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R (on the application of British Telecommunications plc and TalkTalk Telecom Group plc) v Secretary of State for Business, Innovation and Skills [2011] EWHC 1021
It’s certainly been end-to-end stuff so far. Half-time score: ISPs 1, copyright owners 2.
I’ll save you the blow-by-blow account, but it was early doors for the rights-holders when the Act was passed: it looked as if they’d landed a result against online piracy. But this is an Old Firm game: BT and TalkTalk popped up in the box with tricks in their locker – an application for judicial review of the Act before the High Court. A cynical challenge for some (and on a technicality), but they were back in the game.
Now, just when some were beginning to think they might be dead and buried, the rights-holders have edged ahead again: the ref, Mr Justice Parker, has waved the challenge away, and refused it on all grounds bar one (Ofcom’s costs).
The challenge
Admittedly, to some commentators, it did look a bit thin on paper. But it was a set piece in Beckham territory: the Government had opened themselves up for attack from the off. The Act was rushed through in the dying minutes of the last Government. There were always questions to be asked of their defence: difficult calls to be made on issues of net neutrality, data privacy and competing human rights, not to mention technical points of law on implementation steps and cost consequences.
All these came to light in the application for judicial review of the Act’s provisions relating to online infringement of copyright.1 The provisions in question require ISPs: (a) to send warning letters to subscribers reported by rights-holders as infringing copyright; (b) to provide rights-holders with lists of serious repeat infringers; and (c) if secondary legislation is passed, to take technical measures against serious repeat infringers to limit their internet access.
The committed fans pitched up. There were ten interested parties supporting the Government – all rights-holder or creative-industry organisations, including the BPI, the MU, Equity, PACT and the Football Association Premier League. There were two interveners supporting the ISPs: one consumer body, Consumer Focus, and a charity campaigning for freedom of expression, Article 19.
Let’s look at the replay
To find your way through this densely packed midfield, it’s simplest to take each of the five challenges in turn. The outline below just focuses on the main issues at stake and the high-level reasoning of the High Court; the ISPs raised several other highly technical arguments that were rejected by the Court.
1
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Technical Standards Directive2
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The ISPs argued that the provisions amount to a technical regulation and/or rule on services within the meaning of the Technical Standards Directive, and so should have been referred to the EU Commission in draft,3 and that the previous Government’s failure to do so rendered the provisions unenforceable at national level.4
This proved to be an own goal. Parker J found that the "initial obligations" under the Act (concerning warning letters and copyright infringement reports) are not yet legally enforceable against any person: they depend for their content and effect on the publication and enactment of Ofcom’s Initial Obligations Code. So, while the Code will constitute a notifiable regulation in due course, there is no need to notify the Commission yet. Accordingly, the provisions do not fall foul of the Technical Standards Directive.
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2
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E-Commerce Directive5
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The ISPs submitted that the provisions are incompatible with the E-Commerce Directive.
This was a brace for the rights-holders. Parker J ruled that the provisions are not incompatible with the "mere conduit" immunity under the Directive:6 there is no liability for the actual information transmitted (i.e. no liability for the actual underlying infringement of copyright). Nor do the provisions impose a general monitoring obligation on ISPs (which would be prohibited):7 nothing in the Act obliges an ISP to inspect or examine any information being transmitted; the ISP need only identify the wrongdoers.
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| 3 |
Data protection
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The ISPs suggested that, in requiring copyright owners to process subscribers’ personal data (and without their consent), the provisions are incompatible with privacy requirements under the Data Protection Directive8 and the E-Privacy Directive.9
The rights-holders were on a hat-trick. The judge found that the processing of personal data fell within the scope of the exemption permitting processing for the establishment, exercise or defence of legal claims.10 He also held that the processing of traffic data (while at first sight incompatible with certain e-privacy requirements11) fell within the relevant derogation, which could be construed as extending to measures to safeguard property.12
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4
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Proportionality13
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The ISPs contended that the provisions are disproportionate in their impact on ISPs, consumers, business subscribers and public intermediaries – representing disproportionate restrictions on the principle of free movement of services, the right to privacy and/or the right of freedom of expression and communication. The need for proportionality was submitted to flow from various sources of law, including the EU Treaty,14 the E-Commerce Directive15 and the E-Privacy Directive,16 taken with the EU Charter of Fundamental Rights17 and the European Convention on Human Rights.18
This challenge was pretty much given the hairdryer treatment (however politely expressed). Tackling the numerous arguments raised head on, Parker J was clear that the provisions do not amount to disproportionate restrictions. This was not a case involving a fundamental right on one side and, on the other, a “general utility or welfare”; in this case, the copyright owners’ countervailing interests are also recognised as fundamental rights (i.e. the rights to enjoyment and exploitation of property), so the courts should accord Parliament a “wide margin of discretion in weighing the competing rights”, especially where exercised after a lengthy process of consultation and full analysis of the economic evidence.19
In the judge’s view, Parliament, through current copyright legislation, has already struck a fine balance between (a) incentives to creators of copyright material and (b) consumer rights of access to copyright material (albeit at a higher price than would be payable in the absence of copyright protection).20 Parker J found that the Act represented "a more efficient, focussed and fair system” than the current Norwich Pharmacal system21 (under which rights-holders have to bring an application for a disclosure order in any case of suspected infringement, but without any straightforward way of identifying serious repeat infringers).22
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5
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Authorisation Directive23 and costs
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Finally, the ISPs complained that the provisions infringe the Authorisation Directive, which (among other things): (a) prohibits certain discriminatory treatment of electronic communications networks and services; and (b) limits certain cost burdens that can be imposed on ISPs by the communications regulator (currently, Ofcom).
