Select Committee on European Scrutiny Fourth Report



COM(01) 534

Commission staff working paper on certain legal aspects relating to
cinematographic and other audiovisual works.

Commission Communication on certain legal aspects relating to
cinematographic and other audiovisual works

Legal base:
Document originated: (b) 26 September 2001
Forwarded to the Council: (b) 27 September 2001
Deposited in Parliament: (b) 23 October 2001
Department: Culture, Media and Sport
Basis of consideration: (a) SEM of 18 July 2001
(b) EM of 31 October 2001
Previous Committee Report: (a) HC 152-i (2001-02), paragraph 13 (18 July 2001)
To be discussed in Council: 5 November 2001
Committee's assessment: Politically important
Committee's decision: (Both) Cleared


12.1  The Commission gave an undertaking in its 1999 Communication, Principles and guidelines for the Community's audiovisual policy in the digital age, to monitor the current regulatory framework closely, with a view to adapting it where necessary. When we considered the Communication, and the draft Council Conclusions on it which were subsequently adopted at the May 2000 Culture and Audiovisual Council, we concluded that the documents were relevant to any debate on the audiovisual content industry.[41]

The staff working paper

12.2  In April this year, the Commission issued a staff working paper to stimulate a debate on a number of legal and technical issues concerning the audiovisual industries. It invited views from all interested parties by 11 July. We considered it on 18 July when we noted that the former Minister for Tourism, Film and Broadcasting, Janet Anderson, had said in an Explanatory Memorandum (EM) dated 10 May, that the Department for Culture, Media and Sport was co-ordinating consultations within Government and the film and broadcasting industries. She commented that the extent and nature of the questions posed raised issues which could have a significant impact on these industries. She expected them to be "extremely interested" in the paper and to respond accordingly. We accepted that the policy implications of the document could not be fully assessed until the Government's consultation was complete and did not clear the document, but said that we would await the Supplementary EM which the Minister promised.

The Government's view on the staff working paper

12.3  The Minister for Tourism, Film and Broadcasting at the Department of Culture, Media and Sport (Dr Kim Howells) says, in a Supplementary Explanatory Memorandum dated 18 July, that the Department for Culture, Media and Sport co-ordinated an extensive consultation within Government and with industry and that the results would be sent formally to the Commission. He describes the main points to emerge from the consultation and comments:

    "—  we welcome the overall aims of the paper of increasing the circulation of European works, of strengthening the competitiveness of the audiovisual sector and of promoting cultural diversity. These aims fit well with the UK's strategy of supporting the creation of a sustainable and entrepreneurial British and European film industry and of generating structural change in the industry;

    "—  many of the issues raised in the Commission's paper are already, and properly, being dealt with in other fora or by other parts of the Commission. We would wish for this to continue. Examples include copyright, which is predominantly an economic matter for the Internal Market forum and tax issues which are, ultimately, the responsibility of ECOFIN rather than the Culture Council;

    "—  many of the issues raised in the Commission's paper should be left either for decision at national level or through the natural functioning of the marketplace. The proposal to create a registration scheme for European films, for example, would be expensive and could prevent exploitation of audiovisual material by becoming a pre-condition for marketing. A similar proposal to set up an international registration scheme under the auspices of the UN's World Intellectual Property Organisation failed through lack of interest and is now defunct;

    "—  there is no scope or need for the issues raised in the paper to be progressed by means of any form of new legislative action in the audiovisual sphere. The suggestion put forward in the Commission's paper that there might be advantage in regulating or harmonising the rating of films, for example, would not allow Members States to operate their own national schemes to reflect and promote their own cultural values. It would also be very difficult to create a unified regulatory system to take into account the differing requirements of the various national systems; and

    "—  consultation with the film and broadcasting sectors show that they hold similar views on most aspects of the approach taken in the UK Government response to the Commission's paper."

