So what better alternative is there
than an agreement between citizens themselves
reached under conditions that are fair for all?
3.1 Intro
This chapter crosses the bridge from music industry practice to the analysis of the legal regimes deemed most relevant in securing a fair(er) balance in music contracts in the streaming age. Particular focus lies with the effect of the law on contracts entered into between musicians and record companies and/or music publishers as to individually managed exclusive rights.
First, this chapter analyses the role of the legal framework in achieving this book’s policy objective of moving towards a fair(er) balance in the streaming age, fleshing out both the substantive and procedural dimension of what may be perceived as ‘fair’ in this particular context (Section 3.2). It then goes on to provide a typology of the relevant substantive legal regimes, categorising these limitations to parties’ freedom of contract in terms of substantive, geographical and temporal scope and analysing the interplay between them (Section 3.3). Finally, the chapter sets out to establish the appropriate level(s) and method(s) of further potential policy initiatives aimed at contributing to the elusive fair balance that this book advocates (Section 3.4).
3.2 Towards a Fair Balance in the Streaming Age
3.2.1 Balancing Copyright and Other Fundamental Rights
Copyright falls within the scope of the fundamental right to ownership.Footnote 2 Both the material and moral dimensions of copyright are also protected as a sociocultural right.Footnote 3 A risk of conflict arises with other fundamental rights, including freedom of expression and information.Footnote 4 In this regard, achieving a fair balance is key.Footnote 5 Three different dimensions may be discerned.
First, an appropriate balance is required between the protection of copyright as exclusive property and the provision of legal certainty and third parties’ freedom to create. This encompasses questions pertaining to (joint) authorship and the creative reuse of existing works.Footnote 6 The latter questions the appropriate line between copyright infringement and use that falls within the scope of applicable exceptions and limitations.
The second dimension refers to the balance between copyright owners and users as well as exploiters of content protected by copyright. This brings, inter alia, freedom of commerce, expression and information as well as the right to privacy and data protection into the picture. In the debate concerning the digitised entertainment industry, this dimension is linked with the colloquial ‘size of the pie’ that is, the total revenue stream accruing to the content value chain.
The balance between the artistic and commercial players within this value chain provides the third dimension, which concerns the division of artistic and commercial value between the relevant players – in other words, how the abovementioned ‘pie’ is ‘sliced’.Footnote 7 This dimension of the copyright balance is the primary focal point of this book.
3.2.2 Conceptualising a ‘Fair(er) Balance’ in the Streaming Age
The objective is to contribute to a legal framework that is conducive to a fair(er) balance between the interests of the primary music industry stakeholders in the streaming age.Footnote 8 A distinction may be made between substantive and procedural aspects. Substantively speaking, the appropriate allocation of resources within a society comes to the fore. This is associated with the objective of ensuring that stakeholders receive a ‘fair share’. Fairness also implies the procedural dimension of ‘fair play’. In order to ensure that the allocated share is and remains fair, relevant processes should attain certain procedural benchmarks. Keywords in this context include transparency and legal certainty.
As to the question of ‘fair share’, the framework provided by varying theories of distributive justice forms a welcome starting point.Footnote 9 Theories of distributive justice accord varying weight to considerations such as efficiency, equality, liberty and entitlement in justifying ‘their’ account of what should be considered as a just allocation of resources. Broadly speaking, a distinction may be made between egalitarian and libertarian schools of thought, whereby the primary focus either lies with securing equality and equal treatment, or autonomy and freedom.
A prevailing (liberalist) egalitarian theory is John Rawls’ perspective on justice as fairness.Footnote 10 Rawls theorises about a hypothetical scenario in which a group of people must decide on the modalities of their society – what counts as fair terms of cooperation – without knowing what place they will occupy in it.Footnote 11 The chosen principles are to be binding to all and, moreover, irrevocable once the veil of ignorance is lifted. Rawls posits that, starting from this ‘original position’ and conscious of the irrevocable nature of the choices made in this context, a political and economic basic structure will be unveiled that operates under conditions that are fair for all.Footnote 12 In Rawls’ view, the principles of justice that participants in his thought experiment would agree upon are twofold. First, each citizen would be guaranteed a set of certain equal basic, fundamental liberties, including freedom of thought and speech and the right to bodily integrity.Footnote 13 Second, social and economic inequalities would be attached to positions and offices that are open to all and would moreover work to the advantage of those worst off.Footnote 14 The former principle is referred to as ‘fair equality of opportunity’, while the latter is referred to as the ‘difference principle’. This view on society requires a certain degree of direct involvement of the state, whose primary goal is to improve the lot of those least fortunate.Footnote 15 Rawls’ theory is not free from criticism, including for its individualistic conception of what is good and thus worth pursuing, the ideal setting of the ‘original position’ thought experiment and the difficulties in operationalising the difference principle.Footnote 16
Libertarianism puts much greater emphasis on personal autonomy, responsibility and respect for individual rights. A minimal state is advanced as the most ‘just’ way to regulate society. One of the main proponents of libertarianism is the entitlement theory advanced by Robert Nozick.Footnote 17 Simply put, a transaction pertaining to certain resources is deemed fair from a libertarian point of view if it is voluntary. Thus, the free-market economy is placed squarely in the centre and state intervention that is labelled as paternalistic and overly intrusive is rejected.
The perspective of egalitarians and libertarians also diverges as to the perceived role of (copyright) contract law. The question thus is whether or not contract law should make a conscious effort to influence the allocation of resources within a society through the regulation of transactions.Footnote 18 From a libertarian perspective, the answer is negative. A compulsory transfer of resources is considered theft. A Nozickian libertarian’s focus on personal responsibility and the protection of both private property and freedom of contract would bring them to consider the idea of countering the results of voluntary transactions on the basis of considerations of equality as implemented through the provisions of contract law as ‘unfair’.Footnote 19 Conversely, Rawls’ theory of ‘justice as fairness’ may point towards a different conclusion on the basis of egalitarian considerations of equality and inclusivity. The fundamental perceived need to allocate resources in an inclusive way that duly acknowledges the contributions of relevant actors and secures equal opportunities for all stakeholders steers this book in such a direction.Footnote 20 The mere fact that both parties have consented to a certain transaction does not in itself imply that the transaction is actually ‘voluntary’.Footnote 21 The bargaining power of the parties plays a key role. The ‘voluntary’ nature of copyright-related transactions in the streaming age – the actual ‘freedom of contract’ in the real sense of the word – is often merely a mirage.Footnote 22
The Rawlsian principles of distributive justice are meant to shape the institutions that contain the ‘basic structure’Footnote 23 of society from a macro perspective; they provide for fair background conditions, while allowing members of this society to be as free as possible to pursue their own conception of what is good through micro, voluntary transactions.Footnote 24 It has been argued that Rawls considered this basic structure not to include private contractual relations and that such transactions should remain free from government interference in view of the contracting parties’ personal autonomy and responsible agency.Footnote 25 The contrary position has also been defended.Footnote 26 Independently of the exact appropriate scope of Rawls’ ‘basic structure’, the shaping of contract law should not take place independently of distributive considerations. The mere fact that ‘fair’ background conditions are available in a given society does not in itself imply that parties will be able to assume personal responsibility and protect themselves against unfair advantage-taking in the context of foreground contractual transactions.Footnote 27 There is a risk that less advantaged parties enter into contractual transactions that ‘purport to deprive them of resources beyond a Rawlsian sufficiency baseline’.Footnote 28 In such cases, the law should intervene, at least to a certain extent. The distributive effects of the relevant contract law framework should not be ignored.Footnote 29 If contract law steers away from distributive considerations, it risks losing its moral acceptability.Footnote 30
It would be a bridge too far to assess every individual transaction in terms of its (re)distributive qualities.Footnote 31 The original position thought experiment does not require us to presuppose individual parties’ intentions and wishes from behind a veil of ignorance. Instead, the presumed veil of ignorance may be said to apply on a more macro level. Rawls’ perspective on justice as fairness does not give a definitive answer to the question how a specific rule should be shaped and/or how it should be applied to a particular situation.Footnote 32 Instead, it provides a general, overarching thought framework that encourages and guides lawmakers.Footnote 33 Micro-level inequalities in bargaining power are deemed relevant for fairness-assessment purposes if they mirror structural inequalities at a more macro level, such as in the case of employment or consumer contracts.Footnote 34 A party’s status as either an employee or a consumer serves as a proxy for their presumed bargaining power. In classifying a group of people in such a way, the costs of excessive fine-tuning are to be balanced against the objective of being sensitive to inequalities in bargaining power.Footnote 35 There are structural inequalities in the streaming age that point towards the appropriateness of classifying musicians – in particular legacy artists – as the category of stakeholders that should be considered ‘worst off’ and which therefore merits specific and sustained attention when shaping the relevant legal framework from the perspective of fairness.
