AG Szpunar extends a generous hand to foreign authors

In her IPKat article of yesterday, Prof. Eleanor Rosati explains the Opinion of AG Szpunar, published on 5 September 2024, in the pending CJEU case Kwantum Nederland BV, Kwantum België BV v Vitra Collections AG (Case C‑227/23).  As she says, it is an important opinion on the extent of national treatment of foreign authors. I imagine the Court will follow the AG's opinion, but I - respectfully - have my doubts.

EU copyright takes it all … including Article 2(7) of the Berne Convention: AG Szpunar advises CJEU to rule that EU Member States can no longer rely on reciprocity clause for works of applied art - The IPKat (ipkitten.blogspot.com)

Essentially, the case concerned the alleged infringement of the Dutch (and Belgian) copyright of Vitra, a Swiss company, in an Eames chair.  The defendant sought to argue that Article 2(7) of the Berne Convention (directly applicable in the monist Netherlands) allows countries to limit the national treatment of works of applied art in relation to copyright protection to works which are protected by copyright in their countries of origin. The defendants argued that the Eames chair was not protected by copyright in the US, its country of origin, so was not so protected in the Netherlands.  On 31 March 2023, the Dutch Supreme Court referred certain questions to the CJEU.  

The question of infringement at issue between the parties is a narrow one and not of the greatest interest. The Court of Appeal, in a remarkably learned judgment of 14 July 2020, had held that even if the Berne limitation applied, the Eames chair was in principle protected by copyright in the US, and so was not excluded from protection in the Netherlands.  The reasoning of AG Szpunar, however, if adopted by the CJEU, would have striking consequences, effectively extending copyright protection in the EU to all countries of the world, irrespective of their treaty commitments to EU countries.

According to AG Szpunar, the full array of EU-harmonised rights must be available to all non-EU authors, whether or not the national treatment commitments of their countries of nationality extend those rights to EU authors: "First, the European Union’s international obligations do not allow authors who are nationals of third countries to be left outside the harmonised copyright framework, irrespective of the country of origin of their works... Second, since the EU legislature has used the term ‘authors’ without specifying their nationality or place of residence, that term must be interpreted as referring to any author seeking to protect his or her rights within the internal market" (para. 33).  

It will be noted that this argument rests on an interpretation of the word "author".  AG Szpunar says that if the word is not qualified, it must mean all authors. The problem with this is that there is no language confining that class of global authors to nationals of states which have entered into national treatment obligations with the EU country in question.  

A further complication, given that the question is ex hypothesi a matter of EU law, is that the EU is not a party to the Berne Convention, so it is hard to see how the definition of "authors" could be limited to the beneficiaries of national treatment under that treaty.  And while it may be pointed out that the EU is a party to the TRIPS Agreement, which incorporates the substantive provisions of the Berne Convention (other than Article 6bis), the membership of TRIPS is not as extensive as that of Berne (and, incidentally, the substantive provisions do not bind the 37 least developed countries party to TRIPS (Article 66(1)). IIt was the application of the Berne Convention, not the TRIPS Agreement, which was in issue in the national litigation. And in any case, it is difficult to see how the EU could be in breach of its TRIPS obligations in this connection, since copyright is a national right - there is no "EU copyright" to confer or withhold.

It seems that when the EU adopted the 2001 Directive it was regulating the external market as well as the internal market, notwithstanding the limitations on its competence.

It will be a happy discovery for third states negotiating FTAs with DG Trade to know that they need no longer offer anything in return for copyright protection - EU Member States must protect every author in the world, including those from Iran, Iraq and other non-Berne countries, and even beyond the international obligations of Member States - Iraqi authors, look forward to collecting your public lending right royalties!

It seems to me that the simple point is this. The Berne Convention says nothing about the copyright protection of domestic right holders. It is about protecting foreign authors. The 2001 Directive says nothing about the treatment of non-domestic right holders. Member States are entitled to determine how they are to comply with their international obligations, including the definition of the word "author" in that context, unless and until the EU legislator rules otherwise.  But for the CJEU the extension of EU law to the exclusion of Member State discretion is a guiding light...

When copyright protects more than economic interests

Yesterday the Rights Alliance, Denmark’s very effective anti-piracy organization, published a news item about an unusual piracy case implicating the moral rights of performers under the copyright law.

