COMMON POSITION (EC) No 43/98 adopted by the Council on 29 June 1998 with a view to the adoption of Directive 98/. . ./EC of the European Parliament and Council of . . . on the legal protection of services based on, or consisting of, conditional access (98/C 262/03)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles 57(2), 66 and 100a thereof,

Having regard to the proposal from the Commission (1),

Having regard to the Opinion of the Economic and Social Committee (2),

Acting in accordance with the procedure laid down in Article 189b of the Treaty (3),

1. Whereas the objectives of the Community as laid down in the Treaty include creating an ever closer union among the peoples of Europe and ensuring economic and social progress, by eliminating the barriers which divide them;

2. Whereas the cross-border provision of broadcasting and information society services may contribute, from the individual point of view, to the full effectiveness of freedom of expression as a fundamental right and, from the collective point of view, to the achievement of the objectives laid down in the Treaty;

3. Whereas the Treaty provides for the free movement of all services which are normally provided for remuneration; whereas this right, as applied to broadcasting and information society services, is also a specific manifestation in Community law of a more general principle, namely freedom of expression as enshrined in Article 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms; whereas that Article explicitly recognizes the right of citizens to receive and impart information regardless of frontiers and whereas any restriction of that right must be based on due consideration of other legitimate interests deserving of legal protection;

4. Whereas the Commission undertook a wide-ranging consultation based on the Green Paper 'Legal Protection of Encrypted Services in the Internal Market`; whereas the results of that consultation confirmed the need for a Community legal instrument ensuring the legal protection of all those services whose remuneration relies on conditional access;

5. Whereas the European Parliament, in its Resolution of 13 May 1997 on the Green Paper (4), called on the Commission to present a proposal for a Directive covering all encoded services in respect of which encoding is used to ensure payment of a fee, and agreed that this should include information society services provided at a distance by electronic means and at the individual request of a service receiver, as well as broadcasting services;

6. Whereas the opportunities offered by digital technologies provide the potential for increasing consumer choice and contributing to cultural pluralism, by developing an even wider range of services within the meaning of Articles 59 and 60 of the Treaty; whereas the viability of those services will often depend on the use of conditional access in order to obtain the remuneration of the service provider; whereas, accordingly, the legal protection of service providers against illicit devices which allow access to these services free of charge seems necessary in order to ensure the economic viability of the services;

7. Whereas the importance of this issue was recognized by the Commission Communication on 'A European Initiative in Electronic Commerce`;

8. Whereas, in accordance with Article 7a of the Treaty, the internal market is to comprise an area without internal frontiers in which the free movement of services and goods is ensured; whereas Article 128(4) of the Treaty requires the Community to take cultural aspects into account in its action under other provisions of the Treaty; whereas by virtue of Article 130(3) of the Treaty, the Community must, through the policies and activities it pursues, contribute to creating the conditions necessary for the competitiveness of its industry;

9. Whereas this Directive is without prejudice to possible future Community or national provisions meant to ensure that a number of broadcasting services, recognised as being of public interest, are not based on conditional access;

10. Whereas this Directive is without prejudice to the cultural aspects of any further Community action concerning new services;

11. Whereas the disparity between national rules concerning the legal protection of services based on, or consisting of, conditional access is liable to create obstacles to the free movement of services and goods;

12. Whereas the application of the Treaty is not sufficient to remove these internal market obstacles; whereas those obstacles should therefore be removed by providing for an equivalent level of protection between Member States; whereas this implies an approximation of the national rules relating to the commercial activities which concern illicit devices;

13. Whereas those commercial activities which concern illicit devices include commercial communications covering all forms of advertising, direct marketing, sponsorship, sales promotion and public relations promoting such products and services;

14. Whereas those commercial activities are detrimental to consumers who are misled about the origin of illicit devices; whereas a high level of consumer protection is needed in order to fight against this kind of consumer fraud; whereas Article 129a(1) of the Treaty provides that the Community should contribute to the achievement of a high level of consumer protection by the measures is adopts pursuant to Article 100a thereof;

15. Whereas, therefore, the legal framework for the creation of a single audiovisual area laid down in Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities (5) should be supplemented with reference to conditional access techniques as laid down in this Directive, in order, not least, to ensure equal treatment of the suppliers of cross-border broadcasts, regardless of their place of establishment;

16. Whereas, in accordance with Council Resolution of 29 June 1995 on the effective uniform application of Community law and on the penalties applicable for breaches of Community law in the internal market (6), Member States are required to take action to ensure that Community law is duly applied with the same effectiveness and thoroughness as national law;

17. Whereas, in accordance with Article 5 of the Treaty, Member States are required to take all appropriate measures to guarantee the application and effectiveness of Community law, in particular by ensuring that the sanctions chosen are effective, dissuasive and proportionate and the remedies appropriate;

18. Whereas the approximation of the laws, regulations and administrative provisions of the Member States should be limited to what is needed in order to achieve the objectives of the internal market, in accordance with the principle of proportionality as set out in the third paragraph of Article 3b of the Treaty;