The goal should be to craft a legal regime that allows stakeholders to arrive at an allocation of resources through contractual transactions that acquires its perceived fairness on the basis of the legal regime.Footnote 36 Thus, the fairness assessment takes place independently of the intention of the contracting parties.Footnote 37 A balance is required between the objective of securing stakeholders’ individual autonomy and the need to set certain limits to the freedom of contract from the perspective of securing equality of opportunity and the operationalisation of the difference principle.Footnote 38 If contract law is fair, the fairness of contracts entered into within the framework of this law is presumed.
The development of Rawlsian fairness invites us to further flesh out to which resources the distributive perspective of this book applies. In other words, what relevant resources are there to be (fairly) allocated? Again, various theories may offer fruitful ground for further concretisation.
Pierre Bourdieu’s 1986 essay on the forms of capital provides a first useful building block.Footnote 39 Bourdieu defines capital as an accumulation of labour and uses it as a way to explain how power is divided in a society.Footnote 40 He distinguishes three separate but interconnected types of capital, namely economic, cultural and social capital. First, economic capital focuses on direct remuneration and property (how much money one has). The latter two types of capital are more abstract and symbolic, and only have an indirect monetary link.Footnote 41 Cultural capital refers to familiarity with culture and is impacted by personal development, interaction with cultural goods (such as music) and formal education.Footnote 42 In the music industry, some degree of cultural capital appears to be a precondition for entry.Footnote 43 Social capital is associated with the credentials of belonging to a certain group and the strength of members of a connected network.Footnote 44 Capital begets more capital, in the sense that it enhances the owners’ capacity for success. The accumulation of capital over time implies the entrenchment of power relations. In the streaming age, issues arise regarding the division of economic and social capital. Reference may be made to (respectively) the distribution of revenues and the negotiating and/or lobbying position of the various stakeholder groups. The perceived added value of Bourdieu’s theory in the context of this book lies in its express acknowledgement that allocable resources can have both a direct and an indirect monetary link and that both aspects have an impact on the position of stakeholders in a society. Thus, the road towards a fair(er) balance in the music industry must take due account of both commercial and other incentives.
The body of literature devoted to the ‘capability approach’ to social justice adds another dimension.Footnote 45 It seeks to empower people to live a full and dignified life, by asking (1) what people are actually able to do and be (what their ‘internal capabilities’ are), (2) what real opportunities are available to them and, ultimately, (3) how public authorities can aid people in realising their capabilities.Footnote 46 The capability approach focuses on people’s agency and freedom to choose among various options to achieve certain ‘doings and beings’ they perceive (with reason) to be valuable.Footnote 47
A final aspect that may be added to the baseline of Rawlsian justice in the contractual sphere is the idea of ‘reciprocity’, of ‘reasonableness’.Footnote 48 This relational perspective advances the position that ‘others are owed a fair return to what they have given you, just as you are owed a fair return for what you have given others’.Footnote 49 It presupposes that contracting parties wish to cooperate on fair terms and goes beyond the aim of advancing the position of those worst off posited by the difference principle.Footnote 50
In sum, contract law should have a capacity-building role and empower stakeholders who find themselves in a context that postdates the original position to both accomplish their goals through (truly) voluntary transactions and have genuine, sufficiently viable options in this regard.Footnote 51 Simultaneously, due account must be taken of stakeholders’ legitimate, reciprocal claims for a fair return. Only then can an inclusive, equal division of economic, cultural and social capital be attained.
The translation of these ideas to the music industry in the streaming age requires us first to circle back to the interests of the categories of stakeholders analysed in Chapter 2, namely musicians, corporate partners and users. The relevant findings may be summarised as shown in Table 3.1.
| Musicians | Corporate partners | Users | |
|---|---|---|---|
| Who? | See typologyFootnote 52 | Publishers/labels | Private users as group/individuals |
| What? | Create/perform disseminate; obtain remuneration | Obtain return on investment; (disseminate) | Access; create (UGC) |
| Why? | Artistic incentives; economic incentives | Primarily economic incentives | Convenience; |
| Fairness | Agency (exploit / acknowledge); remuneration | Focus on investment (commercial); no undue limitation of freedom of contract | Limited interest; enhance knowledge; account of access |
On the part of musicians, a clear focus on agency and remuneration may be discerned. As a result, fairness from the perspective of musicians may be seen to require a certain degree of exploitation of their work(s)/performance(s), with due acknowledgement of their contribution and proper remuneration. Corporate partners’ commercial focus on the recoupment of their investment, on the other hand, implies that a fair balance may only be attained if there is no disproportionate limitation of the principle of freedom of contract. Swinging the pendulum too much towards either side may lead to detrimental effects in practice. On the one hand, if the legal framework overreaches and provides a framework that is altogether too protective of musicians in a contractual context, the perverse effect may be that their corporate partners cut back on, or even cease, their investments in the music industry ecosystem. This could in turn leave all parties involved in a worse position than before, begging the question whether a ‘bad’ contract is better than no contract at all. On the other hand, overtly and fully championing the principle of freedom of contract, allowing the free market to fully run its course, could lead to equally (if not more) perverse effects. Given the rightful central position that the artist holds under the basic tenets of copyright law, such an outcome is undesirable. Finding a fruitful, reciprocal middle ground that does not unduly violate stakeholders’ basic liberties in the Rawlsian sense and contributes to the improvement of the situation of the category of stakeholders least well off must therefore be the objective. Third, while users only have a limited interest in the division of resources within the content value chain, this does not mean that their perspective should be cast aside. Instead, a fair(er) balance in the streaming age requires consumer education, while taking account of users’ interest in gaining convenient access to protected content. Concomitantly, reference may be made to the presumptive resulting increase in the dissemination of creative works and the enhancement of cultural heritage, which is beneficial to users.
In essence, the objective is to achieve a more balanced contractual playing field in relation to all three stages of the contracts under review.Footnote 53 In the contract formation stage, detailed in Chapter 4 below, the keyword in this regard will be a ‘fair scope’ of rights granted. The transfer of rights to a corporate partner is not considered to be inherently problematic. The question is rather whether the musician receives sufficient return. Thus, in relation to the performance phase of the contract, the focal point of Chapter 5, the question will be whether the contract leads to both ‘fair exploitation’ and ‘fair remuneration’. If either is deemed not to occur, a fair balance requires the musician to be able to either retain or reclaim the relevant rights.Footnote 54 Chapter 6 therefore seeks to increase fairness as to the termination of the contracts under review.
The procedural aspect of fairness may be linked with the concept of ‘fair play’. It implies due attention to legal certainty and transparency.Footnote 55 Here, again, the legal framework and technological developments must work in tandem. Relevant provisions must be well-structured and clear. Vague concepts that are difficult to apply in practice should be avoided. For musicians, such vagueness, combined with a weaker relative bargaining power, increases the risk of disadvantageous clauses in practice. For corporate partners, legal uncertainty leads to increased transaction costs and a more difficult investment climate.Footnote 56
Moreover, rules must be set at the appropriate level. First, regulatory measures must be suitably divided between the international, EU and national level. Second, focus must not only lie with options for legislative amendments that lead to hard law, but also with the possible value of soft law alternatives. These aspects contribute to a streamlined, transparent regulatory framework that provides legal certainty for all interested parties. This is necessary for its impact on the freedom of contract to be as limited as possible while simultaneously securing protection for musicians as the weaker contracting party.
Further, in order to ensure both substantive and procedural fairness, the application of the legal framework in practice must be secured. In this context, this book supplements Rawlsian idealism with ambitious pragmatism. Unfair situations in the music industry are exacerbated by its characteristics as a high-risk, high-reward concentrated marketplace with a pronounced inclination towards superstars. Precisely those characteristics lead to obstacles between the legislator’s objectives and their translation into practice – in other words: between the ‘law in the books’ and the ‘law in action’. This explains the express focus on the application of the legal framework in practice in Chapter 7 below.