In May 2023, the Rights Alliance became aware of the appearance on Reddit of compilations of scenes from films featuring Danish actresses, showing the performers naked or in scenes of a sexual nature. When it attracted public attention, the Reddit site was made private, but the Rights Alliance was able to investigate and reported the matter to the National Special Crime Unit (the NSK).  Yesterday, the NSK arrested a 39-year old man and charged him with infringing copyright by sharing clips from Danish films and television series in a private group on Reddit and on pornographic websites.  Many of the actors concerned have expressed their hurt and anger at the distortion of their performances.

Normally copyright and related rights infringement concerns the economic rights of the artists and producers involved.  However, related rights law also protects the performer against, in the words of the 1996 WIPO Performances and Phonograms Treaty (WPPT), “any distortion, mutilation or other modification of his performances that would be prejudicial to his reputation”.  The WPPT addresses aural (typically musical) performers.  The 2012 Beijing Treaty on Audiovisual Performances covers performers in audiovisual productions. 

Not all countries have signed up to these treaties, and in fact Denmark has not ratified the Beijing Treaty.  However, Article 3(2) of the Danish Copyright Act (Ophavsretten) provides that the work “must not be altered or made available to the public in a manner or in a context which is prejudicial to the author's literary or artistic reputation or individuality.”  Article 65(6) of the Act provides that Article 3 shall apply correspondingly to performers’ live and recorded performances.

Article 76 provides that it is an offence punishable by fine to infringe Article 65 intentionally or with gross negligence.  If the offence is committed intentionally and in aggravating circumstances, the maximum sentence is a year and a half.  If the offence is committed for unlawful gain or otherwise under particularly aggravating circumstances, the maximum sentence is 6 years’ imprisonment (Article 299b, Danish Criminal Code).

The Rights Alliance made the complaint on behalf of the national broadcaster DR, the Danish Actors’ Association, the Danish Film Directors’ Association and the producers whose films had been pillaged.  However, it was clearly the actors who were the principal victims of the alleged offence (it is necessary to recall that there has yet to be a trial) and their interest was essentially personal, not economic.  This seems to be a rare example where a criminal remedy for moral rights infringement is unquestionably proper.

Not all countries have criminal remedies for moral rights infringement – the UK, for example. Perhaps they should?

What Is Arbitrator Bias? (or: No Good Deed Goes Unpunished)

In February 2024 the High Court in London handed down a decision to remove an arbitrator in a film industry dispute, which, in addition to illustrating the importance of insurance in the production sector, illuminated a paradoxical issue in commercial arbitration: if the parties appoint a subject-matter expert to decide their dispute, does the arbitrator risk being removed for bias if, on the basis of his experience, he expresses a conclusion about the evidence before it has been tested at a hearing? 

The case, H1 and H2 v W, D and F [2024] EWHC 382 (Comm), concerned liability under film production insurance. The insurer contended that the arbitrator, an industry professional without legal training, had given grounds for “justifiable doubts as to his impartiality” and sought an order to remove him under section 24 of the English Arbitration Act 1996.  Mr. Justice Calver granted the order. 

The Dispute

The claimants were producing a television series in Sweden and had obtained insurance to protect them in case a specified actor suffered an injury that delayed production.  The actor duly incurred a serious injury during a stunt and the producers claimed under the policy.

The insurance policy incorporated an arbitration agreement, under which any dispute was to be resolved by “an experienced practitioner in film or television programme production”.  The parties being unable to agree on an arbitrator, the British Film Institute was asked to do so.  The BFI selected one “W”, an experienced industry professional and not a lawyer.

In subsequent terms of reference, the parties agreed to waive “any objection to the appointment of the Arbitrator on the grounds of potential conflict of interest and/or lack of independence or impartiality in respect of any matters known to them at the date of the agreement.”

The insurer pleaded, in essence, that they had excluded liability for any “hazardous activity” and that it was also a condition of the policy that the producers, their agents and their employees should use all reasonable care to avoid accidents.  The producers contended that they had relied on an independent stunt coordinator who had approved the stunt and that any hazard arose from unauthorized changes to the stunt made during shooting by third parties, for which the producers could not be held responsible.  It was said that there was “a central issue in the arbitration” as to industry practice in Sweden: was the stunt coordinator responsible for safety on the set or was it the responsibility of the producers?

