In our 3 part video series on Brexit implications for media businesses we touched on some of the issues which the industry will be working on over the next two years to try to ensure that the UK’s intended departure from the EU passes as smoothly as possible. In this article we touch on one particularly thorny issue, the possibility of a Brexit reciprocity gap in the media sector. If this were to happen it could leave some UK-based media businesses at a significant competitive disadvantage compared with equivalent businesses based in the EU. We explain the issue below, and suggest that it is likely to be a key focus for media businesses in their engagement with Government in the short to medium term.
The Great Repeal Bill and its possible consequences
The UK Government’s stated intention is for a Great Repeal Bill to be introduced into Parliament shortly, but only to become law when the UK actually exits the EU. On 29 March 2017, the UK Government served formal notice under Article 50 of The Treaty on European Union to terminate the UK’s membership of the EU (following the June 2016 UK referendum on EU membership). Based on Article 50, the EU Treaties shall cease to apply to the UK and the UK exit will take effect in March 2019 (subject to the unlikely possibility of the withdrawal agreement being concluded sooner and unless all Member States agree to extend the period). Negotiation of a new trade agreement with the EU could take several years beyond 2019 although the Prime Minister has declared the objective of achieving such an agreement within the two-year period.
The title of the Bill itself is something of a misnomer. It might more accurately (but less palatably) have been named the Great EU Law Continuation Bill. The Bill is intended to do two things:
- repeal the European Communities Act 1972. This step is of course of great constitutional and political significance, but would not occur until the UK leaves the EU.
- “convert existing EU law into domestic law, wherever practical” [David Davis, Secretary of State for Exiting the EU]. This would have more immediate practical consequences, since it would define what UK law consists of the morning after Brexit.
The reason for the second limb is to avoid the chaos that would ensue if, overnight, the numerous aspects of EU law which affect business and life in the UK were to be abolished. By maintaining much of the status quo, continuity would be maintained without fettering the ability of Parliament to diverge from EU law in the future on an issue by issue basis.
The qualifier ‘wherever practical’ is in effect a third limb of the Bill. There are many aspects of EU law, particularly those that depend on mutual or reciprocal recognition between EU Member States, that do not lend themselves to simple conversion and continuance, as they could result in different treatment for EU-based businesses in the UK compared to UK-based businesses in the EU. If such a reciprocity gap is to be avoided, these kinds of law will have to be dealt with on a customised basis, either by exclusion from the Bill or via the many statutory instruments that the Government envisages will be required. There are a number of areas of media law and regulation to which this applies.
Reciprocity gaps might arise in the following way:
- A number of media sector EU directives and regulations create systems of mutuality or reciprocity whereby, for example, a clearance obtained in one EU member state is valid for the whole of the EU.
- Post-Brexit, simple conversion and continuance of existing EU law in the UK would mean that a clearance obtained in, say, France would have to be recognised as valid in the UK: because the Great Repeal Bill would have the effect that the UK would continue to follow the rule applicable to the rest of the EU.
- However, the opposite would no longer be true; a UK clearance would, on the face of it, no longer be good in France, because the EU rule only requires France to accept clearances obtained in other EU member states.
- So, a simple conversion and continuance would likely penalise UK-based media businesses and operate as a direct disincentive for them to establish themselves (or remain) in the UK.
The reciprocity gap issue may arise in at least the following areas of relevance for the media industry:
- Broadcast regulation – under the AVMS Directive, broadcasters obtain broadcast licences in their ‘country of origin’ in the EU and cannot (with a few exceptions) be subject to more stringent regulation elsewhere. A simple Great Repeal Bill would force UK headquartered broadcasters to either relocate or select a second ‘home’ territory within the EU, but allow broadcasters in the remaining EU member states to continue to benefit from AVMS protection in the UK.
- Multi-territory online music licensing – the regime in Title 3 of the Collective Rights Management Directive allows one EU collecting society to mandate another to represent its repertoire in relation to online multi-territory music licensing. Post-Brexit, PRS for Music (the UK society affected) could be required to represent the repertoire of a smaller EU society without it having the ability to rely on the protections of the Directive (or indeed the reciprocal right to mandate an EU-based society).
- Cable TV – the mandatory collective licensing provisions applicable to cable retransmission in the Satellite and Cable Directive will continue to benefit EU broadcasters, whereas retransmissions of UK originated content will need to be cleared individually (potentially on a territory by territory basis).
- Satellite TV – the single point of clearance for satellite broadcasts based on the ‘place of uplink’ rule will cease to apply to UK satellite broadcasters (potentially forcing them to uplink from a remaining EU state), whereas EU originated broadcasts will continue to be treated as cleared for the UK.
- Digital Single Market reforms – a number of current legislative proposals from the Digital Single Market reforms incorporate similar forms of mutuality-based systems, including the draft Content Portability Regulations and the draft regulations in relation to the clearance of copyright for ancillary broadcasts online.
- Exhaustion of rights – at present the UK treats any sale of a copyright-protected work with the rightsholder’s consent in the EEA as exhausting the distribution right. If, as is the Government’s intention, the UK does not become part of the EEA post-Brexit then an amendment to the Copyright Designs and Patents Act will be required; without it, sales in the UK would not be treated by the EEA states as relevant for exhaustion purposes, but sales in the EEA would exhaust rights for the UK.
This issue is not, of course, unique to the media industry. It will arise both in relation to laws which particularly affect other sectors of the economy, as well as those which apply more generally (such as the rules in relation to recognition of judgments from other EU countries).
How these issues should be addressed will require careful thought. If EU laws which rely on mutuality systems of the kind referred to above are excluded from the Great Repeal Bill, either generically or by a list of specific laws, that could bring problems of its own for UK companies that also have establishments elsewhere in the EU. But, anything other than a unilateral approach would add to the UK Government’s crowded negotiating agenda during the two year period following the giving of notice under Article 50 on 29 March 2017. If the UK media industry wishes to ensure that it is not placed at a disadvantage by the unintended creation of reciprocity gaps of the kind we have identified then it is likely to want to air these issues soon.
Watch our three part video series on Brexit implications for media businesses here.