Representatives for the European record industry have responded to a letter from their American counterparts which asks the US government to put pressure on the European Union over possible changes to the rules around broadcast and performance royalties. Specifically, the rules governing if and when royalties generated in Europe should flow to American artists and labels. 

Various US record industry organisations say that “nearly $300 million” in annual income could be lost to the American music community because of proposals being considered by the European Commission. However, many European indie labels support those proposals, insisting that they will fix a problem created by a 2020 court ruling which has negatively impacted on artists and labels in some EU countries. 

That includes the Netherlands. Kees van Weijen, Chairman of Dutch indie label trade group STOMP, tells CMU that changes forced onto the country’s copyright system by that 2020 court ruling mean “income for Dutch labels and performers is in fact dropping and we cannot maintain our usual level of investment in local artists and music”. He adds, “this situation is unsustainable”. 

Royalty flows around the world 

Under most copyright systems, when recordings are broadcast or played in public, the broadcasters or businesses using the music have to pay royalties, usually to local collecting societies. If the music played originates in another country, the local society will usually hand the money over to a counterpart society in that other country, which will then pay the relevant artists and labels. 

However, in the US, because of a limitation in American copyright law, AM/FM radio stations and businesses that play music in public don’t have to pay any royalties to the record industry. They do pay royalties to songwriters and music publishers, but not to artists and labels. Which means when European recordings are broadcast or performed in the US, European artists and labels don’t earn any royalties. 

Which poses the question, if US recordings are broadcast or performed in Europe, where royalties are generated, should those flow to the relevant artists and labels in the US, even though no royalties are flowing in the other direction? 

Different countries take a different approach on this. In some countries a ‘national treatment’ approach is taken, which means royalties do flow to the US, because American artists and labels are treated the same as local artists and labels. In some countries a ‘reciprocity’ approach is taken, so money does not flow to the US, because money only flows to countries where there is a reciprocal royalty in place. 

The RAAP ruling 

Although in the European Union many copyright rules are harmonised across all the member states through ‘copyright directives’, those directives are silent on whether countries should operate a national treatment or reciprocity approach. Which previously meant different EU countries had different rules when it came to whether or not broadcast and performance royalties were sent to the US. 

However, in a 2020 legal battle involving Irish performer collecting society RAAP the EU courts ruled that a national treatment approach was the default, and because the directives didn’t mention reciprocity as an option it couldn’t be employed. Which meant those EU countries that did employ a reciprocity approach had to switch to national treatment. 

It was a controversial ruling, though one that would have had minimal impact if EU copyright rules were amended to recognise that member states could employ a reciprocity approach if they wanted to. However, no such amendment has, as yet, happened. 

Van Weijen explains what that meant for the Netherlands. He says, “the Netherlands was the first country, in 2021, to change its rules following the RAAP ruling. This makes us a real test case as the change was introduced on a temporary basis, specifically whilst waiting for the EU to fix the anomaly in the drafting of the directive”. 

“Income for Dutch labels and performers is in fact dropping”, he goes on, adding “we cannot maintain our usual level of investment in local artists and music – this situation is unsustainable”. Therefore, “like all other EU member states who have changed their rules after us, the Dutch government calls on the EC to address this situation and come forward with a proportionate legislative proposal”.  

The current review 

The European Commission recently opened a ‘call for evidence’ about an assortment of copyright matters across Europe and included the debate prompted by the RAAP ruling in its guidance for that consultation. Which is why an assortment of US organisations representing labels, artists and other music creators have written to the US Trade Representative on this issue. 

Their letter expresses “serious concerns” regarding “the European Commission’s recent announcement that they may consider legislation to overturn” the RAAP ruling “which extended national treatment to American recording artists and labels”. 

It then says that the Commission’s proposal “to impose material reciprocity across the EU would mark a dramatic policy reversal and codify discrimination against American creators into EU law”, putting at risk that nearly $300 million in European royalties currently heading to the US. 

To that end, the letter urges the USTR to “take immediate and decisive action to oppose this proposal and ensure that the European Union continues to provide national treatment”. 

It’s actually unlikely that the Commission would propose imposing reciprocity across the whole of the EU. Certainly that’s not what European music industry groups are calling, including pan-European indie label trade group IMPALA. 

It tells CMU, “to be very clear, we are not calling for mandatory reciprocity” which, it says, would be a “disproportionate response” to dealing with the issues created by the RAAP ruling. Instead a “proportionate approach” would be to “clarify the applicability of reciprocity while also allowing countries which operated a different system such as national treatment to continue doing so”.

Which basically means EU law would be flexible on this point, allowing each EU country to adopt its own approach to US royalties, basically by interpreting the relevant international copyright treaties that cover these matters. 

IMPALA adds that there is considerable support for that flexibility across Europe. It says, “all four EU countries who were applying the principle of reciprocity and have changed their rules following the RAAP ruling – the Netherlands, Sweden, Denmark, Ireland – have called on the European Commission to come forward with a proposal to clarify the principle of reciprocity in EU law”.

And, “the majority of EU member states are calling for legal clarity and certainty, and are positive towards a flexible approach which would reflect the diverse national legal traditions”.  

Fixing US copyright law 

While there is division within the music industry on this issue – especially between US and European industry groups – there is one thing that pretty much unites everyone in the music community: US copyright law should be amended so that AM/FM radio stations and businesses playing music in public start paying royalties to artists and labels. Like in most of the rest of the world. 

Every US organisation representing artists and labels would like that change and are actively campaigning for it. Although that campaign has been underway for decades now – so far without success – and the current proposals in US Congress relate to AM/FM radio paying royalties, not pubs, clubs, bars and cafes that play recorded music on their premises. 

But the point is, both US and European industry groups are all very much behind those proposals. However, the question is whether the need to fix US copyright law is relevant to the debate over reciprocity and national treatment. 

IMPALA thinks it is. It says that the lack of full protection for sound recordings in a small number of countries, and especially the US, is one of the reasons why “the principle of reciprocity, which is enshrined in international copyright treaties, is essential”. Because “it helps increase the level of protection worldwide by encouraging third countries to align with the basic standard of rights”.

Which means that, as well as IMPALA calling on the Commission to clarify the principle of reciprocity in EU law, it is also calling on EU officials to “encourage third countries to introduce full domestic broadcast and public performance rights”.

Until very recently, Japanese copyright law obliged broadcasters to pay royalties to labels and artists, but not businesses that play music in public. That has just been changed through an amendment to the country’s copyright rules. 

IMPALA notes that this not only means “artists and labels will now be paid when their records are played publicly in Japan” but it also opens up “revenues from around the world which Japan was not receiving due to existing reciprocity rules”. This, IMPALA adds, “shows why reciprocity is essential to encourage trading partners to bring their legislation in line with other parts of the world”. 

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