Since 2012, through Royal Decree 1657/2012, the private copying levy for private copying in Spain has been covered by public funds, that is, by an annual fixed allocation from the national budget.
As a consequence of the application of the system of public financing, Spanish copyright management entities received annually 5 million Euro from the national budget, compared with 115 million Euro received before Royal Decree 1657/2012 was passed.
In 2013, three copyright management entities (EGEDA, DAMA and VEGAP) filed a claim requesting the annulment of said Royal Decree and therefore, of the public financing system, on the understanding that the private copyright levy must not and cannot be financed by public funds, and instead should be funded by the consumers of private copying.
The matter has been resolved by a judgement passed by the High Court on 10th November 2016.
The judgement of the High Court refers to and ratifies the contents of a decision of the Court of Justice of the European Union of 9th June 2016, pursued by the High Court itself by means of the request for a preliminary ruling. The judgement of the Court of the European Union concluded that the Spanish system did not guarantee that the cost of the fair compensation was to be ultimately funded by the consumers of private copying. The Court noted that even if it is possible for the public financing of the remuneration from private copying, this would only be compatible with Directive 2001/29 when the financing system guarantees that the payment of such compensation in favour of the holders of the intellectual property rights falls upon the consumers of private copying and furthermore complies with the objective of offering a high level of protection of intellectual property, as is the case with the systems in place in Finland and Norway. In the same way, said judgement indicated that the State cannot ultimately be the effective debtor of the levy, and accordingly, declared that the Spanish financing system of the new private copying levy is not able to guarantee that the cost is born only by the consumers of private copying given that the budget allocation dedicated to the payment of the levy is provided for in its totality by the resources of the national budget, or in other words, the money of all tax payers.
Thus, the High Court has clearly stated the following:
a) The problem posed is a matter of European Union law.
b) It recognises that making the system of public financing of the levy compatible with community regulations is a difficult task, since under the Spanish legal system there is no allocation of specific income to determined expenses. That is to say, the money raised by taxes forms part of a common purse which in turn is redistributed according to different criteria, regardless of the origin of the funds. Bearing this in mind, the Spanish system of financing the levy is incompatible with the European Directive 2001/29.
c) In a broader sense, although equally reasonable, the High Court makes it clear that when a national regulation is contrary to community legislation, it must be discarded irrespective of whether it may also be unconstitutional (see the judgement of the Simmenthal case (C-106/77). Said judgement answered the request of the State Attorney to suspend the judicial proceedings until the Constitutional Court stated its decision regarding the possible unconstitutionality of the attacked regulation. Therefore, the judgement declares the Decree Law 1657/2012 null.
d) Likewise, it declares the three copyright management entities procedurally legitimate, given that their action pursues the annulment of a system which clearly harms their income. For example, CEDRO, although it was not one of the claimants, went from collecting 20 million Euro per year with the former system to barely 1 million Euros afterwards.
e) In view of the above point a), it rejects the arguments and reproaches of the claimants against the disputed regulations based only upon national law, which it considers “unjustified, or at least, non-conclusive”.
f) Contrary to what the claimant copyright management entities claim, the High Court justifies the use of the Royal Decree as a legislative means to introduce the private copying levy, given the “undeniably serious and exceptional” economic situation prevailing in Spain in the year 2012.
g) It declares that, in light of the above referred to judgement of the Court of Justice of the European Union, the Spanish system lacks effective legal grounds and consequently is null.
This being the case, the Government should formulate, as appropriate, a new system of public financing compatible with community regulations, or abstain from doing so and thus allow the copyright management entities to carry out their fundraising function, without the intervention of the State.
Eduardo Vilá
Vilá Abogados
For more information, please contact:
25th November 2016
