The cost-sharing order made under the Digital Economy Act, which will force ISPs to pay 25% of the cost of the Act’s copyright enforcement provisions, may be in breach of European law, according to independent barrister Francis Davey.
A European law called the Authorisation Directive (2002/20/EC), which is part of the Telecoms Framework, specifies a limited set of charges the government may impose on ISPs. Under the Authorisation Directive, anyone is allowed to operate an ISP without any sector-specific tax or licence fee not specified in the Directive.
According to Davey, since contributing to the cost of a copyright enforcement regime is not one of the specified charges, this means the Cost Sharing Order recently published by the government is not compatible with the Authorisation Directive.
In other words I cannot see anything in the Authorisation Directive that could allow the UK to impose a requirement to pay for the initial obligations scheme that is compatible with the Authorisation Directive. Unless I am missing something, the Order, as it stands is unlawful.
This objection is not entirely novel. Last year the European Commission ruled that taxes imposed on ISPs in France and Spain to support national broadcasters were incompatible with the Authorisation Directive, for the same reason.
Davey also speculates that the Cost Sharing Order may be defective because it requires copyright holders to estimate how many copyright infringement complaints they will make, and charges them for the estimate, but does not provide a means for recalculating when the actual number is known. Thus a rightsholder has an incentive to underestimate the number of complaints they are likely to make. Ofcom has the opportunity to correct this, if it wishes, by stating in the Initial Obligations Code that rightsholders may only issue as many complaints under the Act as they previously estimated. However no such provision was made in Ofcom’s first draft of the Code.