Select Committee on European Union Third Report


CHAPTER 3: The Country of Origin Principle

Introduction: a wider debate

86.  The Country of Origin principle has been the accepted basis for legislation to assist the free movement of services as a part of development of the single market in the European Union for some time. We are nevertheless well aware of the mood in some parts of the European Union shifting against the Country of Origin principle.

87.  This Committee has recently produced two reports on the Services Directive, which came to the conclusion that the principle was "an essential part of enabling SME service providers to break into the markets of other Member States"[3].

88.  The Services Directive was an attempt by the Commission to ensure a genuine, single market in services across the EU. One of the key issues which arose from this attempt was the ability of service providers to provide services into other Member States without being encumbered by up to 26 other sets of regulations.

89.  The original Commission proposal for the Services Directive was for services to be provided under the rules and regulations of the Member State in which the service provider was established, i.e. a Country of Origin approach to regulation. In both our reports on the Directive, we expressed strong support for the inclusion of the Country of Origin principle.

90.  The principle proved controversial for a number of reasons, especially in the European Parliament. Notwithstanding the Parliament's initial support for the principle, the Directive was heavily amended to shift the basis of regulation from the Country of Origin to the Country of Destination.

91.  Mary Honeyball MEP told us that the European Parliament was "still becoming familiar with the fall-out from the Services Directive, where the whole thing has changed quite considerably". (Q 397)

92.  The Minister described to us the debate over the principle in the context of this Directive as an "example of people having a rather overzealous view about the capacity of the European Union." (Q 178)

The 2005 proposal

93.  The Commission's 2005 proposal had the Country of Origin principle at its centre as the basis for broadcasters supplying services in Article 2a. It was also central to the original TVWF Directive.

94.  The Satellite and Cable Broadcasters Group (SCBG) argued that its members' success in providing television and other audio-visual services in more than 100 million homes across Europe, and broadcast in more than 20 European languages has been enabled entirely by the provisions of the TVWF Directive, and in particular by its application of the fundamental Country of Origin principle.

95.  According to the SCBG, inward investment, employment and revenues in this sector have grown steadily in the last decade, and will continue to do so provided the basic principles of the present Directive are maintained—ensuring that regulation remains based on the country of origin, not on the country of reception. (pp 164-168)

96.  They were concerned that, even though the 2005 proposal sought to maintain the Country of Origin principle, a number of Member States were seeking to change the rules of jurisdiction in a way, which would effectively bring regulation into the country of reception. They were also concerned that the Commission's own proposed amendments to Article 2 (new paragraphs 7,8,9 and 10), under which a Member State may take action against a media service provider established in another Member State, may unintentionally provide a new route for complainant countries to evade the Country of Origin principle.

97.  The SCBG warned us that if the Country of Origin principle were to be undermined in practice by any of these means, the satellite and cable sector of the UK creative economy would be damaged substantially.

The Council's text

98.  Perhaps the most significant of the alterations in the revised text concerns the Country of Origin principle. The revised text introduces new limits to the principle, set out in article 3:

BOX 3

Article 3 of the revised draft Directive
1. Member States shall remain free to require media service providers under their jurisdiction to comply with more detailed or stricter rules in the areas covered by this Directive.

1a. In cases where a Member State:

  • has exercised its freedom under paragraph 1 to adopt more detailed or stricter rules of general public interest; and
  • assesses that a broadcaster under the jurisdiction of another Member State directs all or most of its activity towards its territory

it may contact the Member State having jurisdiction with a view to achieving a mutually satisfactory solution to any problems posed. On receipt of a substantiated request by the first Member State, the Member State having jurisdiction shall request the broadcaster to comply with the rules of general public interest in question. The Member State with jurisdiction shall inform the first Member State of the results obtained following this request within two months.

99.  The Council's revised text adopts a concept originating from Sweden of "mandatory co-operation" for National Regulatory Authorities to mitigate any clashes between the rules of the Country of Origin and Country of Destination over these services.

100.  Mrs Honeyball described the proposal for mandatory co-operation as "probably not very sensible" because of the burden it would put on National Regulatory Authorities such as Ofcom to co-operate with 24, soon 26, other NRAs, all with differing rules. (Q 397)

101.  Mr Murray from the European Consumers' Organisation (BEUC) defended the Swedish position, telling us that "nobody would seriously argue that the restrictions which they wish to maintain arose from a purely protectionist instinct, to stop people buying non-Swedish goods" but from genuine public interest grounds. But he accepted that other Member States often present measures motivated by pure economic protectionism as motivated by similar public interest concerns. (Q 376)

102.  Article 3 of the Council text allows Member States to block broadcasts on grounds of "general public interest", and when "a broadcaster under the jurisdiction of another Member State provides a television broadcast which is wholly or mostly directed towards its territory". Recital 11 clarifies the public interest grounds by referring to European Court of Justice case law and states that they must be "objectively necessary, applied in a non-discriminatory manner, suitable for attaining the objectives which they pursue and do not go beyond what is necessary to attain them."

103.  Further restrictions to Member State action against broadcasters from other Member States are set out in Article 2. The Member State in question must show that the broadcaster it wishes to take action against "manifestly, seriously and gravely infringes Article 22 (1) or (2) and/or Articles 3b;" and has infringed at least twice in the previous 12 months. The Member State must then inform both the broadcaster and the Commission in writing of the actions it will take should the broadcaster infringe again, and allow 15 days for a consultation with the Commission and the other Member State to try to reach an amicable settlement. Ultimately the Commission has the role of deciding whether the measure legitimately falls under the Directive.

104.  Chris Dawes from the DCMS told us that the revised article threatened to "introduce uncertainty to industry", although it was not necessarily "absolutely fatal to the Country of Origin principle." (Q 178)

105.  Matteo Maggiore from the BBC regarded any step backwards from the Country of Origin principle as "tantamount to going back to a world of erecting frontiers to the circulation of services at a time when the potential for trans-border and global communications is becoming greatest". He was concerned that it would undo any benefits from the 1989 Directive. (Q 12)

106.  Mr Paulger from the Commission was forthright in telling us that he viewed the Country of Origin principle as being absolutely central to the Directive; that the revised article 3 was "a measure that would weaken the Country of Origin Principle" and that the Commission "do not like it." (QQ 336-343)

107.  The Minister highlighted the inherent problem for broadcasters in requiring them to fit the requirements of a Country of Destination when "it is impossible for a programme maker now anyway to imagine where a programme might be destined for in 20 years' time and who might be watching it". (Q 178)

108.  We share the considerable concern of the majority of our witnesses over the apparent dilution of the Country of Origin principle. We understand that the opposition to the principle has gained momentum in many quarters of the European Union, but view this as an obstacle to the consolidation of the internal market.

109.  We hope that the proposed monitoring system will work effectively to prevent Member States from obstructing audiovisual media service providers for any grounds other than those strict public interest grounds set out.


3  
Completing the Internal Market in Services, EU Committee 6th Report, Session 2005-06, HL 23 (para 189) Back


 
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