3.3 Typology of the Selected Substantive Legal Regimes
3.3.1 General Limitations to Freedom of Contract
The freedom of contract is a central tenet of contract law.Footnote 57 It implies parties’ freedom to (not) enter into a contractual relationship with one another, as well as their freedom to determine a contract’s content. Parties’ freedom of contract is limited on several fronts. The general limitations under contract law in the continental European jurisdictions under review in this book are included in the main civil codes.Footnote 58 A first general limitation is provided by the principle of good faith that applies in contractual situations.Footnote 59 This principle implies that contract parties’ behaviour is subjected to an obligation of loyalty and limited to what befits a reasonable participant of society.Footnote 60 The principle of good faith may provide a legal basis to set aside contractual provisions that are excessive, unreasonable, unacceptable and thus deemed contrary to good faith.Footnote 61 In a way, this leads to an objectification of parties’ expected behaviour. No articulated general contractual duty to perform in good faith applies under UK law.Footnote 62
Associated limitations stem from the rules concerning vitiated consent and the general prohibition of abuse of law. Parties may not exploit the vulnerability or the inferior position of their counterparty in a way that leads to a manifest disproportion between the obligations of the contracting parties.Footnote 63 Parties’ freedom of contract is also limited by the requirements of public policy and good morals.Footnote 64 For the United Kingdom in particular, the doctrines of undue influence and restraint of trade are noted.Footnote 65
Theoretical restrictions on parties’ behaviour set by general principles of contract law are only applied in exceptional situations, with judges traditionally favouring the freedom of contract.Footnote 66 Moreover, the open-ended nature of many of these restrictions makes it hard to predict their application in practice, which in turn leads to legal uncertainty.Footnote 67 In view of this, the intervention of more specific substantive legal regimes may be desirable. In order to fill this perceived gap, parties’ contractual freedom is additionally curtailed by specific legal regimes, the scope of which is analysed in the next section.
3.3.2 Scope of Selected Substantive Legal Regimes
3.3.2.1 Structure
The following chapters of this book analyse the relevant substantive provisions of copyright contract law and the law of unfair B2B contract terms and trade practices, as well as their interplay with the main relevant provisions of general contract law.
Before delving into the substantive analysis of these provisions in Chapters 4–6, it is important to have a clear view on the scope of and interplay between these seemingly diverse fields of law. Following an overview of the relevant legislative sources of copyright contract law and the law of unfair B2B contract terms and trade practices, the substantive scope of the selected legal regimes in the chosen jurisdictions is analysed. This analysis not only focuses on the scope of ratione materiae and ratione personae – that is, based on the object of and the parties to the contract respectively – but also on the interplay between these fields of law. Then, this section analyses the geographical scope of the selected legal regimes. Finally, the temporal scope of the applicable legal regimes is reviewed.
3.3.2.2 Overview of Legislative Sources
The relevant provisions of copyright contract law are included in the acts that provide the national copyright framework in the chosen jurisdictions: the Belgian CEL, the French IP Code, the German Copyright Act, and the Dutch Copyright Act and Act on Neighbouring Rights. Under German law, a separate act provides a specific, albeit largely contractually waivable regime for publishing contracts that applies to works of literature and music, namely the Verlagsgesetz (in English: Publishing Act).Footnote 68 It is referred to below as the German Publishing Act.
The United Kingdom is the ‘odd one out’ here, as no specific copyright contract law applies to exploitation contracts.Footnote 69 Instead, the law of contracts applies.Footnote 70 However, change may be on the horizon, even though the UK legislator decided not to proceed with the implementation of the DSM Directive subsequent to Brexit.Footnote 71 At the close of 2021, a bill was introduced in the UK Parliament that sought to establish a number of limitations on parties’ freedom in relation to copyright exploitation contracts, partially mirroring certain requirements set by the DSM Directive.Footnote 72 This bill, referenced below as the ‘Brennan Bill’, did not materialise into hard law.Footnote 73 However, the UK Intellectual Property Office (UKIPO) provided extensive additional support for potential legislative action in the form of a report published in February 2023.Footnote 74 This issue therefore appears still to be on the agenda of the UK legislator.
The contractual relationships under review may also be affected by legal regimes concerning unfair B2B contract terms and trade practices. Specific legal provisions in the chosen jurisdictions prohibit the inclusion of unfair terms in contract, as well as certain trade practices labelled as unfair.Footnote 75 As opposed to what is the case in B2C situations,Footnote 76 the law of unfair B2B contract terms and trade practices largely lacks harmonisation at the EU level. The relevant provisions of Belgian law as to both B2B unfair contract terms and trade practices are included in Book VI of the Belgian CEL. In Belgium, relevant legislative changes were made by a 2019 act, which added a number of particularly stringent provisions concerning B2B relationships that have a significant impact on the freedom of contract.Footnote 77 The French legal framework on law of unfair B2B contract terms and trade practices is somewhat fragmented: both the French Commercial CodeFootnote 78 (as amended in 2019Footnote 79) and the French Civil CodeFootnote 80 bear relevance.Footnote 81 In Germany, there is no general restriction on unfair B2B contract terms that were negotiated individually. As to unfair trade practices, the uniform regime applicable to both B2B and business-to-consumer (B2C) situations set by the Gesetz gegen den unlauteren WettbewerbFootnote 82 is noted. Finally, in the Netherlands, no separate general restrictions exist as to either unfair B2B contract terms or trade practices. Instead, the B2B sphere is regulated through principles of general contract law and extra-contractual liability.Footnote 83
A related doctrine, associated with the law of unfair contract terms and trade practices in some jurisdictions, but with competition law in others, is that of abuse of economic dependence.Footnote 84 In the chosen jurisdictions, at the time of writing, this doctrine exists in Belgium, France and Germany.Footnote 85
3.3.2.3 Substantive Scope
3.3.2.3.1 Object of the Contract
The substantive scope of the selected substantive legal regimes may first be qualified on the basis of the object of the contract. This refers to the legal consequences of a contract and, thus, the resulting obligations for the parties. Provisions of general contract law are not limited to a certain type of contract and thus apply regardless of the contract’s object.
Copyright contract law applies to contracts that have as their object to establish a transfer of or a licence to works protected by copyright and/or fixations of performances protected by the neighbouring right of performing artists (‘copyright exploitation contracts’).
A first, general category of provisions of copyright contract law applies to all copyright exploitation contracts, both when the contract at issue results in a transfer of exploitation rights and in case a licence is granted. The rules applicable to exclusive and non-exclusive licences are not identical.Footnote 86 Further, given the particular status of moral rights, the law applicable to such rights differs from the rules that apply to the grant of exploitation rights.
The relevant provisions of French law only refer to the concept of cession.Footnote 87 However, it is commonly accepted that this concept (which may be equated to the English ‘assignment’) includes both transfer (aliénation) and licence (licence) contracts.Footnote 88 The relevant provisions of Belgian copyright contract law expressly refer to both transfers and licences.Footnote 89 German law does not allow authors to transfer exclusive rights.Footnote 90 For performers, Article 79(2a) German Copyright Act expressly specifies that the protective rules of copyright contract law apply to both transfers and licences. Dutch law, finally, defines the scope of application of the relevant provisions relating to copyright sensu stricto by referring to the grant of a right to exploit.Footnote 91 Thus, in these jurisdictions, the qualification of a copyright exploitation contract as a licence does not allow contracting parties to evade the relevant provisions.
