Commission of the European Communities v Portuguese Republic.
Date: 2006-07-06
20. According to settled case-law, in interpreting a provision of Community law it is necessary to consider not only its wording, but also the context in which it occurs and the objective pursued by the rules of which it is part (see, inter alia, Case C-301/98 KVS International [2000] ECR I-3583, paragraph 21, and Case C-156/98 Germany v Commission [2000] ECR I-6857, paragraph 50).
21. As regards firstly the wording of Article 5(3) of the directive, it should be noted that this refers to ‘certain categories of establishments’. Therefore it clearly follows that the legislature did not intend to allow Member States to exempt all categories of establishments from payment of the remuneration referred to in Article 5(1).
22. Next, under Article 5(3), the directive allows Member States to derogate, in respect of public lending, from the general obligation of remuneration of authors referred to in paragraph 1 of that article. According to settled case-law, the provisions of a directive which derogate from a general principle established by that directive must be strictly interpreted (Case C-476/01 Kapper [2004] ECR I-5205, paragraph 72).
24. Finally, the main objective of the directive, as can be seen more precisely from the seventh recital, is to guarantee that authors and performers receive appropriate income and recoup the especially high and risky investments required particularly for the production of phonograms and films (Case C-200/96 Metronome Musik [1998] ECR I-1953, paragraph 22).
25. It follows that the fact of exempting all categories of establishments which engage in such lending from the obligation laid down in Article 5(1) of the directive would deprive authors of remuneration with which they could recoup their investments, with inevitable repercussions for the creation of new works (see Metronome Musik , paragraph 24). In those circumstances, a transposition of the directive that resulted in such an exemption for all categories of establishments would go directly against the objective of that directive.
30. However, on the assumption that that Member State thereby intended to dispute the validity of the directive, it should be remembered that, outside the period prescribed in Article 230 EC, it cannot contest the lawfulness of an act adopted by the Community legislature which has become final in its regard. It is settled case-law that a Member State cannot properly plead the unlawfulness of a directive or decision addressed to it as a defence in an action for a declaration that it has failed to implement that decision or comply with that directive (see, inter alia, Case C-74/91 Commission  v Germany [1992] ECR I-5437, paragraph 10; Case C-154/00 Commission v Greece [2002] ECR I-3879, paragraph 28; and Case C-194/01 Commission v Austria [2004] ECR I-4579, paragraph 41).
31. In any event, the Court has already held that, like other industrial and commercial property rights, the exclusive rights conferred by literary and artistic property are by their nature such as to affect trade in goods and services and also competitive relationships within the Community.  For that reason, those rights, although governed by national legislation, are subject to the requirements of the EC Treaty and therefore fall within its scope of application (Joined Cases C-92/92 and C-326/92 Phil Collins and Others [1993] ECR I-5145, paragraph 22).
34. However, forms of exploitation of a protected work, such as public lending, are different in nature from sale or any other lawful form of distribution. The lending right remains one of the prerogatives of the author notwithstanding sale of the physical recording. Furthermore, the lending right is not exhausted by the sale or any other act of distribution, whereas the distribution right may be exhausted, but only and specifically upon the first sale in the Community by the rightholder or with his consent (see, to that effect, Metronome Musik , paragraphs 18 and 19).
39. Moreover, in the absence of sufficiently precise Community criteria in a directive to delimit the obligations thereunder, it is for the Member States to determine, in their own territory, what are the most relevant criteria for ensuring, within the limits imposed by Community law, and in particular by the directive concerned, compliance with that directive (see, to that effect, Case C-245/00 SENA [2003] ECR I-1251, paragraph 34, and Case C-433/02 Commission v Belgium [2003] ECR I-12191, paragraph 19).
40. In that respect, it has already been held that Article 5(3) of the directive authorises but does not oblige a Member State to exempt certain categories of establishments. Consequently, if the circumstances prevailing in the Member State in question do not enable the relevant criteria to be determined for drawing a valid distinction between categories of establishments, the obligation to pay the remuneration provided for in paragraph 1 of the article must be imposed on all the establishments concerned ( Commission v Belgium , paragraph 20).