No-deal planning full steam ahead?

With just under 2 months to go before the UK is due to exit the EU and the possibility of a no-deal Brexit still looming, the UK audiovisual media services industry, the largest in the EU, was recently dealt a further blow; French President, Emmanuel Macron, confirmed that France will ensure the audiovisual media sector is excluded from any free trade agreement between the UK and the EU.

Cultural sensitivites

The statement set out France’s position in a letter responding to written concerns expressed by lobby group, the French Coalition for Cultural Diversity. The letter went on to confirm that this was a “key issue, for the protection of cultural diversity, on which the Council [of the EU] is unanimous” and having “secured the exclusion of audiovisual services from all free trade deals concluded by the European Union“…France would require “an explicit mention” of the exclusion of audiovisual media services in any free trade agreement.

The statement is unsurprising given that France has long supported “cultural exception” or “cultural diversity” and there is currently very limited precedent for a third country securing single market-equivalent access for broadcasters. In the past the UK’s own European Scrutiny Committee has even acknowledged that audio visual media services are generally excluded from EU free-trade agreements for the same reason.

This latest development in the Brexit tale further cements the need for the broadcasting industry to expedite their no deal planning.

No-deal Brexit: Why was a free trade agreement key for audiovisual media services

Country–of-origin principle

Currently, broadcasters based in the UK have the benefit of the “Country-of-Origin” principle enshrined in the EU’s Audiovisual Media Services Directive (“AVMSD”), which allows them to freely transmit throughout the EU without needing multiple licences as long as they are licensed and regulated in the UK. The principle has particularly benefited the UK broadcasting industry. Coupled with the UK also having a stable and supportive regulatory regime, a developed creative sector, a large domestic broadcasting market, access to highly skilled workers in the industry and being English speaking, among other reasons, it is unsurprising that many non-domestic multinational broadcasters base their European operations here and the UK regulator, Ofcom, licenses more than half of the 2,200 channels broadcast across the EU.

However, as mentioned in our recent bulletin “Audiovisual Media Services: Back to the 80’s?!“, as of the withdrawal date (subject to any transitional arrangement), these EU rules in the field of audiovisual media services will no longer apply to the UK and UK-based broadcasters would be left relying on some-what out of date legislation drafted in the 1980s (see below European Convention on Transfrontier Television: an inadequate alternative?).

Both the UK Government’s no-deal notice on broadcasting and video-on-demand and the European Commission’s notice to stakeholders make it clear that from this date, audiovisual media services received or retransmitted in the EU will no longer benefit from the freedom of reception and retransmission principles laid down in Article 3 of the AVMSD. Therefore, EU member states will be entitled (based on their national law and where applicable, within the limits of the European Convention on Transfrontier Television (“Convention”)), to restrict reception and retransmission of audiovisual media services originating from the UK.

In her Brexit speech on 2 March 2018, Prime Minister Teresa May suggested that a “mutual recognition” in respect of trans-frontier reception and retransmission between the UK and the EU could achieve the same effect as the “country-of-origin” principle under the AVMSD. However, these reciprocal rights and obligations rely on single market access which the UK cannot unilaterally preserve in domestic legislation alone without the consent of member states or agreement with the EU through a free trade agreement – a seemingly unlikely scenario given the French President’s recent statement.

As a possible alternative, in its no-deal notice on broadcasting and video-on-demand, the UK Government stated that the Convention would continue to apply and “may have increased relevance”. However, even the notice acknowledges the possible flaws in this alternative framework.

European Convention on Transfrontier Television: an inadequate alternative?

The Convention is founded on broadly the same country of origin principle as that which went on to be enshrined in the Television Without Frontiers Directive and now the AVMSD, meaning media service providers would still only need one licence from a regulatory body in their jurisdiction to broadcast throughout Europe. It is questionable, however, whether the Convention on its own is likely to be enough to prevent broadcasters from relocating elsewhere in the EU; the Convention excludes seven Member States (Belgium, Denmark, Greece, Republic of Ireland, Luxembourg, the Netherlands and Sweden), lacks an effective enforcement mechanism and, of course, does not cover on-demand services. The mechanism by which reception and re-transmission rights are given effect in each Convention country may also depend on the individual national law and the way that the Convention has been implemented by that country. In addition, those EU countries that are signatories to the Convention will be following the AVMSD rules whilst the UK would be following the Convention rules – meaning that working out how cross-border relationships between UK and EU media business work in practice could prove challenging.