Copyright contract law also provides different sets of rules for certain contract types. These specific regimes differ as to their effect on parties’ freedom of contract. The first contract type subject to specific regulation in Belgium, France and Germany is the publishing contract.Footnote 92 Such a contract may be defined as a contract through which the author of a work protected by copyright sensu stricto (or, in certain cases, their successor(s) in title), grants their corporate partner (the ‘publisher’) the right to reproduce or have reproduced, make available and distribute this work for the purpose of publication and dissemination.Footnote 93 These rules apply to contracts between composers and music publishers, but not to contracts between performers and record companies.Footnote 94 The researched provisions particular to publishing contracts were clearly drafted with a literary context in mind. Regardless, the concept of ‘publishing contracts’ is interpreted broadly as including both literary publishing and music publishing.Footnote 95
A specific set of rules is sometimes foreseen in employment situations and for certain categories of commissioned music – either compositions or performances.Footnote 96 In such cases, the contractual playing field is considered to be more level and thus the objective of protecting artists as presumed weaker parties to a contract is deemed to apply to a lesser extent.Footnote 97 On the one hand, musicians may be active under an employment contract or deemed to be employees in accordance with the applicable social statute. Although factually and legally distinct from the US concept of works ‘made for hire’,Footnote 98 this refers to music that the musicians at issue were, in essence, ‘hired’ to make. For specific rules to apply, the relevant music must arise in the course and in the context of the performance of the employment relationship.Footnote 99 Notably, under Dutch law, the employer is deemed to be the author of works created by the employee. As a result, the relevant protective provisions of copyright contract law do not apply to employees that create works susceptible to protection under copyright sensu stricto.Footnote 100 This rule does not apply as such to performers. Instead, under Dutch law, employers of performers are granted the right to exploit the exclusive rights granted to performers to the extent that this is foreseen in the contract, or follows from either the nature of the contract, common practices or reasonableness.Footnote 101 Further, not all of the chosen jurisdictions provide specific rules applicable to employment situations: German law expressly provides that the protective rules of copyright contract law also apply to employment relationships, unless the terms or the nature of this relationship dictate otherwise.Footnote 102 French law contains no such specification, but does not foresee any specific rules pertaining to the rights of employed musicians either. Finally, Belgian law provides a number of specifications as to the regime applicable to employment contracts, as well as ‘commissioned’ content.Footnote 103
On the other hand, specific rules are also foreseen for ‘commissioned’ music, which result from a specific ‘commission’ for a particular context or purpose. The protective provisions of Dutch copyright contract law do not apply to commissioned content that is primarily intended for ‘use by the commissioning party’.Footnote 104 Also under Belgian and French law, more permissive regimes apply.Footnote 105
Thus, the law foresees differing rules for music made in an employment context and/or on commission, in terms of both ownership and exploitation. There are several arguments in favour of increased simplicity.Footnote 106 This rings especially true in the music industry, where recourse to employee status through short-term employment contracts for specific creative output is a recurring strategy to ensure social security protection and mitigate precarious social situations.Footnote 107 A linked observation is that the day-to-day practice of employed and freelance musicians is often quite similar – with large ensembles frequently calling upon the services of musicians of both categories and many freelance musicians consistently being asked to work for a select set of corporate partners or even a single corporate partner.Footnote 108 The distinct treatment of employees and non-employees may therefore be problematic.Footnote 109 A solution could be to presume the existence of an employment relationship in cases where a situation of economic dependence exists for the artist.Footnote 110 This concept may be defined by analogy to the regimes concerning abuse of economic dependence in B2B situations, namely as a situation where the market power of an undertaking vis-à-vis their contracting party allows them to force certain contract conditions on this contracting party that would not have been accepted in the absence of such market power.Footnote 111 Alternatively, freelancers in a situation comparable to that of employees, in the sense that they cannot determine their own conduct on the music market, may be qualified as ‘false self-employed’. This, in turn, supports the argument in favour of an analogue legal status.Footnote 112
Finally, copyright contract law may provide specific rules for performance contractsFootnote 113 and audio-visual production contracts.Footnote 114 Save the presumption of transfer of exploitation rights in an audio-visual context,Footnote 115 these regimes are not discussed in detail in this volume.
3.3.2.3.2 Parties to the Contract
This subsection treats the personal scope of the selected substantive legal regimes. Principles of general contract law apply regardless of the identity of the parties to the contract. Conversely, both the relevant provisions of copyright contract law and the law of unfair B2B contract terms and trade practices seek to level the contractual playing field in situations where one of the parties has a weaker bargaining position than the other. The personal scope of these regimes is tailored to cases where such a protective attitude is merited.
The personal scope of application of the protective regimes of both copyright contract law and the law of unfair B2B contract terms and trade practices as to corporate partners is quite broad.
First, the identity of the corporate partner does little to affect the scope of application of the relevant provisions of copyright contract law, provided that the object of the contract is for the corporate partner to carry out exploitation activities in accordance with the contract.Footnote 116 Illustrative reference may be made to Recital 72 DSM Directive, which provides that its provisions on copyright exploitation contracts do not apply when the corporate partners merely act as end users and do not exploit the music themselves.Footnote 117
Second, the personal scope of the law of unfair contract terms and trade practices differs slightly between the chosen jurisdictions.Footnote 118 In any case, one would be hard-pushed to find a corporate partner engaged in the music industry contracts under review that does not fall within the scope of all of them.
The personal scope of copyright contract law vis-à-vis musicians is simultaneously broader and narrower in scope than is the case for the law of unfair B2B contract terms and trade practices. Subject to specific regimes that apply to music made in an employment context or on commission, the protective provisions of copyright contract law apply to persons that qualify as authors and/or performers under the law of copyright.Footnote 119 Natural persons who are active as musicians thus fall within the scope of the protective regimes.Footnote 120 As confirmed by Recital 72 DSM Directive, the same should be true for musicians who conduct their activities through the vessel of a legal entity, such as a one-person company.Footnote 121 This is especially true since the mere fact of having recourse to a legal entity to enter into contracts does not appear to affect one’s bargaining power. However, if a musician’s company may be considered exceedingly powerful in the music marketplace, a convincing argument may be made against the applicability of the protective regimes.Footnote 122 In such a case, the musician is no longer a weaker party to the contract and the regime’s objective no longer applies.Footnote 123 A similar line of argument applies to hereditary rightsholders: while the scope of application of the relevant provisions of copyright contract law is in principle extended to heirs, this extension should not extend to powerful heirs that assume a similar status to corporate partners.Footnote 124 Determining when a musician acting through a legal entity or the heir(s)/estate of a musician should lose their status as a perceived weaker party is difficult and requires an analysis of all relevant circumstances. A cautious approach is merited.
The protective rules of copyright contract law also do not apply within secondary relationships between corporate partners and third parties, since neither the objective of protecting a weaker party nor the aim of furthering the position of artists are deemed to apply in such a case.Footnote 125 However, as will become clear, artists may in some cases stake a claim vis-à-vis such third parties in order to protect their own interests.Footnote 126
As to provisions on unfair B2B contract terms and trade practices, again the scope in the chosen jurisdictions varies. Depending on the national framework at issue, the relevant question is whether the musician engages in an economic activity or acts for purposes related to their craft. In the past, the European Commission (EC) has held that performing musicians are deemed to engage in economic activities insofar as they commercially exploit their artistic performances.Footnote 127 In view of this, it may be argued that provisions on unfair B2B contract terms and trade practices do not apply to amateur musicians, with the exception of those who are (sufficiently) commercially active in the music industry. Drawing a line in the sand in this regard, however, is rather difficult. Moreover, once amateur musicians enter into a copyright exploitation contract with a corporate partner in the music industry, it may be argued that the commercial exploitation of their music is on the horizon and thus that those musicians lose their amateur status. Excluding such musicians from the scope of application of the protective framework would leave them exceedingly vulnerable from a legal perspective. The bargaining power of an amateur musician entering into a copyright exploitation contract without any ‘professional’ aspirations at the moment of contract formation may even be lower than that of a musician who purposefully seeks to ‘enter’ the music industry. As the risk of unfairness may be considered as inversely proportionate to the bargaining power of the weaker party, the amateur status of a musician should not have any impact on the scope of the relevant provisions on unfair B2B contract terms and trade practices with regard to the music industry contracts under review. Further, the applicability of these provisions is not affected by the fact that a musician conducts their activities through a legal entity, or that the contract is entered into by the musician’s successors in title – hereditary or otherwise. Finally, no separate rules apply to the use of either exploitation rights or moral rights, and the legal framework applies indiscriminately to composers and performers.
While the provisions on copyright exploitation contracts in the DSM Directive do not distinguish between contracts with authors and performers, it will be shown that the applicable legal framework in the chosen jurisdictions nevertheless differs markedly.Footnote 128 Independently of the legal (re)qualification thereof, the contribution of musical performers risks being accorded less artistic and/or commercial value than that made by a composer.Footnote 129 In other words, performers’ share of music’s social, cultural and economic capital is more limited than that of composers.Footnote 130 While the creative genius of a composer is often quite readily accepted, many performing musicians – especially session musicians – are considered to be mere craftsmen, as providers of a certain service.Footnote 131 On a contractual level, this perceived status is usually accompanied by standard contracts, with a full assignment of rights in return for a flat fee.Footnote 132
This apparent underprivileged nature of performance may be unmerited.Footnote 133 ‘Music’ in itself does not exist in a palpable way, only the score does. A composition consisting of melody, harmony and rhythm requires a performance to bring it to life.Footnote 134 Illustrative reference may be made to variations in timbre, rhythmic articulation and other sound elements that often cannot be exhaustively recorded through musical notation.Footnote 135 The artistic value of the creative, interpretative work done by performing musicians should receive due recognition, thus increasing performer agency.Footnote 136 Because of the overarching importance attached to notation in music, to the musical score, such aspects risk remaining underexposed.Footnote 137 In a way, the emphasis put on a musical score in a certain genre is inversely proportionate to the valuation of musical performance in practice.Footnote 138 In the field of classical music in particular, the score determines and separates the roles of musicians: the composer writes and owns the score, while performers merely interpret it and work in its service.Footnote 139 In such a context, possibly (mis)guided by a lack of knowledge regarding the legal status of their activities, performers see themselves as ‘mere’ performers. In other musical genres, where emphasis on the score is more limited (for example, pop music, R&B or EDM), performing musicians may value the nature of their contribution more highly.Footnote 140 Attention to the appropriate artistic and commercial valuation of performances is therefore necessary.
