CJEU - Advocate General´s Opinion regarding the new financing model of fair compensation for private copying in Spain The Advocate General of the Court of Justice of the European Union (hereinafter, the "CJEU") has recently delivered his opinion in relation to the questions referred to the CJEU by the Spanish Supreme Court regarding the conformity of Directive 2001/29 CE (hereinafter, the "Directive") with the Spanish system of fair compensation for private copying. Facts of the case On 7 December 2012, the Spanish Government, via Royal Decree 1657/2012 (hereinafter, the "Royal Decree"), modified the system of fair compensation for private copying. Where it used to previously consist of the payment of a levy by consumers who purchased certain devices used for the reproduction of copyright-protected works, the new financing model now provides for compensation of authors paid through the General State Budget. Under the new system, the amount of the compensation to be paid to copyright holders is determined on the basis of an estimation of the damage caused as a result of the reproduction from any legal source of copyrighted works, a system which is also used in Finland, Norway and Estonia. In 2013, three collective rights management organizations (EGEDA, DAMA and VEGAP) filed a claim before the Spanish Supreme Court questioning the validity of the Royal Decree alleging its incompatibility with provision 5.2.b) of the Directive. First, opponents to the Royal Decree claim that the new system for determining fair compensation for private copying is an infringement on the requirement of the Directive which provides that compensation should be ultimately paid by the individuals who actually caused the damage. In the Spanish case, the manner of payment of compensation for private copying is allegedly illegal as the burden is shifted to taxpayers given that the amounts are to be paid out of the General State Budget. Second, the claimants state that, given the fact that the maximum amount of compensation which can be paid out during any given year is predetermined by the General State Budget, no objective criterion can be used to calculate the actual damage, and therefore it is impossible for the compensation to be considered "fair". Under such circumstances, the Spanish Supreme Court decided to suspend the proceeding and ask the Court of Justice to resolve the following: 1. Is the new Spanish system for fair compensation for private copying consistent with provision 5.2.b) of the Directive? 2. In case the first question receives a positive answer, is it consistent with the Directive to establish a priori the compensation within the budget limits of each period? Opinion of the Advocate General In the Advocate General´s opinion, the first question raises an issue of great importance to the financing of compensation for private copying: can fair compensation take a different form other than the digital levy? While the Directive does not impose an obligation on Member States to regulate the private copying exception, the Directive states that in the event the Member State decides to regulate this exception, the compensation to the author must be fair. The Directive, however, does not contain specific provisions that govern the form of compensation, the calculation method or the identification of the individual or debtor actually responsible for payment of fair compensation. In addition, the Directive does not contain any legally binding rules that only limit the payment of fair compensation to users who copy or may copy copyrighted works. In view of this, it is not logical to consider that the Directive should regulate how the fair compensation should funded. In line with the arguments of the claimants, the Advocate General acknowledges that with the new Spanish system, all taxpayers will have to participate in the financing of the fair compensation for private copying, which is really not a compelling issue given that oftentimes, there is no direct link between the tax paid by a certain taxpayer and the choice of expenditure items, the same way that a taxpayer is unable to choose where his money should be spent. From a jurisprudence perspective, there is no general principle in European Law which provides that the financing of the compensation must only be shouldered by users who copy or may copy copyrighted works, so that in practice the only possible system is the payment of a computer equipment fee, as stated by the claimants. In fact, the Advocate General believes that setting this kind of levy or tax as the only system for financing the compensation is not desirable either, as it could also affect users who use this equipment to copy content not protected by copyright, which means that it is impossible to foresee all the effective uses that a user can make of said goods. Regarding the second question raised, the claimants argue that the amounts paid as fair compensation for private copying are obviously not enough as the Government paid 8.6 million Euros in 2013, and 5 millions Euros in 2014 while the effective damage suffered by the right holders was approximately 18.7 million Euros and 15.2 million Euros, respectively. Accordingly, from the Advocate General´s point of view, a Member State is not deemed to have complied with the Directive´s obligation to provide fair compensation when the system used for its calculation does not effectively compensate the damage caused as a result of the private copying of copyrights works. Therefore, the compensation should be calculated on the basis of the damage effectively caused and in any case should be not established a priori. While it is true that the budgetary expenditure cannot be predicted beforehand, the Advocate General believes that the budgetary projections are not that difficult to estimate on the basis of precise and reliable data. Conclusion In view of the considerations set out above, the Advocate General recommends responding to the Spanish Supreme Court as follows: 1. Provision 5.2.b) of the Directive is to be interpreted to mean that it does not preclude financing the fair compensation for private copying via the General State Budget. 2. However, setting fair compensation a priori within the limits of each budgetary period without taking into account the actual damage caused to the right holders, is contrary to the Directive. It should be noted that the Court of Justice´s final judgment is still pending and, although the Advocate General's opinion is not legally binding, the CJEU is expected to rule along the same lines. For more information, please contact Jose Maria Mendez, Naiara Elizagarate or Michael Fonseca.