The DEA Goes Ahead

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On 20 April the High Court, in case [2011] EWHC 1021 (Admin), substantially rejected the arguments that BT and Talk Talk had raised (supported by the consumers’ groups Open Rights Group, Article 19 and Consumer Focus) against the validity of the Digital Economy Act (DEA). The DEA is therefore set to go ahead.

BT and Talk Talk had applied for a judicial review of the DEA on 5 grounds. The claimants had also challenged (on 4 of the same 5 grounds) the validity of the Copyright (Initial Obligations) (Sharing of Costs) Order 2011 (the Costs Order) under which the legislator had decided that ISPs would bear 25% of the costs arising from the DEA, while the copyright owners should bear the remaining 75%. Interestingly, the judge has accepted one of the arguments against the validity of the Costs Order, which will now have to be re-discussed by Parliament.

The reasoning behind the decision adopted by Mr Justice Kenneth Parker is summarised below.

In the first ground of their application, the claimants challenged the DEA on the basis that its provisions constitute a technical regulation. The government should have therefore notified the DEA to the European Commission under the Technical Standards Directive. The judge disagreed with this interpretation of the DEA. The provisions of the DEA are not sufficiently precise and specific and they are ineffective and unenforceable prior to the adoption of a code of practice that Ofcom is due to adopt in final form to implement the DEA. “Unless and until a code is in force the ISP is not liable to receive a copyright infringement report under the DEA and an ISP is not obliged to take any action in respect of any such report pursuant to the DEA.” That code will have to be notified to the European Commission pursuant to the Technical Standards Directive prior to its adoption.

The second ground of challenge was based on the potential conflict between the DEA and the provisions of the E-Commerce Directive introducing the ‘mere conduit’ principle whereby ISPs are (to a certain extent) not liable for the information transmitted through their networks. Mr J Parker contested the wide interpretation of the mere conduit principle proposed by the claimants to sustain their case. In adopting the E-Commerce Directive, the European legislator struck a careful balance between the interests of copyright owners and the interests of ISPs. The DEA does not alter this balance and is in fact in line with Article 12.3 of the E-Commerce Directive, which expressly allows Member States to adopt measures “requiring the service provider to terminate or prevent an infringement.”

The third ground of the claimants’ challenge was based on the potential conflict between the DEA and the data protection legislation. The judge admitted that IP addresses are to be treated by copyright owners and ISPs as personal data under the UK Data Protection Act, but dismissed the challenge. The UK Data Protection Act provides (Schedule 3 paragraph 5) that personal data (including sensitive personal data) can be processed legally if the processing “is necessary for the purpose of, or in connection with, any legal proceedings (including prospective legal proceedings)”. There is no doubt that in this case copyright owners would act for the protection of their rights for the purpose of potential future proceedings.

The claimants’ fourth ground of challenge was probably the most controversial and Mr J Parker decided it as the last point of his judgement. It was claimed that the DEA was disproportionate in its impact on “ISPs, consumers, business subscribers and public intermediaries” on the basis of a number of legal sources including “Articles 7, 8, 11 and 52 of the Charter of Fundamental Rights and/or general principles of EU law, pursuant to Article 6 TEU and the Human Rights Act 1998 and Articles 8 and/or 10 of the European Convention of Human Rights.” Mr J Parker rejected all these arguments, recognising that judges must be careful in seeking to make assessments that should be made by Parliament: “In this case Parliament has addressed a major problem of social and economic policy, where important and conflicting interests are in play. On the one hand there is evidence to suggest that the media industry, broadly interpreted, is sustaining substantial economic damage as a result of unlawful activity on the internet […]. On the other hand, the business models of ISPs are constructed on the basis that they are essentially conduits for the flow of information […]. Similarly, subscribers of the ISPs and users of the internet appreciate that the technology is the most prodigious tool for the transmission and interchange of information and other material ever designed […]. Information is also a public good, and interference with access to, and publication of, information may adversely affect general welfare. How these competing and conflicting interests should be accommodated and balanced appears to me a classic legislative task, and the court should be cautious indeed before striking down as disproportionate the specific balance that Parliament has legislated.”

Finally, in the fifth ground of challenge, the claimants considered that the DEA and the Costs Order infringed the Authorisation Directive as their provisions would impose additional charges on ISPs which had not been published as part of Ofcom yearly overview of administrative charges imposed on ISPs. Mr J Parker (as the only concession to the claimants) partially accepted this argument and decided that the Costs Order was unlawful to the extent it obliges ISPs to contribute to Ofcom administrative costs of carrying out its functions under the DEA. The Costs Order will therefore have to be rewritten.

The decision, which needs to be assessed within the boundaries of its procedural context (a judicial review process), will likely have an impact on the interpretation of the DEA by the courts in future case law. It confirms the trend (in the EU and globally) towards a reshaping (or erosion?) of the mere conduit principle. Many questions still remain unanswered which will need to be addressed by Ofcom and, hélas, by the courts.

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