The Communication and the Government's view

12.4  The Communication sets out the Commission's broad policy on the technical and legal issues of importance to the development of the film and broadcasting sectors on which it consulted. Building on the consultation, it puts forward a number of proposals and sets out the principles which will guide it in the application of state aid rules to the cinema sector. The Minister summarises these in his EM and describes recent developments. First, he records that nearly 50 written comments were received from Member States, national regulatory authorities, trade associations, broadcasters (including the BBC), producers, directors and trade unions.

12.5  The Minister then notes that:

    "The Communication examines seven main areas affecting the audiovisual sector and puts forward action for each.

    "The Communication and the proposed action are broadly satisfactory to the UK Government. Importantly, there are no immediate proposals for new legislation or regulation; the Commission intends to examine most areas further by means of, for example, independent studies or establishment of groups of experts. The Communication was discussed at an informal Ministerial meeting in Mons at the beginning of October. All Member States welcomed the Communication and approved the open stance the Commission had taken in proposing to carry out further studies [on] the various issues under review.

    — Main Proposals

    "The Communication proposes further action in the following areas.

    State Aid

    "Current criteria for state aid to cinema and TV programme production will remain in place until 2004. Prior to then, the Commission intends to continue multilateral dialogue with Member States to discuss relevant issues connected with state support to cinema and TV production. The current state aid criteria for film are based on a 1998 ruling on the French system of aid. The ruling runs for six years. Essentially, aid intensity must be limited to 50% of a production budget. Difficult and low budget films are excluded from this limit: it is up to each Member State to establish a definition of difficult and low budget film according to national parameters.

    Protection of Heritage and Exploitation of Audiovisual Works

    "There are four separate issues addressed by the Commission under this heading:

      (i)  The legal deposit of audiovisual works

      "From the consultation process it was apparent that there is support for the need to preserve audiovisual, particularly cinematographic, works. But there was no support for a single European archive; deposits should be organised at national or regional level.

      "Since there was a lack of consensus on the type of measure appropriate to progress this matter, the Commission intends to carry out a stocktaking exercise later this year to assess the current situation in Member States. The Commission also intends to encourage cooperation and best practice between interested parties.

      (ii)  The creation of a registration scheme

      "The consultation resulted in support for the creation of public registers of film in Member States but at the Mons meeting of European experts at the beginning of October there was considerable opposition. The UK Government opposes any form of compulsory EU scheme. The Commission intends to carry out a stocktaking exercise later this year to assess the current situation in Member States.

      (iii)  Rightsholders database

      "There was a lack of support for the creation of a rightsholder database.

      (iv)  The exploitation of rights

      "There was a general consensus that this issue was more properly covered by the Copyright Directive (2001/29/EC) and should not therefore be addressed in the context of this consultation.


    "The UK Government believes that technical and commercial development of e-cinema should be taken forward by the recently established European Digital Cinema Forum (EDCF), of which the UK, with France and Sweden, was a founding force. There was widespread support for the EDCF in the consultation; the Commission also welcomes the establishment of the Forum. The Commission is also proposing that development of e-cinema be included in the EU Sixth Framework Programme for Research and Technological Development and in the pilot projects measure of the EU Media Plus programme.


    "The UK questioned the need for action at European level in respect of fiscal measures in force in Member States: support to particular sectors of the economy, such as cinema, is a matter for individual Member States.

    "A number of respondents to the consultation wish to have a reduced rate of VAT applied to cultural goods and services. This would require amendment to Annex H of the 6th VAT Directive. The Commission are due to review the list of goods and services in the Directive to which a reduced rate may be applied, but this will not [be] before the end of 2002. The Commission will consider whether to respond to the request for a reduction in VAT in the context of the review of the Directive. We will continue to stress that in any event tax issues are a matter for Ministers responsible for taxation and should be discussed in appropriate fora.


    "The UK line was that an EU-wide regulatory system was unnecessary since it would not cater for differing cultural circumstances. While most Member States took the same stance there was also support for increased co-operation between competent authorities and rating bodies to develop mutual recognition. (Various European regulatory bodies already meet to gain a better understanding of cultural and regulatory differences between Member States.)

    "The Commission intends to carry out a study during 2002 on the rating of films to evaluate the reasons for, and the impact of differences between, different national rating systems.