The discrimination complaint fell on deaf ears. In the judge’s view, the proposed exclusion (under the draft Initial Obligations Code) of small-scale ISPs and mobile network operators from the scope of the initial obligations is not "discriminatory" under the Authorisation Directive: it is reasonable and proportionate for the Government to concentrate on larger ISPs in the first instance and to identify other individual ISPs on a case-by-case basis (where there are high levels of copyright infringement) – and, in any event, Ofcom must monitor levels of online copyright infringement, so it could alter the qualification criteria in the Code as necessary in future.
The first attempt on costs hit the woodwork. Parker J found that ISPs do not have unlawful cost burdens under the contested provisions or under the draft Costs Order24 (which is currently before Parliament) in relation to:
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the ISP’s own reasonable costs of carrying out its obligations under the regime (of which the ISPs are due to recover 75% from copyright owners); or
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case fees charged by the appeals body for each specific subscriber appeal received (of which the ISP concerned is due to bear 25%).
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But the position taken by the Costs Order on what it defines as “qualifying costs” was a stonewall penalty. Parker J ruled that ISPs should not be required to bear any part of Ofcom's or the appeals body’s costs of setting up, monitoring and enforcing the scheme: these would amount to administrative charges on ISPs extending beyond the exhaustive description of recoverable administrative charges under Article 12 of the Authorisation Directive (which are, in essence, limited to charges for Ofcom’s administration of its overall regulatory scheme). The judge distinguished these from: (a) the ISPs’ internal costs, as simply irrelevant for these purposes; and (b) the case fees, as arising in the case of a specific appeal involving a particular ISP and a particular copyright owner (and ensuring simply that the judicial vehicle under the Act is adequately funded). The draft Order provides for the ISPs to bear 25% of the qualifying costs, so it will need to be amended to give effect to the decision.
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Extra time?
No doubt, both sides will play until the whistle blows. On 27 May 2011, BT and TalkTalk sought leave to appeal the decision (other than the finding on Ofcom’s costs). They wanted to re-open all their grounds of challenge – apart from proportionality, on which they have recognised the High Court’s view that there is an exceptionally high threshold to show that the legislation is not a proportionate response before the Code of Practice is published. Leave to appeal was, however, refused.
The ISPs had previously indicated that they might ask the Court of Appeal to make a reference to the European Court of Justice. The odds, however, on a good run in Europe might be slim: anticipating this, Parker J remarked that an ECJ reference would serve no useful purpose, as the questions of EU law concerned have “clear answers”.25
A level playing-field
Even in the absence of an appeal (or a reference), there’s everything to play for – from both sides’ point of view. The High Court decision is by no means a golden goal for the rights-holders, even if the ISPs left their shooting boots at home on this occasion. The scrutiny required once Ofcom’s Initial Obligations Code is notified to the EU Commission will delay its publication yet further. This could delay plans to send out warning letters, which were expected later this year. The technical measures are some way off: even if implemented at all, they would not take effect until at least a year after the initial obligations begin. It remains unclear whether the Coalition Government will favour the robust technical measures that were favoured by the last Government. In any event, it is uncertain how effective the Act will be in combating online piracy – and that can only become clearer in practice (and when assessed in tandem with improved educational campaigns and an expanded legitimate online market, as emphasised in Professor Hargreaves’ recent report26).