19. Whereas the distribution of illicit devices includes transfer by any means and putting such devices on the market for circulation inside or outside the Community;

20. Whereas this Directive is without prejudice to the application of any national provisions which may prohibit the private possession of illicit devices, to the application of Community competition rules and to the application of Community rules concerning intellectual property rights;

21. Whereas national law concerning sanctions and remedies for infringing commercial activities may provide that the activities have to be carried out in the knowledge or with reasonable grounds for knowing that the devices in question were illicit;

22. Whereas the sanctions and remedies provided for under this Directive are without prejudice to any other sanction or remedy for which provision may be made under national law, such as preventive measures in general or seizure of illicit devices; whereas Member States are not obliged to provide criminal sanctions for infringing activities covered by this Directive; whereas Member States' provisions for actions for damages are to be be in conformity with their national legislative and judicial systems;

23. Whereas this Directive is without prejudice to the application of national rules which do not fall within the field herein coordinated, such as those adopted for the protection of minors, including those in compliance with Directive 89/552/EEC, or national provisions concerned with public policy or public security,

HAVE ADOPTED THIS DIRECTIVE:

Article 1 Scope

The objective of this Directive is to approximate provisions in the Member States concerning measures against illicit devices which give unauthorised access to protected services.

Article 2 Definitions

For the purposes of this Directive:

(a) 'protected service` shall mean any of the following services, where provided against remuneration and on the basis of conditional access:

- television broadcasting, as defined in Article 1(a) of Directive 89/552/EEC,

- radio broadcasting, meaning any transmission by wire or over the air, including by satellite, of radio programmes intended for reception by the public,

- information society services within the meaning of Article 1(2) of Council Directive 83/189/EEC of 28 March 1983 laying down a procedure for the provision of information in the field of technical standards and regulations (7),

or the provision of conditional access to the above services considered as a service in its own right;

(b) 'conditional access` shall mean any technical measure and/or arrangement whereby access to the protected service in an intelligible form is made conditional upon prior individual authorization;

(c) 'conditional access device` shall mean any equipment or software designed or adapted to give access to a protected service in an intelligible form;

(d) 'associated service` shall mean the installation, maintenance or replacement of conditional access devices, as well as the provision of commercial communication services in relation to them or to protected services;

(e) 'illicit device` shall mean any equipment or software designed or adapted to give access to a protected service in an intelligible form without the authorization of the service provider;

(f) 'field coordinated by this Directive` shall mean any provision relating to the infringing activities specified in Article 4.

Article 3 Internal market principles

1. Each Member State shall take the measures necessary to prohibit on its territory the activities listed in Article 4, and to provide for the sanctions and remedies laid down in Article 5.

2. Without prejudice to paragraph 1, Member States may not:

(a) restrict the provision of protected services, or associated services, which originate in another Member State; or

(b) restrict the free movement of conditional access devices for reasons falling within the field coordinated by this Directive.

Article 4 Infringing activities

Member States shall prohibit on their territory all of the following activities:

(a) the manufacture, import, distribution, sale, rental or possession for commercial purposes of illicit devices;

(b) the installation, maintenance or replacement for commercial purposes of an illicit device;

(c) the use of commercial communications to promote illicit devices.

Article 5 Sanctions and remedies

1. The sanctions shall be effective, dissuasive and proportionate to the potential impact of the infringing activity.

2. Member States shall take the necessary measures to ensure that providers of protected services whose interests are affected by an infringing activity as specified in Article 4, carried out on their territory, have access to appropriate remedies, including bringing an action for damages and obtaining an injunction or other preventive measure, and where appropriate, applying for disposal outside commercial channels of illicit devices.

Article 6 Implementation

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by [. . .] (8). They shall notify them to the Commission forthwith.

When Member States adopt such measures, they shall contain a reference to this Directive or shall be accompanied by such reference at the time of their official publication. The methods of making such reference shall be laid down by Member States.

2. Member States shall communicate to the Commission the text of the provisions of national law which they adopt in the field coordinated by this Directive.

Article 7 Reports

Not later than five years after the entry into force of this Directive, and every three years thereafter, the Commission shall present a report to the European Parliament, the Council and the Economic and Social Committee concerning the implementation of this Directive accompanied, where appropriate, by proposals for adapting it in the light of technical and economic developments.

Article 8 Entry into force

This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.

Article 9 Addressees

This Directive is addressed to the Member States.

Done at . . .

For the European Parliament

The President

For the Council

The President

(1) OJ C 314, 16.10.1997, p. 7.

(2) OJ C 129, 27.4.1998, p. 16.

(3) Opinion of the European Parliament of 30 April 1998 (OJ C 152, 18.5.1998, p. 64), Council Common Position of 29 June 1998, and Decision of the European Parliament of . . . (not yet published in the Official Journal).

(4) OJ C 167, 2.6.1997, p. 31.

(5) OJ L 298, 17.10.1989, p. 23. Directive as amended by Directive 97/36/EC of the European Parliament and of the Council (OJ L 202, 30.7.1997, p. 60).

(6) OJ C 188, 22.7.1995, p. 1.