Legally speaking, this translates into the desirability of a legal framework that does not force performers to always ‘play second fiddle’. Composers and performers are entitled to an analogue level of protection, unless the specifics of their situation dictate otherwise in particular situations.Footnote 141 Significantly, the minimum thresholds for copyright exploitation contracts set by the DSM Directive apply equally to the broad category of ‘authors and performers’, which includes all types of musician. In terms of application of the existing rules, this implies a desirability of uniform interpretation of analogue provisions.
3.3.2.4 Interplay between Relevant Legal Regimes
Analysis of the scope of the selected substantive legal regimes reveals a significant overlap. The interplay between the different applicable sets of rules is therefore relevant. This relationship may be qualified on the basis of the legal distinction between general and specific rules (leges generales and leges speciales). General contract law serves as a lex generalis and applies in a complementary way to copyright exploitation contracts, to the extent that no specific rules to the contrary exist.Footnote 142 In practice, the broad scope of application of general contract law and the lack of tailoring to the specificities of contractual dynamics of the CCIs (including the music industry) limit its application in practice, to the benefit of the relevant specific legal regimes.Footnote 143
Copyright contract law and contract-related provisions on unfair B2B contract terms and trade practices may be qualified as a lex specialis vis-à-vis general contract law, with an overlapping but distinct substantive scope. While the scope of copyright contract law is more limited than that of provisions on unfair B2B contracts in terms of object, it may apply to a broader category of parties (that is, also to musicians that do not qualify as undertakings). This renders the absolute categorisation of either regime as ‘general’ or ‘specific’ tricky. A simultaneous application of both legal regimes may be sought. While copyright contract law is more tailored to the contracts under review, the rules on unfair B2B contract terms fulfil a complementary, fallback role.
Finally, the regimes applicable to certain specific copyright exploitation contracts may be qualified as a lex specialis vis-à-vis the more general provisions of copyright contract law. Again, the more general rules apply in a subsidiary way to the extent that no deviating specific provision is applicable.Footnote 144 For this book, this distinction is chiefly relevant for publishing contracts and music made in an employment context or on commission.
3.3.2.5 Geographical Scope
Contract law has traditionally been largely embedded in national traditions. Further, as dictated by the principle of territoriality, the geographical scope of the relevant rules of copyright (contract) law is limited to the national territory. Over recent decades, the importance of the EU level to the regulation of copyright law has increased. Until recently, there was no substantive regulatory EU intervention in the field of copyright contract law, with the EU legislator traditionally favouring the principle of freedom of contract over the protection of parties with weaker bargaining power in B2B situations. While several EU directives refer to the need to secure appropriate remuneration for artistsFootnote 145, substantive rules were, until recently, limited to the contract measures included in the Term Extension Directive and the criteria for appropriate remuneration of rightsholders set forth in Article 16(2) CRM Directive – which were implemented into UK law prior to Brexit and subsequently retained.Footnote 146
The first step to fill this gap was taken with the DSM Directive, which was meant to lead to EU-wide express provisions on the negotiation of artists’ contracts.Footnote 147 As will become clear throughout the analysis of the substantive provisions in the following chapters, the harmonising effect of the DSM Directive is only partial. The relevant provisions are of a minimum harmonising nature and the Member States retain a significant margin of implementation.
Finally, the international regulatory level deals with copyright exploitation contracts only in an indirect way.Footnote 148 In particular, reference may be made to the recognition that artists have a right to see their interests protected, as is acknowledged in Article 27(2) UDHR and Article 15(1)(c) ICESCR.
3.3.2.6 Temporal Scope
3.3.2.6.1 Principles of Intertemporal Law
The third aspect that determines the relationship between the different relevant legal regimes is their application in time. This issue is governed by the principles of transition law, also referred to as ‘intertemporal’ law. Two distinct but interlinked questions arise.Footnote 149 First, it must be determined when exactly a new legal regime enters into force, when an act becomes binding. Second, there must be a delineation of the concrete situations to which the new legal regime at issue applies. Three main types of hypothetical circumstances may be discerned. First, both the legal fact and its consequences – here, the music industry contract and its performance through exploitation and remuneration – may take place before the entry into force of the new act. In such a case, unless the new regime is expressly imbued with retroactive effect, the old regime remains applicable. In the second category of situations, both legal fact and consequences arise after the entry into force of the new act. Again, settling the issue of temporal application is quite simple: the new regime applies to such cases. The third set of circumstances provides more food for discussion. Indeed, when the legal fact occurs before the new act’s entry into force, but its legal consequences (partially) take place only after this moment, resolving the issue of temporal application is contentious. By way of example, such a situation arises in case a music industry contract is concluded before the entry into force of the new regime and is still ongoing when the new legal regime enters into force.
In determining the applicable legal regime, a balance must be sought between considerations of substantive and procedural fairness.Footnote 150 On the one hand, a new legal regime may be considered to bring progress in terms of equality and justice. A broad application in time of a new legal regime may be considered to further fairness in substantive terms. This translates into an immediate application of the new legal regime to the legal consequences of ongoing contracts that postdate its entry into force.
On the other hand, grounds of ‘fair play’ rather argue in favour of applying the old regime to existing contractual relationships. Contracting parties may legitimately expect their relationship to be governed by the law applicable at the moment of contract formation. This leads to a parallel application of two differing legal regimes: contracts concluded following the new regime’s entry into force are subject to this new regime, while ongoing contracts are still governed by the old regime. As such contracts fade out over time, so does the old legal regime. This engenders both transparency and legal certainty for contracting parties, who are likely to have negotiated their contractual relationships solely in view of the legal framework applicable at that time.Footnote 151 It may be argued that the contractual balance thus reached between the parties should not be disturbed ex post.
However, a principled choice for immediate application of new legal regimes could be the most beneficial. Such a solution would both provide clarity and avoid the unequal treatment (and thus risk of discrimination) that a choice for continued application of the old regime to ongoing contracts would entail.Footnote 152 Other arguments in favour of such a choice include furthering of progress through the enhanced justice that the new legal regime is assumed to bring.
A new legal regime may include an express provision regarding its entry into force and/or its applicability in time, such as by including a transition period.Footnote 153 If it does not, a set of default rules applies. In the chosen EU jurisdictions, the default rules regarding entry into force of an act range from (in principle) a day (FranceFootnote 154), ten days (BelgiumFootnote 155) or fourteen days (GermanyFootnote 156) to one or two months (NetherlandsFootnote 157) following its publication.Footnote 158
The default rules regarding an act’s application in time usually adhere to four main principles. The first is the fundamental principle of non-retroactivity, which dictates that new acts generally do not apply to past situations, and is motivated by the wish to protect legal certainty and the legitimate expectations of legal subjects.Footnote 159 Second, new acts generally apply immediately and exclusively to current and future situations.Footnote 160 Third, the legal consequences of ongoing contracts are usually governed by the old regime.Footnote 161 The fourth rule provides for exceptions to the third, leading to immediate application of certain acts, even to ongoing contracts.Footnote 162 The precise details of this fourth rule differ. In Belgium, both mandatory acts and acts that relate to public order apply immediately, save if the act at issue provides otherwise.Footnote 163 A more restrictive view is taken in France and Germany, where the immediate application to ongoing contracts is limited to those new acts where particularly imperative public policy considerations apply – a rather vague concept in itself.Footnote 164 An – interesting, yet somewhat unpredictable – alternative approach that has to some extent been accepted in Germany and the Netherlands seeks to solve intertemporal conflicts on a case-by-case basis, referring to a set of criteria that includes the new law’s objective, the perceived injustice caused by the old law and the legitimate expectations of the relevant parties.Footnote 165
A convincing argument may be made to remodel intertemporal law based on conflict-of-law rules, focusing on the legitimate expectations of parties whose situation is adversely affected by the new legal regime.Footnote 166 If this party (or these parties) may legitimately expect the old regime to apply, this would be the outcome of the case, unless the result would not be in conformity with applicable higher norms, such as the constitution.Footnote 167
3.3.2.6.2 Application to Legal Framework
A full discussion of the temporal application of general contract law falls outside the scope of this research.Footnote 168 However, particular attention is devoted to the relevant provisions of copyright contract law in the continental EU jurisdictions under review, which have evolved significantly over recent decades.
