In this case two interesting legal questions with regard to the Dutch music industry were answered. Firstly, in what situation is an artist the phonogram producer of his own music and not the music publisher? And secondly, is it problematic if an artist enters into a publishing and management agreement with two separate companies that are held by the same owner and when does such situation create a conflict of interest?
Before discussing these questions, the facts of this case will be summarized below.
On 20 September 2017 the Dutch Midden-Nederland District Court rendered an interim judgement in proceedings on the merits initiated by the well-known Dutch DJ Martin Garrix against record label Spinnin’ Records (“Spinnin”) and management agency Music Allstars (“MAS”) ¹.
Martin Garrix is a 21 year old world famous DJ. The release of his track Animals on 17 June 2013 was his international breakthrough. Defendant Spinnin is a record label that exploits and markets electronic music of numerous DJ’s. The second defendant, MAS, is a company that focusses on the management of persons, services and (music) rights in the entertainment industry. Both companies have the same owners and have its offices at the same address.
In 2012, Martin Garrix entered into a production agreement with Spinnin and a management agreement with MAS (the “2012 Agreements”). The father of Martin Garrix represented his minor son during the negotiations leading towards the 2012 Agreements. Before entering into the agreements, his father got advice from two legal advisors both pointing out that it seemed Spinnin had a conflict of interest and was possibly not able to fully represent the interests of Garrix. Garrix did however enter into both agreements in July 2012. In 2013, Martin Garrix - again represented by his father - entered into a new production and management agreement (the “2013 Agreements”).
In 2014 the father of Garrix had a meeting with a media company in France after which he sent an e-mail to MAS stating he was informed he had made a bad production deal and that if MAS had fully presented his sons interests, Garrix would have never entered into this exclusive 2 year production agreement with a one sided renewal option for Spinnin:
“Why would, without even payment of any big signing fee or substantial advance, Martin Garrix sign away all his master rights (including Sena monies paid by collecting right society on neighboring rights)??? In the given circumstances there was and is no reason to sign anything else than a license agreement while master rights should definitely remain with Martin Garrix. Please consider seriously how this can be redressed asap.”
In 2015 meetings took place regarding possible adjustments of the production agreement but these negotiations were not successful. Subsequently Martin Garrix terminated the 2012 Agreements and the 2013 Agreements. MAS and Spinnin were not willing to agree or to acknowledge the termination.
Claims of Garrix
Martin Garrix therefore started legal proceedings and requested the Dutch Midden-Nederland District Court, inter alia, to declare that: a. Spinnin was wrongfully considered as phonogram producer and that Garrix did not receive the remuneration by the Foundation for the Exploitation of Neighboring Rights (SENA) Garrix was entitled to; and b. the 2012 Agreements and the 2013 Agreements were rightly terminated because of error of fact.
With regard to the first claim, the court states that the European legislator has intended to give protection to the party that makes the financial investment in the first recordings (e.g. the party that holds the financial risk in case the record fails to be a success). The court further looks at the factual circumstances of this case and considers that Garrix composed all songs with his own instruments and recorded them on his own computer and Spinnin solely provided feedback during the production process. The court therefore states Garrix has to be regarded as the phonogram producer.
The fact that the costs to record the songs were not very high and Garrix did not hold a large amount of risk, a criterion discussed in Directive 92/100 and Directive 2006/115, was not enough to change the court’s opinion.
Error of fact
With regard to the error of fact, the court states that a contract which has been entered into under the influence of an error and which would not have been concluded had there been a correct assessment of the facts, may be avoided. Garrix states there is an error because false statements were made on behalf of Spinnin and MAS, namely that:
- the terms of the production and management agreements were in line with market conditions;
- it is very usual that a publishing agreement and a production agreement is entered into with the same party;
- Spinnin and MAS were professional enough to prevent any conflict of interest.
Additionally, very relevant facts were concealed, such as, inter alia, that:
- Garrix might be deemed as phonogram producer with regard to his own songs;
- Spinnin did not produce any cd’s themselves, but used associated companies to do so under a license agreement;
- The agreed royalties of the production agreement were much lower because of (sub)license agreements with other parties;
- YouTube-revenues could be significant in the future (Garrix was contractually excluded from these revenues);
- MAS did not have any employees of its own in 2012 and all management duties were performed by employees of Spinnin.
The court first concludes that Spinnin and MAS gave the impression in 2012 that they were able to represent the best interests of Garrix. All the statements mentioned above were done in response to questions raised by Garrix’ father with regard to any conflict of interest after he had consulted two legal advisors. Secondly the court states that this impression is false and concludes so by emphasizing that Spinnin had falsely concealed numerous fact and additionally had falsely stated that Spinnin would share the exploitation remunerations with a second company. The court therefore concluded the 2012 Agreements were rightly terminated.
With regard to the 2013 Agreements, the court states that there was already a valid production agreement between Spinnin and Garrix and it may be assumed that if there was no error of fact, Garrix would not have entered into a new agreement with Spinnin. Although the situation is different with regard to the management agreement, the court assumes that if Spinnin and MAS would not have stated that they were professional enough to represent Garrix interests (even in case of conflict of interest), Garrix also would not have entered into this second agreement. The 2013 Agreements were therefore also rightly terminated.
The 2012 Agreements and the 2013 Agreements were rightly terminated and are deemed to have never existed under Dutch law. The next step for Martin Garrix is try to recover all collected remunerations by Spinnin based on the production agreement and the management fees (at least to some extend). Because of the complexity of this case, the court requested all parties to provide more information.
This exciting case will proceed on 15 November 2017, unless parties will reach a settlement.
Hopefully to be continued.