COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on the follow-up to the Commission communication on certain legal aspects relating to cinematographic and other audiovisual works (Cinema communication) of 26.09.2001 (published in OJ C 43 on 16.2.2002) (text with EEA relevance)

1. Introduction

1. The Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions on certain legal aspects relating to cinematographic and other audiovisual works [1] (hereinafter referred to as "the Communication") tackled, among others, two issues that are of vital importance for the cinematographic industry: State aid to cinema and protection of heritage.

[1] COM(2001)534 final of 26.09.2001, OJ C 43, 16.02.2002

2. The present Communication is the follow-up to that Communication. In the field of State aid, the Commission intends to provide legal security to the sector, by clearly stating the rules to be applied until 30 June 2007. In relation to film heritage, the Commission proposes adopting a Recommendation of the European Parliament and of the Council on film heritage and the competitiveness of related industrial activities.

2. The general approach of the Commission with regard to State Aids to cinema sector.

1. The criteria used by the European Commission to assess the compatibility with the EC Treaty of aid schemes for cinema and TV production were clarified in chapter 2 of the Communication. This Communication contains the general approach of the Commission with regard to State aid to the cinema and TV production sector.

2. These criteria are two-fold:

a) Respect of the general legality criterion;

b) Specific compatibility criteria for State aid to cinema and TV programme production.

3. The Communication stated that the specific compatibility criteria would remain valid until June 2004. Member States' aid schemes for cinema and TV production are currently authorised by the Commission until the same deadline.

4. The Commission organised a broad consultation exercise on the possible adjustment of the specific compatibility criteria with Member States, accession countries and professionals, within the framework of the Cinema Expert Groups, which met on 9 and 19 January 2004 in Brussels. Member States and professionals unanimously expressed their satisfaction with the criteria set out in the Communication and did not raise any concern regarding their impact on competition.

5. In their view, the cinema sector in Europe is under pressure and therefore aid is needed to support it. They fear that a modification of the existing rules could threaten the stability of the sector and therefore they pleaded to maintain the set of rules as it now stands.

6. The Commission's main concerns are not related to the volume of the aid, which, being aimed at supporting culture is compatible with the Treaty. However, the Commission recalled its worries over certain territoriality requirements, i.e. the "territorialization" clauses of certain aid schemes. Such territorialization clauses impose on producers an obligation to spend a certain amount of the film budget in a particular Member State as an eligibility condition for receiving the full aid amount. Territorialization clauses may constitute a barrier to the free circulation of workers, goods and services across the EC. They may, therefore, fragment the internal market and hinder its development. However, the Commission considers that these clauses may be justified under certain circumstances and within the limits set in the Communication in order to ensure the continued presence of human skills and technical expertise required for cultural creation. Of course, this Communication is without prejudice to the Commission's obligations under the Treaty to deal with complaints relating to possible breaches of other Treaty rules than the State aid provisions.

7. The Commission has therefore carefully considered the arguments put forward by the national authorities and the professionals of the cinematographic sector. It accepts that the sector of film production is under pressure. It is therefore willing to consider, at the latest at the time of the next review of the Communication, higher aid amounts being made available provided that the aid schemes comply with the conditions of general legality under the Treaty and, in particular, that barriers to the free circulation of workers, goods and services across the EC in this sector are reduced.

8. In advance of the next review of the Communication, the Commission intends, in addition to further analysing the arguments of the sector, to carry out an extensive study on the effects of the existing State aid systems. The study should examine in particular the economic and cultural impact of the territorialization requirements imposed by Member States, in particular taking into account their impact on co-productions.

9. In the light of the above, the Commission extends the validity of the specific compatibility criteria for aid to cinema and TV programme production, as set out in the Communication, until 30 June 2007.

3. Protection of film heritage

1. The Cinema Communication examined the legal deposit of audiovisual works at national or regional level as one of the possible ways of conserving and safeguarding the European audiovisual heritage and launched a stocktaking exercise of the situation regarding the deposit of cinematographic works in the Member States, accession countries and EFTA countries. All Member States already have systems in place for collecting and preserving cinematographic works forming part of their audiovisual heritage. Four-fifths of these systems are based on a legal or contractual obligation to deposit all films, or at least those films that have received public support.

2. Cinematography is an art form contained on a fragile medium, which therefore requires positive action from the public authorities to ensure its preservation. Cinematographic works are an essential component of our cultural heritage and therefore merit full protection. In addition to their cultural value, cinematographic works are a source of historical information about European society. They are a comprehensive witness to history of the richness of Europe's cultural identities and the diversity of its people. Cinematographic images are a crucial element for learning about the past and for civic reflection upon our civilisation. In order to ensure that the European film heritage is passed down to future generations, it has to be systematically collected, catalogued, preserved and restored. In addition, European film heritage should be made accessible for educational, academic, research and cultural purposes, without prejudice to copyright and related rights.