But this game needs a goal, and the issue at stake – online piracy – is no well-worn cliché. The creative industries are literally in trouble – and here “literally” doesn’t mean metaphorically, like it does in match commentary. For instance, research conducted by Harris Interactive for the BPI’s Digital Music Nation 2010 report suggests that, while the number of UK users of peer-to-peer file-sharing software rose slightly, the use of non-P2P channels (in particular, overseas MP3 pay sites, MP3 search engines and cyberlockers) is rising significantly, and that more than 75% of music downloaded in the UK is illegally downloaded. The potential for displaced sales is, to all intents and purposes, self-evident (and also supported by appropriate evidence).27 Parker J is surely not wrong in describing the situation as “a major problem of social and economic policy”,28 nor is he exaggerating the scale of the opportunity-cum-challenge presented by the internet as being “the most prodigious tool for the transmission and interchange of information and other material ever designed”.29
Kicking the ball into the long grass is clearly a temptation, but one that should be resisted in the interests of reaching a fair result for businesses and consumers alike. The precision balancing exercise between the competing interests doesn’t have a simple answer, and raises difficult issues of law: that much is clear. But the strike is not at an impossible angle – even if requiring inventiveness and subtlety out of the top drawer. At the end of the day, perhaps the real problems can only be resolved on the ground, through the detailed implementation of the regime. As Professor Hargreaves has observed: “The strong online enforcement measures made possible by the Digital Economy Act should be carefully monitored so that the approach can be adjusted in the light of evidence.”30
This need not mean that, as some commentators fear, ISPs and consumers will be “robbed”. The Act seems to be widely misunderstood: households will not have their internet access disconnected merely on rights-holders’ say-so. There has been too little public commentary to date on the careful checks and balances set out in the detailed provisions (such as the requirements to lay secondary legislation before Parliament and to devise fair procedures and proportionate sanctions). Equally, rights-holders should be careful what they wish for, as a balance tilted too far in their favour (especially heavy-handed, indiscriminate deterrents) would alienate their customers. In providing a flexible framework under the Act, Parliament deserves more credit than it has received from either side to date.
If the High Court is correct, the rules of engagement are clear, and both sides can resume play and get on with the full 90 minutes. That is not to underestimate the several conundrums posed by the regime – how to deal fairly with open wi-fi providers (such as internet cafés and libraries) is a case in point, as is children’s use of home computers. But it would be premature to rule out a win-win situation for all concerned: the online networks and the content providers ultimately need each other.
As David Coleman or Big Ron might have put it, there’s potentially unlimited potential.
Ed Baden-Powell
Article written for Entertainment Law Review.
| 1 |
Sections 3 to 18 of the Act. |
| 2 |
Directive 98/34/EC laying down a procedure for the provision of information in the field of technical standards and regulations, as amended by Directive 98/48/EC. |
| 3 |
Under Art. 8 of the Technical Standards Directive. |
| 4 |
In accordance with Case C-194/94 CIA Security International [1996] ECR I-2201. |
| 5 |
Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market. |
| 6 |
Under Art. 12 of the E-Commerce Directive. |
| 7 |
Which would be contrary to Art. 15(1) of the E-Commerce Directive. |
| 8 |
Directive 95/46/EC on the protection of individuals with regard to the processing of personal data and on the free movement of such data. |
| 9 |
Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector. |
| 10 |
Under Art. 8(2)(e) of the Data Protection Directive. |
| 11 |
Under Art. 6 of the E-Privacy Directive. |
| 12 |
Under Art. 15 of the E-Privacy Directive. |
| 13 |
The judge took this fourth ground of challenge last in the judgment (dealing with the fifth ground in the fourth spot). |
| 14 |
Articles 6, 52, 56 and 61 of the EU Treaty (as amended). |
| 15 |
Art. 3(4). |
| 16 |
Art. 15.
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| 17 |
Articles 7 (right to respect for private life) and 8 (right to protection of personal data). It should be noted that the Charter rights only have effect under UK law to the extent that UK law provides for such rights in its national law. In effect, therefore, the Charter adds nothing to UK human rights law – a point on which there is no commentary in the judgment.
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| 18 |
Articles 8 (right to respect for private life) and 10 (right to freedom of expression and communication) – along with Directive 2009/140/EC, recital (4), which recognises that effective freedom of expression requires internet access.
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| 19 |
See paragraphs 212-215.
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| 20 |
At para. 249.
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| 21 |
Norwich Pharmacal v Customs and Excise Commissioners [1974] AC 133.
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| 22 |
Para. 228.
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| 23 |
Directive 2002/20/EC on the authorisation of electronic communications networks and services, as amended by Directive 2009/140/EC.
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| 24 |
Copyright (Initial Obligations) (Sharing of Costs) Order 2011. The legality of the Order was also challenged more widely by the ISPs, but only on grounds 2-5: ground 1 did not apply as the Order has been notified in draft to the EU Commission.
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| 25 |
Para. 264.
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| 26 |
Digital Opportunity, May 2011, at page 81.
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| 27 |
As Parker J found at para. 252.
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| 28 |
At para. 211.
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| 29 |
At para. 211.
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| 30 |
At page 6 of the Digital Opportunity report.
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