Carl Gardner writes on the rejected appeal by BT and TalkTalk over the Digital Economy Act’s impact on ISPs. This article is taken from his timely blog post on the always stimulating Head of Legal blog: www.headoflegal.com
On 6 March, the Court of Appeal rejected the appeal by BT and TalkTalk in their judicial review of the Digital Economy Act 2010 (see R (British Telecommunications plc and TalkTalk Telecom Group plc) v Secretary of State for Culture, Olympics, Media and Sport and others  EWCA Civ 232). This is a disappointment for digital rights campaigners, but not legally surprising – the arguments made by BT and TalkTalk never looked strong, and Mr Justice Kenneth Parker's original judgment in the Administrative Court ( EWHC 1021) was difficult to fault.
Sections 3 to 18 of the Act amend the Communications Act 2003, and provide that, once an 'initial obligations code' has either been agreed by relevant players in industry or imposed by Ofcom, copyright owners should be able to send ISPs 'copyright infringement reports' of alleged copyright breaches by their subscribers. The ISP must then notify its subscribers of their alleged breaches, and may then be required to send a copyright holder a 'copyright infringement list' of the number of notifications sent by the ISP to subscribers. Provision is also made for the possible introduction of obligations on ISPs to take technical measures limiting or even suspending individual subscribers' Internet access in appropriate circumstances – to be laid down by ministers, and fleshed out by Ofcom, again in a code.
The first argument for BT and TalkTalk (the first of a somewhat kitchen-sinkish list of EU law complaints) was that the new requirements should have been notified to the European Commission under the Technical Standards Directive – and because they were not, they're unenforceable. The government's defence was that the need to notify arises only when the details of the code are clear – the framework Act does not have legal effects in itself. Lord Justice Richards (with whom Lady Justice Arden and Lord Justice Patten agreed) upheld Kenneth Parker J's ruling for the government (at -):
'… there is not a lot of point in troubling the Commission and other Member States with something that is inchoate. Informed comment depends on there being a worked-through draft, especially as consideration of issues of proportionality depends on the detail.
The judge was right to find that the contested provisions do not have the "legal effects" described by the court's case-law. The "initial obligations" of ISPs under sections 124A and 124B are conditional on there being a code in force under section 124C or 124D … Moreover the Code is to be made for the purpose of regulating the initial obligations, and the scope of those obligations will be dependent on the detailed content of the Code. Whilst the statute prescribes various basic features of the Code, it leaves very considerable freedom for the working out of the detail.'
Secondly, it was argued that the burden imposed on ISPs by the new notification provisions makes them 'liable for the information transmitted' contrary to Article 12(1) of the E-commerce Directive. This was also rejected (at -), as was the ISP's complex argument that the provisions breach Article 3 of the E-commerce Directive because they restrict freedom to provide 'information society services' (Internet services to you and me) throughout Europe. This was always likely to be an uphill argument since the Annex to the Directive expressly takes copyright out of the scope of Article 3, and again, Richards LJ rejected it (at  and -):
'The expression "copyright" in the Annex is not defined. The Secretary of State's contention, accepted by the judge, is that it has its normal meaning, encompassing all aspects of the law of copyright under national laws, that the contested provisions were taken for reasons falling within the field of copyright in that sense, and that Article 3(2) therefore does not apply to them. The appellants submit that "copyright" in the Annex has a more limited meaning, referring only to the substantive law of copyright under national laws and to such measures for the protection of copyright as have been introduced by [the Copyright] Directive 2001/29/EC … that the contested provisions do not relate to copyright in that sense; and that they are incompatible with Article 3(2) …
At the time when the Electronic Commerce Directive was adopted, "copyright" in the Annex to the directive must in my view have had its normal meaning, encompassing all aspects of the law of copyright under national laws, and cannot have had the elaborate meaning attributed to it by the appellants …
In my judgment, that is sufficient to dispose of the appellants' case under Article 3 of the Electronic Commerce Directive.'
The claimants argued that the provisions breach Article 8 of the Data Protection Directive but this was again rejected, Richards LJ agreeing (at ) with Kenneth Parker J that any data processing required by the new provisions was 'necessary for the establishment, exercise or defence of legal claims' and so permitted by Article 8.2.e of the Data Protection Directive.