    Other Measures to improve the circulation of film

    "A number of ideas to increase the production and circulation of European films were suggested. The Commission intends to take these forward in two ways. They will create a group of experts to provide the Commission with information and ideas and information on the technological and market developments in the audiovisual production sector. The Commission will also launch an independent study to identify and evaluate financial flows within the European cinema industry based on data relating to films marketed between 1996 and 2000. The study will analyse the different phases — from pre-production through to distribution and export — and will also assess the impact and relationship between investors, film performance and revenues.

    Question to be considered in the 2002 review of the TV Without Frontiers (TVWF) Directive

    — Definitions

    "The consultation explored two matters concerning definitions: the definition of a European work and the definition of an independent producer. As regards the first, opinions were divided as to whether a more detailed definition should be provided in Community law, with some asserting this was not necessary while others called for harmonisation. The UK Government view is that there would be no value in developing further definitions. With regard to the definition of an independent producer, the general opinion was that the issue should be considered in the review of the TVWF Directive.

    "The Commission have not suggested specific action but consider that the debate initiated through the consultation process will provide useful input to the studies that have been launched in preparation for the review of the TVWF Directive in 2002.

    — Questions on media chronology and on-line rights

    "An obligation exists in Community law for Member States to ensure that broadcasters do not broadcast cinematographic works outside periods agreed with rights holders. There was widespread agreement that this was sufficient. Provided that media chronology is guaranteed at European level, deadlines for film exploitation should be left to contractual arrangements between the parties involved. The Commission consider the consultation has confirmed that the current position under Community law remains the best solution, permitting a flexible approach."

12.6  In conclusion, the Minister comments that the UK will participate fully in the proposed studies to ensure that the outcomes are as positive as possible. He adds:

    "We will need to monitor the forthcoming studies closely to maximise UK input and to ensure that conclusions reached, and any further action proposed, are relevant and beneficial to the development of the audiovisual industry. We will prepare further Explanatory Memoranda if any significant actions are proposed as a result of the studies.

    "More specifically, the Communication will help contribute to the review of the Television Without Frontiers Directive that is to be carried out next year. The Communication has also clarified the rules that apply to state aid to the film industry thereby improving legal certainty for Member States."

12.7  The timetable is set out at the end of the Communication. The Government believes that most of the actions will be completed during 2002, though specific target dates for completion are not given, but state aid will not be reviewed until 2004 and the work of the e-cinema forum will continue for some time, possibly until 2006.


12.8  When we considered the staff working paper on 18 July, we said that we might wish to recommend it for debate when we had considered the results. The Minister's Explanatory Memorandum on the Communication, in which the Commission puts forward its proposals following the consultation, provides us with a useful account of discussions on the issues at an informal Ministerial meeting in early October. From what he tells us, we conclude that it would be premature to recommend a debate at this stage.

12.9  The Minister says that the Communication is broadly satisfactory to the Government. There are no immediate proposals for new legislation or regulation and the Commission notifies its intention to examine most areas further, including the wish of a number of respondents for a reduced rate of value added tax on cultural goods and services. In this latter case, it was agreed at the informal Ministerial meeting that the request should be considered in the context of the review of the 6th Value Added Tax Directive, which is not expected to be conducted before the end of 2002. The Minister says that the Government will continue to stress that, in any event, tax issues are a matter for the Ministers responsible for taxation.

12.10  Two issues which we described in our report of 18 July, concerning the definition of an independent producer and the definition of a European work, were explored in the consultation. The Minister says that the general opinion, presumably at the informal Ministerial meeting, was that the definition of an independent producer should be considered in the context of the review of the Television Without Frontiers Directive, which is scheduled for the end of 2002. In the case of a European work, opinions were divided. The Government's view is that there would be no value in developing further definitions.

12.11  We do not consider that these documents should be recommended for debate at this stage, and we clear them from scrutiny.

41  (20991) 14261/99 and (21182) - ; see HC 23-xvi (1999-2000), paragraph 9 (10 May 2000). Back

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