Both sides proposed to call expert witnesses on this issue.

The evidence of bias

“I know all three [of the insured’s experts] very well, … what [the witness] said is what I will believe.. I absolutely believe what he says... if that’s what he said I would accept that… I know the professionals. I can say now what I think”.

At a procedural hearing, the arbitrator said that he knew the claimant’s experts, that one in particular was “one of the top Norwegian producers” and that he would accept what he said about the issue of on-set responsibility in Sweden, even though it differed from W’s own views as to industry practice.  He did not know the insurer’s witnesses, arguably depreciating their authority.  He indicated that he did not think the experts needed cross-examination.  In response, the insurer’s counsel submitted that W should listen the evidence before reaching a conclusion and W said that he would, albeit he had formed a view. 

The judge held that these comments gave rise to justifiable doubt as to W’s impartiality, on the basis that he appeared to have prejudged the allegedly central issue.  He revoked W’s appointment.

According to the judge, “the parties might expect the arbitrator to use his special knowledge of the film industry to understand the evidence that is given at the arbitration and any usages of the trade. But they would not expect him to use his special knowledge to pre-determine that he would prefer the evidence of an industry insider whom he knew (both personally and by reputation) over one whom he did not know” [para. 83].  The judge treated the arbitrator’s strong view about the witnesses as evidence of bias.

But what is “bias”?

According to England’s highest court, to be affected by bias is to be “motivated by a desire unfairly to favour one side or to disfavour the other.” (R v Gough (Robert) [1993] UKHL 1, at 4, per Lord Goff.)  Lower courts have said, more vaguely: “Bias can come in many forms. It may consist of irrational prejudice or it may arise from particular circumstances which, for logical reasons, predispose a judge towards a particular view of the evidence or issues before him” (Director General of Fair Trading v Proprietary Association of Great Britain [2000] EWCA Civ 350, at para. 37).  However, what unites all instances of bias is the influence on the tribunal of a collateral factor irrelevant to the proper disposal of the proceedings.

If the parties select a subject-matter expert as arbitrator, let alone where they expressly waive any objection of partiality based on his existing knowledge, they accept that this knowledge can be put to use by him.  The authorities are clear that an arbitrator, at least if an industry professional rather than a lawyer, is entitled to use his personal knowledge (for England, see: Mediterranean and Eastern Export Co Ltd v Fortress Fabrics (Manchester) Ltd [1948] 2 All E.R. 186; for the US: Sapp v. Barenfeld, 34 Cal. 2d 515, 212 P.2d 233 (1949)). 

When an adjudicator expresses a preference about the evidence, that is not in itself any indication of a lack of impartiality with regard to a party.  “The mere fact that the case of one party is regarded with disfavour is manifestly not enough to raise a danger of bias. It is necessary to concentrate on the assertion that there is a danger that this regarding with disfavour was the result of some unfairness” (Porter v Magill [2000] 2 W.L.R. 1420 (C.A.), at 1457).  W clearly wanted to get to the truth of the matter, having asked the parties to make 12 individuals available to answer questions.  However, the parties provided witness statements for only two.  He actually disagreed with the expert witness as to industry practice, but was willing to accept his evidence.

The problem in this case was one of due process, not bias.  The limitation on the arbitrator is not that he may not use his existing knowledge, but that he must ensure that it is deployed with procedural fairness.  In particular, he must enable the parties to challenge his personal view in case it is not already being contended for by one of the parties (Fox v. Wellfair Ltd [1981] 2 Lloyd's Rep. 515).   “It has to be emphasized, however, that the duty to act fairly is quite distinct from the autonomous power of the arbitrators to make findings of fact.” (Bulfracht (Cyprus) Ltd. v Boneset Shipping Company Ltd. "MV Pamphilos" [2002] EWHC 2292, at page 10, per Colman J.)

What happened here?  The arbitrator shocked the insurer’s counsel by indicating that he would accept the evidence of the producers’ witness irrespective of any cross-examination or submissions.  This was because he preferred that witness as a witness. This was evidence of W’s incompetence, as a layman, in the conduct of an arbitration, not of bias in favour of the producers.  It was precisely his function to form a view about the persuasiveness of the parties’ witnesses.  There was no reason to suppose he would have said anything different about him if the “top Norwegian producer” had been called by the insurer, rather than the producers.