In Belgium, the existing provisions of the 1994 Belgian Copyright Act were included in Book XI, Title 5 Belgian CEL by way of the Belgian Act of 19 April 2014.Footnote 169 These codified provisions apply to all works and performances that are protected when this act entered into force on 1 January 2015.Footnote 170
The French legal framework saw an important substantive amendment with a 2014 decree that changed provisions concerning publishing contracts in particular.Footnote 171 The French legislator expressly applied these new, restrictive rules to pre-existing contracts in the literary sector.Footnote 172 Further, a 2016 act brought significant changes to the rules that apply to contracts between performing musicians and their record companies, in addition to setting up an alternative dispute resolution (ADR) mechanism specific to the music sector.Footnote 173 While most of the relevant provisions concerning copyright exploitation contracts do not apply to contracts ongoing at the entry into force of these provisions, an exception was made for a particular transparency obligation specific to record companies.Footnote 174
Over recent decades, the German legislator amended and supplemented the provisions of copyright contract law under review in this book by way of acts dating from 2002,Footnote 175 2007Footnote 176 and 2016.Footnote 177 The German legislator has combined the traditional route of having the legal consequences of ongoing contracts be governed by the old regime with the immediate application of some protective provisions to ongoing contracts.Footnote 178 First, while most of the provisions of the German Act of 28 March 2002 only apply to contracts that were concluded, and/or facts that occurred, from 1 July 2002 (the day the 2002 act entered into force), limited immediate application was accorded to the right of fair remuneration as to contracts concluded between 1 June 2001 and 30 June 2002 if the content at issue was/is exploited after 30 June 2002.Footnote 179 In addition, the contract adjustment mechanism applies to all facts that have occurred since 28 March 2002 – also those stemming from contracts predating the German Act of 28 March 2002.Footnote 180 The main change effected by the German Act of 28 October 2007 was the introduction of the possibility for authors to grant rights relating to future methods of exploitation under certain conditions.Footnote 181 The relevant transitional provision foresees that contracts dating between 1 January 1966 and 2008 that exclusively grant all essential exploitation rights to the corporate partner, without limitation in either place or time, also include methods of exploitation that were not yet known at the time of contract formation, unless the author objects in a timely manner.Footnote 182 As for the 2016 amendment of the German Copyright Act, the new provisions concerning copyright exploitation contracts only apply to contracts concluded from 1 March 2018 onwards, with the exception of the right of revocation, which applies to all facts that occur after 1 March 2018, independent of their contractual origins.Footnote 183
The 2015 Dutch act on copyright exploitation contracts contains a wide range of protective rules. Before the entry into force of this act, copyright exploitation contracts were largely governed by the general provisions of the Dutch Civil Code.Footnote 184 In principle, the provisions of the 2015 act only apply to contracts that postdate its entry into force, with some exceptions.Footnote 185 The most relevant exceptions to this principle are the limitation as to future works, the general requirement of reasonableness and the right of revocation.Footnote 186 Those protective rules also apply to pre-existing contracts. Several amendments of the legal framework are on the table in the Netherlands at the time of writing.Footnote 187
In addition, in the past decade, the implementation of two relevant EU directives into national law led to several amendments of copyright contract law in the chosen jurisdictions that bear relevance to the legal framework applicable to the music industry contracts under review, namely the Term Extension Directive and the DSM Directive.
The extended term of protection for phonograms applies to all content that qualified for neighbouring rights protection on 1 November 2013, as well as all posterior content.Footnote 188 The rights in phonograms granted to corporate partners on 1 November 2013 continue to produce effects for the extended period of protection of twenty years, unless the contract itself clearly indicates otherwise.Footnote 189 It is difficult to envisage a such a deviating contractual provision, given the inherent difficulties associated with predicting future legislative developments. It may therefore be said with relative certainty that prior grants remain applicable for the full period of seventy years. This arrangement is ostensibly prompted by concerns of legal certainty,Footnote 190 but appears to be a policy decision in favour of corporate partners. This term extension was coupled with several measures that sought to ensure that musicians reaped part of the additional revenues associated with the term extension.Footnote 191 These measures apply to contracts that predate the entry into force of the Term Extension Directive, effective from the fifty-first year of protection. While this immediate effect favours musicians, this is countervailed by the continuing effect of prior grants during the extended period of protection.
The other legislative instrument of note at the EU level is the DSM Directive, which dates from 2019.Footnote 192 The implementation of this Directive into Member State law was due by 7 June 2021. The provisions of the DSM Directive apply in respect of ‘all works and other subject matter that are protected by national law in the field of copyright’ on or after this date.Footnote 193 This implies that the DSM Directive may apply to pre-existing music.Footnote 194 However, the application in time of the DSM Directive is expressly limited by the proviso that it does not affect ‘any acts concluded and rights acquired before 7 June 2021’.Footnote 195 Alternative interpretations are possible, especially as to its application to pre-existing licence agreements. The provision apparently perceives the contractual relationships at issue as a static environment, whereby a singular relevant point in time may be pinpointed. While this may be true for contracts resulting in a transfer of rights, such a single moment in time is much more difficult to determine in a licensing context.Footnote 196
On the one hand, it could be argued that the concepts of ‘acts concluded’ and ‘rights acquired’ refer to all copyright exploitation agreements entered into before 7 June 2021, be it through a transfer or a licence. This would mean that the minimum benchmarks set by the DSM Directive only apply to contracts postdating the DSM implementation deadline. This interpretation clearly favours the interests of corporate partners. It risks undermining the objective of the DSM Directive to secure enhanced protection for artists.Footnote 197
The alternative interpretation is that the concept of ‘acts concluded’ refers to acts of exploitation, not agreements.Footnote 198 This position is supported by the Dutch DSM Implementation Act, which provides that it does not apply to exploitation activities (in Dutch: exploitatiehandelingen) and rights granted (in Dutch: verworven rechten) predating its entry into force.Footnote 199 This interpretation would bring acts of exploitation conducted on the basis of earlier contracts into the temporal scope of application of the DSM Directive. This interpretation would be favourable to the interests of musicians.Footnote 200
In interpreting this provision, recourse may be had to ECJ case law interpreting the transitional provision of the InfoSoc Directive, which provides that its provisions apply ‘without prejudice to any acts concluded and rights acquired before 22 December 2002’.Footnote 201 In the context of the VG Wort case concerning private copying, the phrase ‘acts concluded’ was interpreted as referring to ‘acts of exploitation’ by the ECJ.Footnote 202 However, this argument is specific to the context of private copying and has no place in a contractual situation.Footnote 203 The indiscriminate copying of the concept ‘acts concluded’ from the InfoSoc Directive is regrettable. A clearer formulation, as was included, for example, in the Unfair Contract Terms Directive,Footnote 204 the Consumer Rights Directive,Footnote 205 the Sale of Goods DirectiveFootnote 206 and the Digital Content Directive,Footnote 207 would have been preferable.
Independently of the above, the question arises how certain triggers that occur after the formation of the contract may affect the legal framework to which the contract must adhere. Reference may be made to clauses that foresee a renegotiation or termination of the contract in case certain circumstances arise.Footnote 208 Does the concept of ‘acts concluded’ include such ‘new’ agreements based on a contractual relationship that predates the DSM Directive? The text of the DSM Directive suggests that the minimum benchmarks do not apply to exploitation activities that took place before 7 June 2021.Footnote 209 The ‘lack of clarity supports application of the general rule against retroactivity’.Footnote 210
Finally, the requirement of transparencyFootnote 211 applies from 7 June 2022 onwards.Footnote 212 This grace period seeks to enable corporate partners to adapt their existing reporting practices to the minimum benchmarks set by the DSM Directive.Footnote 213 However, the DSM Directive has failed to specify expressly whether, following the expiry of this grace period, the requirement of transparency will apply to contracts concluded before 7 June 2022 (or even 7 June 2021).Footnote 214
The absence of clear legislative guidance on the temporal application of the DSM Directive is regrettable, since it leaves the door open for legal uncertainty and regulatory divergences at the national level. A preliminary reference filed with the ECJ by the Belgian Council of State will hopefully provide such guidance. This case is pending under the docket number C-575/23 at the time of writing and concerns the neighbouring rights of the performing musicians of the National Orchestra of Belgium.
The Netherlands was the first of the chosen jurisdictions to implement the DSM Directive into national law, on 16 December 2020.Footnote 215 Subject to the specifications on ‘acts concluded’ reviewed above, the provisions on artist contracts of the Dutch DSM Implementation Act entered into force on 7 June 2021.Footnote 216 The reporting obligations entered into force on 7 June 2022.Footnote 217 The Dutch DSM Implementation Act does not expressly treat the issue of application of the reporting obligations to ongoing contracts.Footnote 218
Second, on 12 May 2021 the French government issued a decreeFootnote 219 partially implementing the DSM Directive, including the provisions on artist contracts.Footnote 220 The French decree only specifies its temporal application as to the provisions that implement Article 17 (7 June 2021) and Article 19 DSM Directive (7 June 2022).Footnote 221 The French DSM Implementation Decree expressly specifies that the reporting obligations will apply to ongoing contracts.Footnote 222 No specification was added as to the provisions implementing Articles 18 and 20 through 23 DSM Directive.