3. There have been a number of EU and international actions aimed at protecting film heritage. At EU level, the following should be mentioned:

* The Council Resolution of 26 June 2000 [2] on the conservation and enhancement of European cinema heritage calls on Member States to cooperate in the restoration and conservation of cinema heritage, including through recourse to digital technologies, to exchange good practice in this sector, to encourage progressive networking of European archival data and to consider the possible use of these collections for educational purposes.

[2] OJ C 193, 11.7.2000.

* European Parliament Report on the Commission Communication on cinema of 7 June 2002, [3] in which the European Parliament underlined the importance of safeguarding the cinematographic heritage.

[3] PE 312.517, not yet published in the Official Journal.

* The Council Resolution of 24 November 2003 on the deposit of cinematographic works in the European Union [4] invited Member States to put in place an efficient system of deposit and preservation of the cinematographic works forming part of their audiovisual heritage in their national archives, film institutes or similar institutions, if such systems do not yet exist.

[4] Council Press Release 1457/03, OJ C 295/5, 5.12.2003.

4. At international level, The European Convention for the protection of the Audiovisual Heritage [5] was open for signature on 8.11.2001. It provides that each Party has to introduce the obligation to deposit moving image material forming part of its audiovisual heritage and having been produced or co-produced in the territory of the Party concerned.

[5] http:// conventions.coe.int, Council of Europe, ETS No 183.

5. The transfer of the possession of cinematographic works to archiving bodies does not imply transferring copyright and related rights to them. Nevertheless, Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society [6] stipulates that Member States may provide for an exception or limitation in respect of specific acts of reproduction made by publicly accessible libraries or by archives which are not for direct or indirect economic or commercial advantage.

[6] OJ L 167, 22.06.2001.

6. Finally, the cinematographic industry in Europe has great potential for creating employment and contributing to economic growth. This refers not only to the production and showing of films, but also to the collection, cataloguing, preservation and restoration of cinematographic works. The conditions for the competitiveness of these industrial activities related to film heritage need to be improved, especially as regards better use of technological developments, such as digitisation.

7. In the light of the above, the Commission proposes adopting a Recommendation of the European Parliament and of the Council on film heritage and the competitiveness of related industrial activities. Member States, accession countries and professionals have been consulted on the draft proposal, within the framework of the Cinema Expert Groups, which met on 9 and 19 January 2004 in Brussels.

EXPLANATORY MEMORANDUM

4. Introduction

The Commission Communication on certain legal aspects relating to cinematographic and other audiovisual works [7] examined the legal deposit of audiovisual works as one of the possible ways of conserving and safeguarding the European audiovisual heritage. The Commission noted that while there was widespread support for the objective of conserving and safeguarding the European audiovisual heritage, there were different views on the legal status of deposit of audiovisual works.

[7] COM(2001)534 final, 26.9.2001, OJ C 43/6, 16.2.2002.

As announced in the Communication, the Commission carried out a stocktaking exercise of the current situation in the Member States. A questionnaire was sent to Member States, accession countries and EFTA countries on 26 March 2002.

An analysis of the replies shows that ten Member States have established a legal obligation for producers to deposit their cinematographic works in the national libraries or film institutes. For three other Member States, the obligation of deposit, established by law or by contractual relationship, concerns exclusively films that receive public funding. In two Member States, the deposit is done on a voluntary basis. In summary, four-fifths of Member States have a system of compulsory deposit for all or publicly financed works.

The Commission set up two groups of cinema experts as a follow-up to the Cinema Communication: one composed of Member States representatives and one of professionals. The Cinema Member State Expert Group discussed the protection of film heritage at its meetings of 20 September 2002 and 9 January 2004. The Cinema Professional Expert Group also discussed the matter on 5 November 2002 and 19 January 2004.

Consultations confirm that there is general agreement that cinematographic works are an important part of Europe's cultural heritage. According to the replies to the questionnaire, private initiative or voluntary systems cannot ensure systematic deposit and preservation of all cinematographic works. This objective can only be achieved via systematic deposit systems. In addition, there is a majority view that the national systems should be interlinked and best practices exchanged.

5. Context

Both the Council and the European Parliament have underlined the importance of collecting and preserving the European film heritage.

