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European Parliament’s culture committee demands action from European Commission on “reciprocity” approach to international royalties

By | Published on Wednesday 3 November 2021

European Union

The Chair of the European Parliament’s culture committee has asked the European Commission for clarity on when it will launch its study into the impact of a copyright ruling in the European Union courts last year regarding the flow of recording royalties between countries.

The EU’s Commissioner For The Internal Market, Thierry Breton, announced such a study would be launched in July, but since then there has been no progress. And culture committee chair Sabine Verheyen says “time is of the essence if we want to avoid a financial disaster for the music sector”.

This all relates to how income collected by the record industry’s collecting societies, when recorded music is broadcast or played in public, flows around the world. Each country has its own collecting society which collects royalties from broadcasters, and other businesses that use music in public, from within that country, and then passes that money onto the performers and labels involved in each track.

Although, if the music that is broadcast or played was recorded and released by performers and labels in other countries – who are not members of the society in the country where the recordings are being used – the money is usually paid over to a counterpart society in the home country of those performers and/or labels. Simple.

But there is a complication. In a handful of countries, copyright law does not provide the owners of sound recordings with as much control as you’d expect under other copyright systems. For example, under US law, there are no general performing rights as part of the sound recording copyright, meaning copyright owners have no control over the use of their music on radio or in public spaces. Which in turn means that radio stations – and pubs, clubs, bars etc – that play recorded music don’t need a licence from, or to pay any royalties to, the record industry.

That poses the question, if no radio and public performance royalties are flowing from – say – the US to Ireland, should the Irish collecting societies still send royalties back to the US? Different countries have different approaches in this domain – and sometimes the rules are different for the royalties due to labels and the royalties due to performers (this being a revenue stream where, in most countries, the monies are split between the copyright owners and anyone who performs on a record).

This very question – in relation to Ireland – ended up in court as part of a dispute between the Irish society for labels – PPI – and the Irish society for performers – RAAP. Ireland previously employed what is know as the ‘reciprocity approach’ when it comes to performer royalties, meaning that monies collected in Ireland are not shared with performers in countries where no royalties are collected due to limitations in local copyright law. So, no money was flowing from Ireland to the US.

As part of the PPI/RAAP dispute, the question was raised as to whether that reciprocity approach was actually allowed under European law and/or according to the EU’s interpretation of the global copyright treaty that covers these things. The Irish courts bounced that question up to the EU courts which answered “no“.

The EU court basically said that because the specific European directive relevant to the Irish case didn’t mention the reciprocity approach, EU member states couldn’t apply it. The previous assumption – actually backed by the European Council – was that because the relevant directive was silent on reciprocity, EU member states could apply it if they wanted to.

The ruling was welcomed by US collecting society SoundExchange, which has been busy calling for an end to the reciprocity approach around the world, arguing that countries that operate such a system have incorrectly interpreted the aforementioned global copyright treaty. SoundExchange also wants the UK – which likewise operates a reciprocity approach for artist royalties – to also alter its system, a call backed by some British musician groups.

However, there have been plenty of critics of the EU court’s ruling within the European music community, who argue that it will result in monies unfairly flowing out of the European record industry over to the US, while there remains no return royalty flow because of the ongoing limitations in American copyright law.

Critics of last year’s judgement have pointed out that the ruling in the PPI/RAAP case was based on the relevant European directive being silent on this issue. So one quick solution would be to end the silence, ie amend the directive so to clarify that member states can employ a reciprocity approach if they so wish.

Earlier this year, various MEPs in the European Parliament – in particular Spanish MEP Ibán García Del Blanco – called on the European Commission to investigate the impact of the PPI/RAAP ruling, and what measures could be taken to mitigate that impact. In response, Commissioner Breton announced that a study would be instigated.

But with that study still not underway, culture committee chair Verheyen has now requested that the Commission answer a three-part question on this issue.

Verheyen’s formal query in the European Parliament states: “Over a year ago the Court Of Justice of the EU delivered its ruling in [the PPI/RAAP case]. Since then, the Commission has repeatedly been warned of dire consequences for European music performers and producers’ revenue were it not to amend [the relevant directive]. An initial question on this issue was tabled by MEPs in April 2021. Commissioner Breton replied in June to confirm that the Commission was aware of the sector’s concerns and that a study would be launched shortly”.

“It is now several months later and yet there has been no study”, the query continues. “As the court explained, the directive can simply be amended to confirm reciprocal treatment for European performance and broadcast rights. Time is of the essence if we wish to avoid a financial disaster for an already struggling music sector which is only just starting to see some light at the end of the tunnel after the COVID-19 crisis”.

With all that in mind, the query asks “When will the study be launched? Will the Commission propose amending the directive to confirm reciprocal treatment for performance and broadcast rights; if so when and if not why not? [And] will the Commission then compensate performers who lose revenue due to its failure to take action?”

Commenting on the formal query, Verheyen says: “Time is of the essence if we want to avoid a financial disaster for the music sector which is already struggling due to COVID, so we are asking for responses and action from the European Commission”.

Commenting on the formal query, Verheyen says: “Time is of the essence if we want to avoid a financial disaster for the music sector which is already struggling due to COVID, so we are asking for responses and action from the European Commission”.

Meanwhile Del Blanco adds: “The solution is straightforward, the EU court itself indicated that the relevant directive can simply be amended to re-confirm reciprocal treatment for European performance and broadcast rights. Let’s get it done and not lose more time”.

Among those campaigning for that change to the relevant directive to be made is IMPALA, the pan-European organisation for the independent music community.

Its Executive Chair Helen Smith says: “It’s been a year since we flagged that this ruling could cost European producers and performers 125 million euros a year in broadcast and public performance income to the USA alone. We look to the EU to get the directive clarified urgently, now is really not the time for the music sector to lose that kind of money”.