The third of the chosen jurisdictions to implement the DSM Directive was Germany, on 19 May 2021.Footnote 223 The amendments of the German Copyright Act pertaining to copyright exploitation contracts entered into force on 7 June 2021, while the separate act implementing Article 17 DSM Directive entered into force on 1 August 2021.Footnote 224 Detailed provisions have been foreseen on the temporal application of the amendments to ongoing contracts. Contracts with either composers or performers that were concluded and/or facts that occurred from 1 July 2002 until 28 February 2017 in principle remain subject to the legal framework as applicable on 28 February 2017.Footnote 225 In principle, the law as applicable on 1 March 2017 remains applicable to contracts with either composers or performers that were concluded and/or facts that occurred from 1 March 2017 until 6 June 2021.Footnote 226 Since 7 June 2021, the legislative amendments pertaining to the use-it-or-lose-it clauseFootnote 227 and the contract adjustment mechanismFootnote 228 also apply to ongoing contracts.Footnote 229 From 7 June 2022, the amended provisions setting forth active reporting obligationsFootnote 230 also apply to ongoing contracts.Footnote 231
Finally, in Belgium, a remarkable evolution has taken place. The 2021 Belgian implementing act specified that its entry into force did not prejudice rights granted by law or through prior acts of exploitation.Footnote 232 This formulation indicated an intended restrictive application in time and a lack of application of the new rules to ongoing contracts.Footnote 233 However, consequent to a legislative amendment dating from the spring of 2024, the mandatory provisions of this act now expressly apply to ongoing contracts.Footnote 234
Both the law of unfair B2B contract terms and trade practicesFootnote 235 and general contract law have undergone changes over recent decades. The 2019 Belgian rules concerning unfair contract terms apply to contracts that have been concluded, renewed and/or modified after 1 December 2020,Footnote 236 while the amended regime concerning unfair trade practices applies to undertakings’ behaviour on or after 1 September 2019.Footnote 237 Recent relevant amendments to the French regime on unfair B2B contract terms and trade practices, intended to significantly simplify the applicable regime and render it more intelligible, entered into force on 26 April 2019, without an express qualification as to the temporal effects of the amended provisions under review in this book.Footnote 238 Further, the provision specific to contracts of adhesion under French law initially stems from contract law reform dating from 2016, whereby pre-existing contracts were excluded from the scope of application, and was subsequently amended in 2018, as to contracts entered into from 1 October 2018 onwards.Footnote 239
Before substantively analysing the applicable legal framework, it is difficult to comprehensively assess the choices of national and EU legislators concerning the temporal scope of the relevant legal framework. Only after the relevant rules have been reviewed and evaluated, the application of the legal framework in time may be put to the ‘fairness test’.
3.4 Establishing the Appropriate Level(s) and Method(s) of Regulation
Before delving into the substance of the law, the appropriate level(s) and method(s) of regulation merit closer attention. At present, the relevant legal framework spans protective regimes across several fields of law and provides several rules that vary depending on the type of contract – with different rules applying to music publishing contracts and contracts with record companies, as well as to employment situations or commissioned music.Footnote 240 The different substantive scope of the relevant protective regimes allows for an approach that is tailored to the wide spectrum of musicians: both composing and performing musicians, either with or without an employment status, active in big or small groups or as a soloist, and so on. Doing justice to the diversity that exists in practice is a legitimate objective.
However, given the continuous emergence of new business models and methods of exploiting protected content, an equally legitimate question is whether attaining this objective is at all feasible. In addition, more simplicity and uniformity in terms of the applicable rules may be beneficial. Therefore, an argument may be made in favour of a more streamlined, harmonised legal framework. Such a framework may be less tailored to specific situations, but would provide a coherent, transparent set of rules that engenders legal certainty. While stopping short of a full uniformisation of the applicable rules, this consideration is to be borne in mind throughout this book. It is valid at both the national and EU levels, the latter from an internal market perspective. Notably, the DSM Directive does not distinguish between different types of contracts. It not only applies to the broad spectrum of creations (both works and performances), but also to a multiplicity of economic and cultural sectors – not only the music industry.Footnote 241
The field of law considered to be the most suitable for the purposes of this book is copyright contract law, given its proximity to the CCIs and the music industry in particular. Provisions of general contract law and those curtailing unfair B2B contract terms and trade practices may act as a fallback rebalancing measure in certain exceptionally unfair situations. However, the general nature of these rules makes it hard to effectively invoke them in the context of the contracts under review.Footnote 242 Conversely, given their focus on relationships characterised by a difference in (bargaining) power, the provisions pertaining to unfair B2B contract terms and trade practices may serve as a source of inspiration. The benefits of the threefold structure of (1) a list of per se prohibitions, (2) a grey list subject to an impact test and (3) a general norm based on fairness considerations are hard to deny. As argued by Ohly, this approach ‘combines certainty in clear cases with flexibility to deal with unforeseen situations’.Footnote 243 However, this would require compiling a list of appropriate per se prohibitions that is both clear and complete – and does justice to the diversity of CCIs as well as within the music industry itself.Footnote 244 Potential express prohibitions spring to mind of tying practices between music publishers and record companies, of undue limitations of royalty calculation bases, of excessive discounts and deductions, of the grant of rights to future methods of exploitation without separate remuneration, of unbridled option clauses and indefinite terms, and so forth.Footnote 245 This list may very well be partly subjective, and it is almost certain that some stakeholders would not agree with its formulation. Moreover, research of the same kind in other CCIs would undoubtedly lead to a similar but different list of terms and practices to be considered per se unfair. Therefore, formulating a comprehensive regime of unfair B2B contract terms and trade practices in the CCIs would be rather challenging. A generalised harmonisation of the law of unfair B2B contract terms and trade practices at the EU level – also extending beyond the CCIs – is therefore unlikely.Footnote 246 In any case, from the perspective of good lawmaking, hard law regulatory intervention as to the music industry alone appears to be inefficient and overly sectorial. In view of this, the area of unfair B2B contract terms and trade practices does not appear to provide fruitful ground for further harmonisation for the purposes of this book.