Had W not accepted the admonishment of the insurer’s counsel that he should allow the process to unroll in the normal way and in fact disallowed or ignored cross-examination, he could have been accused of failing “properly to conduct the proceedings”, a distinct ground of challenge under section 24(1)(d) of the 1996 Act.  However, it remained to be seen whether, educated by the lawyers appearing before him, he did in fact take account of cross-examination and the advocates’ arguments when the hearing took place.  W’s expressed preference for the producers’ expert was certainly potential misconduct, but it was a category error to treat it as evidence of bias.

Substantial injustice

Did it matter?  Arguably, yes: to remove an arbitrator for improper conduct of the proceedings under section 24(1)(d), the applicant has to show that “that substantial injustice has been or will be caused to the applicant”.  This depends on what would have happened at the end of the arbitration:

“The test for substantial injustice focuses on the issue of whether the arbitrator has come by inappropriate means to one conclusion whereas had appropriate means been adopted, he might realistically have reached a conclusion favourable to the applicant. It does not require the court to try the issue so as to determine, based on the outcome, whether substantial injustice had been caused” (London Underground v Citylink [2007] EWHC 1749 (TCC) at para. 47, per Ramsay J. (in the context of a challenge to an award under section 68). 

One possibility is that W would have ignored cross-examination and submissions and kept to his fixed opinion.  If so, that would have been a failure to conduct the proceedings properly which would probably have affected the outcome.  W would still have been removed.  However, taught by the advocates as to how an arbitration is supposed to proceed, he might have listened in good faith to the evidence and applied an open mind.  We shall never know.

This would have played out differently in the United States.  Although institutional rules, such as rule R19(c) of the Commercial Arbitration Rules of the American Arbitration Association, may empower an arbitral institution to remove an arbitrator for bias, the courts will not interfere during the course of the arbitration to remove an arbitrator for lack of impartiality.  The parties have to wait for the award and then apply to vacate it on grounds of “evident partiality" (Federal Arbitration Act, 9 U.S.C.A. § 10(a)). 

This “narrow  standard of review acts as a bulwark against legal ingenuity. Lawyers can easily find one thing or another in almost any proceeding to which they wish to take exception. There are benefits to such legal creativity in many contexts but not in the one before us. Allowing procedural challenges to every award would force parties into court to argue their dispute a second time, incurring the litigation costs and delays they intended to avoid by agreeing to arbitration in the first place.” (UBS Fin. Servs., Inc. v. Padussis, 842 F.3d 336, 339 (4th Cir. 2016), per Wilkinson J). 

England is less concerned, it seems, about delay created by legal ingenuity.

Conclusion

Lay arbitrators are a valuable option for parties litigating in a specialised industry; and it is easier to teach a layman about the basic rules of arbitration than to turn a lawyer into an industry expert.  Evidence of a lack of impartiality removes the arbitrator whether there is a substantial risk of injustice or not, so it is important to be clear about the difference between holding a relevant view about the evidence and holding an irrelevant view affecting a party.

Finally, one wonders what W thinks about this.  Under section 23(5) of the 1996 Act, the arbitrator is entitled to be heard on the application to remove him, but, understandably, W does not seem to have taken the opportunity.  Although the judge decided to anonymise the judgment, everyone in the case must have known who the “biased” arbitrator was and so too, no doubt, people connected with the production.  As a senior member of the industry, W accepted an invitation by the national film agency to use his experience in the resolution of a dispute, albeit for a fee.  Will he ever accept, or recommend a professional colleague to accept, a similar invitation?

It could surely have been avoided.  Someone – perhaps the Chartered Institute of Arbitrators – could produce a short leaflet explaining to lay arbitrators how the process is supposed to unroll.  The basic principles of arbitration are hardly complex.

However, full marks to the BFI for supporting arbitration in the film industry.  It is to be hoped that this experience does not put them off a sequel.  

As a footnote, it is puzzling that everyone agreed that the practice in Sweden was central to the case.  The insurance policy was governed by English law and clearly placed responsibility on the producers for negligently-caused accidents, whether the accident was caused by an agent (e.g., a freelance stunt coordinator) or an employee. One therefore might wonder how central to the arbitration industry practice in Sweden could be.  But those involved in the case no doubt had their reasons…