order to provide an answer to the referred question the CJEU would need to consider other provisions of EU law with the AG focusing his analysis in the following three points. 

As a first argument, he argued that the Court had to assess if Jamendo could be regarded as an information society service provider falling within the scope of Directive 2000/31 (which, in turn refers to Directive 98/34). If this classification was deemed appropriate, then Article 3(2) of that directive prohibits Member States from restricting the freedom to provide services from other Member States, upholding the principle of the Member State of origin and mutual recognition between Member States. 

Alternatively, Jamendo's activities could be considered as a form of 'physical' provision of services. According to Article 16 of the Directive 2006/123, the freedom to provide services, once again, should preclude the Italian approach. However, Article 17(11) specifies that such freedom does not extend to certain sectors, including copyright and neighbouring rights, with the CJEU in its judgment in OSA [Katpost here] highlighting that this exclusion also applies to the activities of CMOs. Nonetheless, the AG — artfully — suggested a different interpretation of the article in point 73 of his opinion, stating:

[…] It follows from that provision only that Article 16 thereof does not preclude application of the substantive copyright law of the Member State of destination of the service or application of the service provider’s obligations, in particular as regards the authorisation required for the use of works. This interpretation is therefore similar to that of the analogous exclusion provided for by Directive 2000/31. By contrast, if the EU legislature had intended to exclude management services for copyright and related rights from the scope of Article 16 of Directive 2006/123, it would have expressly provided for this.

Finally, considering Article 56 TFEU and by revisiting the reasoning presented by the CJEU in the OSA case, independent management entities should not be excluded from engaging in copyright intermediation in Italy, as this activity can be conducted by various CMOs, whether national or established in other Member States.

...yet, now, it can enjoy
the Mediterranean sun as well.

The CJEU decision 

In its ruling, the CJEU opted to remain consistent with its established case law and rejected the applicability of Directive 2000/31 and, horribile dictu, Directive 2006/123, reaffirming AG Sharpston's stance that “collecting societies may be considered either not constituting services at all or constituting non-economic services of general interest” [see point 62 of her Opinion in OSA].

Predictably, due to the lack of any provision governing access by independent management entities to the activity of copyright management in Directive 2014/26, the Court centred its argumentation on Article 56 of the TFEU and the proportionality of the restriction, endeavouring to determine whether the Italian approach would be appropriate to achieve the public interest objective concerning copyright protection.

Ultimately, the Court ruled in favour of the liberalisation of the Italian intermediation market, assessing that the domestic provision in question would exceed what is required for the protection of copyright since it “wholly” precludes any independent management entity, irrespective of the regulatory obligations it must adhere to under the national law of the Member State where it is established, from exercising a fundamental freedom guaranteed by the TFEU.

Conclusion

The outcome of the case was largely predictable, although two observations must be made:

1) Despite reaching a verdict that benefits the well-functioning of the EU copyright management market (serving the interests of both LEA and Jamendo), the judgment represents a missed opportunity to rectify the flaws in previous case law, as pointed out by AG Szpunar in his interpretation of Articles 16 and 17 of Directive 2006/123. 

2) The decision adds to the growing list of provisions that raise concerns about the compatibility with EU law of certain national approaches, underscoring the need for reevaluation of the Member States’ discretion or “creativity” when transposing and interpreting EU law. [Other Italian examples: the copyright protection of works of applied art -see Katpost here for a comment on Flos and Cofemel- and more recently the press publishers’ related right - see Katpost here.]