Finally, the potential contribution of competition law to a fair(er) balance in the music industry is noted, as well as the need to approach copyright (and IP in general) contracts and competition from a holistic perspective.Footnote 247
The next step is to determine the regulatory level that appears the most appropriate for enhancing fairness in the music industry. The global reach of online music and, consequently, the cross-border nature of the contracts under review beg the question whether further harmonisation of the copyright contract law should take place at the international regulatory level. However, regardless of possible substantive arguments in favour of global harmonisation, the realisation of hard-law rules on copyright contracts at the global level appears, at the time of writing, to be wholly unrealistic. Consequent to the principle of territoriality, the applicable national copyright laws differ by country, with a significant divide still persisting between civil law and common law countries. Therefore, for the foreseeable future, an international consensus on the appropriate copyright contract law framework seems illusory. Regardless, the consequences of the further globalisation and increasing homogeneity of the music market may yet surprise us all.Footnote 248
Awaiting such potential surprises, the main question as to the appropriate regulatory level is whether and to what extent further European harmonisation of copyright contract law is merited – even though the United Kingdom would not be covered by such regulatory evolution. Subsequent to the principle of conferral, the EU has only the competences conferred on it by the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU), in order to achieve the objectives contained in these treaties.Footnote 249 EU competences are either exclusiveFootnote 250 (including the establishment of competition rules necessary for the functioning of the internal market), sharedFootnote 251 (including internal market) or supportingFootnote 252 (including culture). The exercise of the EU’s competences is further subject to the principles of subsidiarity and proportionality. The former implies that the EU may only act under its shared and/or supporting competences if the objectives of the proposed action can be better achieved at the EU regulatory level.Footnote 253 If this is not the case, national regulation is considered a better fit. Second, subsequent to the principle of proportionality, the EU may not act in a way that exceeds what is necessary to achieve the objectives of the TEU and/or the TFEU.Footnote 254
The EU legislator does not have a generalised competence for copyright contract law.Footnote 255 However, Article 114 TFEU grants the EU legislator power to adopt measures for the establishment and functioning of the internal market. Further, Article 118 TFEU specifies that the EU is competent to establish measures for the creation of EU-wide IP rights.Footnote 256 So far, harmonising EU measures relating to copyright have primarily been based on the objective of furthering the internal market.Footnote 257 Not only is EU harmonisation deemed to contribute to the proper functioning of this internal market, it is also said to simultaneously stimulate innovation, creativity, investment and production of new content.Footnote 258 For EU action to be legitimately based on the internal market competence, the measures at issue must genuinely have as their aim and content to improve the conditions for the establishment and functioning of the internal market.Footnote 259 In this context, the ECJ deems a ‘mere finding of disparities between national rules and of the abstract risk of obstacles to the exercise of fundamental freedoms or of distortions of competition liable to result therefrom’ to be insufficient.Footnote 260 As contract law is traditionally a national field of law, there was a certain hesitation regarding harmonisation of the law applicable to copyright exploitation contracts.Footnote 261 This reticence was further fuelled by the wish to acknowledge territorial differences between CCIs.Footnote 262 A final hurdle for harmonisation efforts in the field of copyright contract law was the limited harmonisation of initial ownershipFootnote 263 and moral rights.Footnote 264
A shift towards harmonisation in the field of copyright exploitation contracts was first indicated by the rules on contractual relationships with CMOs in the CRM Directive.Footnote 265 The need for further harmonisation was subsequently identified in the runup to the DSM Directive.Footnote 266 The undeniability of the cross-border dimension is confirmed by the harmonising measures that are already in place at the EU level.Footnote 267 The measures included in the DSM Directive in particular seek to allow rightsholders to better exercise their rights in the online environment, thus improving the functioning of the Digital Single Market.Footnote 268 The legislative approach in the jurisdictions under review varies rather widely. This sits uneasily with the online and thus potentially global nature of the music contracts under review. Fragmentation, a lack of transparency and ensuing shortcomings in terms of legal certainty arise, as well as a risk of forum shopping.Footnote 269 The effect is a validation and continuation of existing power relationships. The potential for further harmonising efforts is clear.Footnote 270
The next step is to determine the appropriate method of regulation. A first important distinction in this regard is that between hard and soft law. The former refers to binding legal instruments and has the benefits of transparency and legal certainty. However, a further increase in such top-down regulation risks entailing a disproportionate encroachment on the freedom of contract and may moreover lead to inefficiencies due to an increase in administration and transaction costs.Footnote 271 More malleable, flexible soft law may be said to contribute to a dynamic framework that is more likely to be able to keep up with market changes than somewhat static and all too often unwieldy top-down regulation.Footnote 272 In addition, the often sector-specific nature of soft law may aid in acknowledging the specificity of the various CCIs, allowing for a list of per se prohibitions without having to compile one list that ‘works’ for all CCIs. Finally, soft law that stands the test of time may, over time, be cemented into hard law.Footnote 273 This also applies to collectively bargained solutions that may be made generally binding.
The CCIs are extremely diverse, especially across different national territories. Even within the music industry itself, there are relevant genre-specific practices, such as the distinction between employed and freelance orchestral musicians.Footnote 274 Drawing the line between an overly specific sectorial framework and a one-size-fits-all regulatory approach that does not take due account of this diversity may be problematic.Footnote 275 A potential solution to this conundrum may be to reserve the applicable hard law framework for general rules and essential principles, which are then fleshed out in complementary sector-specific soft law and best practices fuelled by recurring, inclusive stakeholder dialogues. The French implementation process of the DSM Directive may serve as an example, as it leaves much of the specifics of the protective legal framework to collective bargaining.Footnote 276 Cross-border – and preferably sector-specific – initiatives in this regard would be most welcome. There may even be room for soft law regarding copyright exploitation contracts at the international level.Footnote 277 A particular role in this regard may be envisaged for the World Intellectual Property Organization (WIPO), and in particular the open public–private partnership ‘WIPO for Creators’Footnote 278 that was launched by WIPO and the Music Rights Awareness Foundation in 2020.Footnote 279 While this initiative was primarily set up for awareness-raising purposes, a potential enhancement of its role in terms of standard-setting could be contemplated.Footnote 280 However, the potential of sector dialogue should not serve as an excuse for the legislator to avoid making hard (law) decisions.
Empirical research associated with evidence-based lawmaking is difficult and its results are often unpredictable. Nevertheless, additional qualitative and quantitative evidence obtained through independent research that uses a solid methodology should be welcomed.Footnote 281 Further evidence may be obtained on the impact of the law on the overall income of musicians, on the investment climate for corporate partners and on the position of users, as well as on the functioning of reporting, contract adjustment and ADR mechanisms in practice. Further interdisciplinary research that brings together the law, economics and sociology is to be supported.Footnote 282 A promising initiative in this regard is the ‘Copyright Evidence’ project, which was developed by the CREATe Centre at the University of Glasgow in partnership with the AHRCFootnote 283 Creative Industries Policy & Evidence Centre (PEC).Footnote 284 This project houses an open platform that collects empirical studies relating to copyright. It has already catalogued over 900 studies at the time of writing. At the EU level, reference may be made to the Music Moves Europe (MME) strategic initiative, which may lead to the creation of a European Music Observatory.Footnote 285 The impact assessments drafted in support of regulatory action at the EU level may also play a contributing role.Footnote 286 Finally, the inclusion of the objective of achieving a ‘competitive, fair and sustainable European music ecosystem’ in the context of the EU research and innovation framework programme Horizon Europe is noted with assent.Footnote 287
3.5 Outro
This chapter has analysed the normative criterion of achieving a ‘fair(er) balance’ between the legitimate interests of the relevant music industry players on both a procedural and substantive level, with a focus on exclusive, individually managed rights in the recorded music and music publishing sector. It then went on to analyse the scope of the relevant substantive legal regimes in substance, place and time. Following an overview of the relevant legislative sources at the national, EU and international levels, the substantive scope of the different protective regimes was assessed. In addition to a categorisation based on the object of the contract, it was found that the identity of the parties to the contract may also affect the applicable legal rules. Given the overlap between the different legislative regimes, their interplay was subsequently reviewed, revealing a multitude of leges generales et speciales. Geographically speaking, the continued importance of the national regulatory level in the field of contract law was highlighted, both as to general contract law, copyright contract law and provisions on unfair B2B contract terms and trade practices. This chapter then delved into the crucial issue of intertemporal law, highlighting the essential principles and the conservative application in terms of time of the progressively more protective legal regimes in the chosen jurisdictions. Finally, the appropriate level(s) and method(s) of regulation were treated, arguing in favour of evidence-based lawmaking that combines a hard law approach to general rules and essential principles, to be specified through soft law and sector-specific best practices.
This brings us to the substance of the relevant regulatory framework. Three types of measures may be distinguished. First, there may be certain formal requirements, such as the need for a written document for purposes of proof or validity. Second, the legal framework may result in the prohibition of certain clauses deemed unfair or excessive, either under the framework of (copyright) contract law or the law of unfair B2B contract terms and trade practices. By way of example, the scope of rights transferred may be limited to a certain extent, such as by the principle of strict interpretation, the need for a proper specification of the scope and terms of the transferred/licenced right(s) and restrictions to the transfer of/licence to certain rights – for example, to future works and/or unknown modes of exploitation. Other rules may limit contract transfers, sub-licensing and/or excessive contract duration, or prohibit other contract terms and/or trade practices deemed unfair. Third, the legal framework may impose certain substantive obligations on one (or more) of the contracting parties in favour of the weaker contract party (or parties). Such measures seek to level the contractual playing field and include certain exploitation obligations and requirements regarding appropriate remuneration for the transferee/licensee. While formal contract requirements are largely confined to the formation stage of the contract and apply in an ex ante way, the latter two categories transcend the abovementioned triad based on the stages of the contract and combine legislative intervention relating to the conditions at the outset of the contract with ex post mechanisms that seek to rectify situations labelled as unfair.
Many of the legislative provisions under review in this book also apply outside the music industry context, to other CCIs. However, given this book’s focus on the music industry, the analysis of the relevant legal regimes focuses on their application to the music industry contracts under review. Where deemed relevant, prior analogous research relating to other CCIs is referenced in the footnotes.
The analysis of each category of regulatory measures in the following chapters is two-pronged. First, the substantive scope of application of the measure is analysed, confirming whether it applies to both transfers and licences, and to both composers and performers. Specifications as to scope are not only made on an individual level, but also based on the collective dimension of copyright exploitation. In particular, the influence of the idea of collectiveness (concretised through both collective bargaining and the intervention of CMOs) on the scope of application of the measure at issue is highlighted. Subsequently, the content of the measure is reviewed, focusing on the applicable conditions of application, the appropriate interpretation of the resulting obligations for the contract partners and the question whether the measures at issue may be subject to contractual deviation.
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