The current status of the Convention is also unclear; following adoption of the AVMS Directive, the Council of Europe proposed to amend the Convention to bring it in line with the Directive and extend the scope to cover on-demand services. However, following intervention from the European Commission the revisions to the Convention were eventually discontinued and there is no longer a Convention Standing Committee.

The UK Government acknowledges these potential challenges with the Convention in its no-deal notice and suggests that audiovisual media providers seek local legal advice on how individual member states deal with their Convention obligations to permit freedom of reception and what action (if any) needs to be taken.

Draft Broadcasting (Amendment) EU Exit Regulations 2019: Brexit SI

In preparation for a no-deal Brexit, at the end of December 2018, the Department for Digital, Culture, Media and Sport also issued a draft statutory instrument under the EU (Withdrawal) Act 2018 to come into force on exit day if there is no-deal. The corresponding Explanatory Memorandum provides some useful commentary on the UK Government’s current policy stance. In particular the memorandum suggests that the statutory instrument seeks to “remedy deficiencies in retained EU law” arising from Brexit – in two key ways:

  • implementing the Convention, to continue a system of freedom of reception and transmission, minimum content standards and mutual co-operation between parties to the Convention; and
  • moving to a country of destination system of regulation which requires television services in the UK to be licensed and regulated by Ofcom. This is subject to two exceptions:
    • by implementing the Convention, television services provided by broadcasters in countries that are party to the Convention do not need a licence from Ofcom. The memorandum also suggests a “country of origin regulation very similar to the system under the AVMSD could be retained” with countries party to the Convention; and
    • certain Irish language television services originating in the Republic of Ireland (not party to the Convention) do not need a licence from Ofcom, this is to honour commitments made in the Good Friday Agreement).
  • Any television service originating in an EEA state which is not party to the Convention (and therefore not currently required to have a licence in the UK), is treated as an exempt foreign service for 6 months after exit day, effectively providing a transitional period to obtain the necessary broadcasting licence from Ofcom.

Despite heavily focussing on the Convention, neither the memorandum nor the statutory instrument address the misgivings with relying on the Convention.

Impact on the UK audiovisual media industry: no deal planning full speed ahead?

In light of the possible flaws with the Convention and the fast diminishing likelihood of including audiovisual media services in any free trade agreement with the EU, well-known media companies licensed and based in the UK are inevitably tempted to restructure their European operations.

The no-deal notice advices audiovisual media service providers to assess on a case-by-case basis whether their current licence would continue to be accepted in the EU countries where the service is made available.

In order for UK-licensed multinational broadcasters to continue to broadcast across the EU, they may be required to also obtain a separate broadcast licence, and comply with additional regulation, in another member state in which they are: (i) established (e.g. where the head office / editorial decisions regarding the services are taken / significant part of the workforce is located); or (ii) certain technical criteria are satisfied in respect of satellite uplink or satellite capacity (which apply where the establishment criteria is not met).

The industry association for commercial broadcasters warned in 2018 that losing EU-wide broadcast rights could jeopardise £1 billion in annual investment from these international operators. In fact, in light of the current uncertainty, we have already started to see a number of multi-national channel providers who have a UK Ofcom broadcasting licence, apply for a separate broadcasting licence in an alternative jurisdiction, in an effort to continue to take advantage of the country of origin principle across the EU post-Brexit. Ireland, Germany, the Netherlands and France are currently proving popular alternative destinations.

With 9 weeks to go before the UK is due to leave the EU and the way ahead for Brexit still uncertain, one thing is for sure, no-deal Brexit planning ought to be at the top of the agenda for UK based multinational broadcasters wanting to continue to transmit across the EU.