The Council has adopted two Resolutions on this matter. The first one, adopted on 26 June 2000, [8] called on Member States to cooperate in the restoration and conservation of cinema heritage, including through recourse to digital technologies, to exchange good practice in this sector, to encourage progressive networking of European archival data and to consider the possible use of these collections for educational purposes. The latest one, adopted on 24 November 2003, [9] confirmed that European cinematographic works are an essential manifestation of the richness and diversity of European cultures and that they constitute a heritage that has to be conserved and safeguarded for future generations. It also stressed that European cinematographic works forming part of Member States' audiovisual heritage must be systematically deposited in national, regional or other archives, in order to ensure their preservation.

[8] OJ C 193, 11.7.2000.

[9] Council Press Release 1457/03, OJ C 295/5, 5.12.2003.

In its Report on the Commission Communication on cinema of 7 June 2002, [10] the European Parliament stressed the need for a compulsory legal deposit of audiovisual works by Member States, in line with the European Convention for the protection of the Audiovisual Heritage. In the view of the European Parliament, legal deposit should be compulsory for beneficiaries of State aid, as a transitional measure.

[10] PE 312.517, not yet published in the Official Journal. The Rapporteur was Luckas Vander Taelen.

In addition, the Council of Europe opened the Convention for the protection of the Audiovisual Heritage [11] for signature on 8 November 2001. This Convention requires its signatories to set up a system of compulsory legal deposit of all moving image material, and voluntary deposit of ancillary material. The Convention has not yet entered into force.

[11] http:// conventions.coe.int.

6. Scope of the Recommendation

The Recommendation focuses on cinematographic works. For other audiovisual works, e.g. television programmes, the Recommendation provides only for voluntary deposit.

The Recommendation covers all aspects of film heritage: collection, cataloguing, creation of databases, preservation, restoration, and use for educational, academic, research and cultural purposes, and cooperation between the institutions responsible at European level.

7. Why a Recommendation from the European Parliament and the Council rather than a Recommendation from the Commission?

Given that the harmonisation of laws of the Member States is excluded from industrial and cultural policies, the Community is bound to use non-binding instruments, such as recommendations, to fulfil the tasks and obligations enshrined in the Treaty.

The EC Treaty gives the Commission extensive powers to adopt Recommendations: Article 249 provides that "in order to carry out their task and in accordance with the provisions of this Treaty ... the Commission shall ... make recommendations". Article 211 states that "in order to ensure the proper functioning and development of the common market, the Commission shall ... formulate recommendations or deliver opinions on matters dealt with in this Treaty, if it expressly so provides or if the Commission considers it necessary".

Nevertheless, the Commission considers that a Recommendation from the European Parliament and the Council has to be preferred to a Recommendation from the Commission on this matter, for two reasons. First of all, the Recommendation in question seeks effective cooperation between Member States on the protection of film heritage. This can be better achieved if the Recommendation is discussed and adopted by the Council. Secondly, the European Parliament has fully backed the need to preserve film heritage in two Reports. [12] Therefore, it seems appropriate to fully involve the European Parliament in the discussion and adoption of the Recommendation. The involvement of the European Parliament will result in more public debate and a bigger impact of the Recommendation. In conclusion, the objective pursued by the Community can be better achieved by the adoption of a Recommendation from the European Parliament and the Council rather than a Recommendation from the Commission.

[12] PE 303.777, OJ C140, 2.6.2002, and PE 312.517, not yet published in the Official Journal.

8. Legal Basis for the Recommendation

The cinematographic industry in Europe has great potential for creating employment and contributing to economic growth. This refers not only to the production and showing of films, but also to the collection, cataloguing, preservation and restoration of cinematographic works. The conditions for the competitiveness of these industrial activities related to film heritage need to be improved, especially as regards better use of technological developments, such as digitisation. Therefore, the legal basis proposed for the Recommendation is Article 157 of the EC Treaty, which requires the Community and the Member States to ensure that the conditions necessary for the competitiveness of the Community's industry exists, with action aimed, inter alia, at fostering better exploitation of the industrial potential of policies of innovation, research and technological development.

Article 157 has already formed the legal basis for acts adopted in the field of audiovisual policy, such as Council Decision of 20 December 2000 on the implementation of a programme to encourage the development, distribution and promotion of European audiovisual works (MEDIA Plus - Development, distribution and promotion 2001-2005) [13] and Council Recommendation of 24 September 1998 on the development of the competitiveness of the European audiovisual and information services industry by promoting national frameworks aimed at achieving a comparable and effective level of protection of minors and human dignity. [14]

[13] OJ L 13/35, 17.1.2001.