BT and TalkTalk argued that the new Digital Economy Act provisions also breach the Privacy in Electronic Communications Directive, but Richards LJ, applying Case C-275/06 Promusicae, upheld the ruling of Kenneth Parker J that Article 15 of the Directive permits member states to legislate to limit confidentiality for the purpose of effectively protecting copyright.
The next, and somewhat tortuous, argument was that the notification provisions breach the E-communications Services Authorisation Directive read with the Framework Directive. The argument was essentially that any notification system like that established by the Digital Economy Act must by law be contained in the 'general authorisation' required under the Authorisation Directive, and could not lawfully be contained in it because of Article 6.3 of the Directive. That argument faced the hurdle of Article 3.1 of the Framework Directive, which says:
'This Directive as well as the Specific Directives [which include the Authorisation Directive] are without prejudice to measures taken at Community or national level, in compliance with Community law, to pursue general interest objectives, in particular relating to content regulation and audio-visual policy.'
As I say, a tortuous argument was put forward to try and surmount this, but it failed. Richards LJ said (at ):
'Notwithstanding those submissions, I find the judge's analysis convincing. Article 1(3) of the Framework Directive is apt in my view to permit the contested provisions by way of derogation from the Authorisation Directive, as measures taken at national level to pursue general interest objectives. The recitals to the Framework Directive tend to support that view and certainly contain nothing to undermine it.'
The one point on which the appeal succeeded was on the issue of costs, on which BT and TalkTalk had already scored a consolation goal in the first instance judicial review. Kenneth Parker J had ruled that the 'qualifying costs' imposed by the new regime on ISPs – the costs incurred by Ofcom or the appeals body in carrying out its functions under provisions – breached Article 12 of the Authorisation Directive, which limits the types of administrative charges which can be imposed on ISPs.
Richards LJ agreed with this (that point was not appealed by the Business Secretary), and that another category of costs, the 'relevant costs' which would be reasonably incurred by an ISP in carrying out its notification obligations, was lawful.
Where he disagreed with the judge below, and gave BT and TalkTalk a small victory in this appeal, was that he saw a third category of costs, the 25% 'case fees' charged to ISPs by the appeals body in respect of each subscriber appeal, as also in breach of Article 12.
The last argument rejected was a general one that the provisions breach the principle of 'net neutrality' enshrined in Article 8.1 of the Framework Directive, and discriminated against bigger ISPs by giving special exemptions to smaller ISPs. An interesting argument, this: while the net neutrality argument might appeal to digital rights campaigners, I doubt very much that the discrimination argument does. Had it succeeded, it would have meant the notification system had to cover smaller ISPs as well. Richards LJ gave it short shrift (at ):
'The judge's conclusion was soundly based on detailed evidence submitted on behalf of the Secretary of State. He was plainly entitled to take the view that the exclusion of smaller ISPs and MNOs represented a proportionate response; and in the circumstances I do not think that anything material is added by recourse to the principle of non-discrimination or the desirability of technological neutrality.'
Finally, the claimants wanted a reference to the European Court of Justice, unsurprisingly, given the multiplicity of apparently convoluted readings of EU legislation they had relied on. But this was also rejected (at ):
'The appellants requested that if we were in doubt about any of the issues raised in the appeal we should make a reference to the Court of Justice. Kenneth Parker J declined to make a reference, stating at  that "the questions of European Union law raised by this judicial review admit of clear answers, and I do not believe that any useful purpose would be served by my making a reference". I am of the same view.'
So the appeal has failed except on 'case fees' – the government will now have to decide whether it should underwrite those, or whether to impose the entire burden of the fees on copyright holders. No doubt many would see that as the better solution.
In principle BT and TalkTalk could seek permission to appeal to the Supreme Court on the basis that these are legal questions 'of general public importance' – and they might be tempted simply because under EU law the Supreme Court is in theory obliged, rather than merely able, to refer a question of interpretation to the European Court if it is necessary to do so. In a campaigning judicial review like this, a reference, with the delay of perhaps two years and the uncertainty it would cause, would be a victory in itself.
But I doubt they would get permission to appeal. I am not sure these really are questions of general public importance or that, given the generally uphill nature of some of the submissions made, the Supreme Court will be interested in hearing them or think a reference to Europe is necessary.
The Digital Economy Act is coming: ministers should soon be able to give Harriet Harman what she wants.
Carl Gardner is a barrister. He is a former government lawyer who now works as a writer, lecturer and consultant. Find out more at www.headoflegal.com