(7) OJ L 109, 26.4.1983, p. 8. Directive as last amended by Commission Decision 96/139/EC (OJ L 32, 10.2.1996, p. 31).

(8) 18 months after the date of publication.

STATEMENT OF THE COUNCIL'S REASONS

I. INTRODUCTION

1. On 23 September 1997, the Commission submitted a proposal for a European Parliament and Council Directive on the legal protection of services based on, or consisting of, conditional access.

The proposal is based on Articles 57(2), 66 and 100a of the EC Treaty.

2. The European Parliament delivered its first-reading Opinion on 30 April 1998.

The Economic and Social Committee delivered its Opinion on 25 February 1998.

Further to the European Parliament's Opinion, the Commission submitted an amended proposal on 20 May 1998.

3. The Council adopted its common position, under Article 189b of the Treaty, on 29 June 1998.

II. OBJECTIVE

The purpose of the proposal is to ensure an adequate level of legal protection to television, radio broadcasting and information society services whose remuneration depends on 'conditional access` techniques such as encryption and electronic locks. Such services include pay-TV, video-on-demand, audio-on-demand and electronic publishing. The Member States will be obliged to prohibit, and provide appropriate sanctions against, a wide range of commercial piracy activities which allow the circumvention of conditional access techniques and give unauthorised access to protected service.

III. THE COMMON POSITION

1. General comments

The Council's common position is in line with the objective and the content of the Commission proposal to ensure an adequate level of legal protection of a broad range of services that are provided against remuneration and on the basis of 'conditional access` techniques.

2. Specific comments

The Council considered that a number of changes should be made to the Commission's proposal. However, these changes do not substantially alter objectives nor content of the proposal. These changes are summarised hereafter:

(a) Principal changes made to the Commission proposal

(i) Scope (Article 1)

The Council deemed it necessary to introduce a new article to make the scope of the Directive clearer and more precise.

In order to give further examples of national measures not covered by the Directive, recital 23 has been extended.

(ii) Definitions (Article 2)

The Council considered it appropriate for reasons of legal certainty to make the definitions clearer and easier to read. Therefore the following modifications were made:

- the words 'against remuneration` have been moved from (b) to (a),

- the text of (d) has been clarified,

- the definition of 'unauthorised access` has been merged into the definition of 'illicit device` in (e),

- previous (g) has been reworded and clarified.

(iii) Infringing activities (Article 4)

This Article, which deals with various infringing activities related to illicit devices, illicit services and illicit promotion, states that only commercial activities are unlawful, it being understood that Member States are free to take measures at national level against private possession.

In order to clarify the provision of infringing activities and avoid possible loopholes a reference to 'rental` and 'distribution` of illicit devices has been added in the list of infringing activities. The Council also considered it appropriate to clarify what is meant by 'distribution` in a new recital 19. In order to make sure that infringements require intention (i. e. have to be committed knowingly), the Council also included a new recital 21.

(iv) Sanctions and remedies (Article 5)

Article 5(2) sets out various remedies that can be invoked by service providers in the Member States. The following modifications to the Commission proposal relate to the nature of legal regimes in different Member States rather than to the content of the proposal:

- to make the text clearer 'service providers` has been replaced by 'providers of protected services`,

- in order to take into account the different meaning of the notion of 'injunction` in the different national legal regimes, the common position is completed with a specific reference to 'other preventive measures`,

- the notion of 'seizure` has been replaced by 'disposal outside commercial channels`, since 'seizure` can in certain legal systems only be executed under criminal law,

- in order to clarify these issues further, a new recital 22 has been added.

(b) Council position on the European Parliament's amendments

(i) Amendments included in whole or in part in the common position

The Council retained eleven amendments (Nos 1, 2, 6, 7, 8, 12, 13, 15, 19, 23 and 24) proposed by the European Parliament.

- Amendments 1, 6, 8, 12 and 23 have been incorporated verbatim. However, it should be noted that amendment No 23 has been incorporated in a new recital 13 instead of an Article,

- Amendments 2, 7, 13, 15, 19 and 24 have been adopted in spirit with slight modifications.

Amendment No 2 is modified to reflect the exact wording of the Treaty; amendment No 7 is supplemented by the words 'possible future` before community or national provisions, since no such legislation exists at the moment; amendment No 13 is modified in order to maintain coherence with the original proposal; in amendment No 15 the words 'measures by Member States` have been replaced by 'national provisions`; amendments Nos 19 and 24 are reflected in spirit.

(ii) Amendments not incorporated in the common position

In declining to include amendments Nos 5, 9, 11, 18, 20, 21, 22 and part of 23 in its common position, the Council endorsed the Commission's position as set out in its amended proposal.

As regards the remaining amendments, the Council was guided by the following considerations:

- Amendments Nos 3, 4, 10, 16, 17 and 25: the Council did not deem it advisable to insert these amendments which related to the use of conditional access for reasons other than the protection of remuneration, since they are not covered by the objectives of the proposal,

- Amendment No 14: the Council took the view that it was inappropriate to add a recital that included such a specific reference to the content of this Commission's Communication.