EU proposes greater transparency and stricter governance for collecting societies

Out-Law News | 11 Jul 2012 | 3:22 pm | 4 min. read

Rights holders will be able to exercise greater control over organisations that collect royalties for them under new plans outlined by the European Commission.

The Commission has published a draft EU Directive (46-page / 174KB PDF) which would, if enacted, set European-wide standards of transparency and governance that collecting societies would have to conform to.

The proposed new laws also seek "to encourage and facilitate multi-territorial and multi-repertoire licensing of authors' rights in musical works for online uses in the EU/EEA," according to the Commission.

Under the Commission's plans rights holders are given the express right to choose which collecting society should be able to manage their rights and have the right to terminate deals with collecting societies "upon serving reasonable notice".

Collecting societies would also be prohibited from managing the rights of rights holders for specific works, categories of rights or types of work or other "subject matter" without obtaining rights holders' "express consent" to do so and only after providing rights holders with details of "their rights" detailed in the draft Directive.

In general collecting societies would be required to "act in the best interest of their members" and "not impose on rights holders whose rights they manage any obligations which are not objectively necessary for the protection of the rights and interests of these rights holders."

Collecting societies would be obliged to hold general meetings of rights holder members at least once a year where members would have the power to decide whether directors of the society should be dismissed or refused pay or other benefits, such as pensions awards. At the meeting members would also be able to have a say on matters such as "the policy on the distribution of the amounts due to rights holders" and the collecting society's "general investment policy."

Further requirements are placed on collecting societies to ensure they are "diligent in the collection and the management of rights revenue" and that they carry out "distribution and payments accurately, ensuring equal treatment of all categories of rights holders."

In general rights holders must be paid the amount of royalties they are due within a year of the monies being collected. This is "unless objective reasons related in particular to reporting by users, the identification of rights, rights holders or to the matching of information on works and other subject matter with rights holders prevent the collecting society from respecting this deadline."

Once a year collecting societies would also have to produce a report to detail to rights holders they collect royalties for what revenue they have collected and include any deductions to that figure that have been applied. Rights holders also have a right to request details about the licensing tariffs charged by collecting societies for use of their works. The tariffs must be negotiated in "good faith" and the licensing terms must be "based on objective criteria, in particular in relation to tariffs."

The Commission's proposals also include new plans that seek to ensure that collecting societies that licence the use of music on a pan-EU basis have the "capacity" to do so.

The collecting societies would have to be able to "process electronically, in an efficient and transparent manner, the data needed for the administration of such licences, including for identifying the repertoire and monitoring its use, invoicing users, collecting rights revenue and distributing amounts due to rights holders," according to the draft Directive.

Among the minimum requirements would be that collecting societies could "accurately identify the musical works" they are "authorised to represent", identify the different rights and rights holders within each EU member state and have "the ability to identify and resolve in a timely and effective manner inconsistencies in data held by other collecting societies granting multi-territorial licences in online rights in musical works."

The collecting societies would have to "monitor the use of online rights in musical works" by "online music service providers" that it grants a multi-territorial licence to, ensure accurate invoicing and distribute amounts owed to rights holders "accurately and without delay after the actual use of the work is reported, except where any further delay is attributable to the online music service provider."

The Commission said changes to the laws governing collecting societies are necessary.

"Some collecting societies struggle to adapt to the requirements of the management of rights for online use of musical works, in particular in a cross-border context," it said in a statement. "As a result of today’s proposal, those collecting societies willing to engage in the multi-territorial licensing of their repertoire would therefore have to comply with European standards. This would make it easier for service providers to obtain the necessary licences for music to be distributed online across the EU and to ensure that revenue is correctly collected and fairly distributed to composers and lyricists."

"More generally, collecting societies operating in all sectors would have to comply with new European standards providing for improved governance and greater transparency in the conduct of their activities. The need for a change of certain practices was highlighted by recent cases where royalties collected on behalf of rights holders were lost due to poor investment policies, but also by evidence of long-delayed payments of royalties to rights holders," the Commission said.

EU Commissioner for the Internal Market Michel Barnier said: "More efficient collecting societies would make it easier for service providers to roll out new services available across borders – something that serves both European consumers and cultural diversity."

"All collecting societies should ensure that creators are rewarded more quickly for their work and must operate with full transparency. This is paramount to sustaining investment in creativity and innovation which will in turn lead to additional growth and increased competitiveness," he added.