BT v Secretary of State for Business, Innovation and Skills - Approved

8/7/2019 BT v Secretary of State for Business, Innovation and Skills - Approved

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Neutral Citation Number: [2011] EWHC 1021 (Admin)

Case No: CO/7354/2010IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 20/04/2011

Before :

MR JUSTICE KENNETH PARKER- - - - - - - - - - - - - - - - - - - - -

Between :

THE QUEEN

(on the Application of)

(1) BRITISH TELECOMMUNICATIONS PLC

(2) TALKTALK TELECOM GROUP PLC Claimants

- and -

THE SECRETARY OF STATE FOR BUSINESS,

INNOVATION AND SKILLS Defendant

- and (1) BPI (BRITISH RECORDED MUSIC INDUSTRY) LIMITED

(2) BRITISH VIDEO ASSOCIATION LIMITED

(3) BROADCASTING ENTERTAINMENT CINEMATOGRAPH AND THEATRE UNION

(4) EQUITY

(5) FILM DISTRIBUTORS ASSOCIATION LIMITED

(6) FOOTBALL ASSOCIATION PREMIER LEAGUE LIMITED

(7) MOTION PICTURE ASSOCIATION INC

(8) THE MUSICIANS UNION

(9) PRODUCERS ALLIANCE FOR CINEMA AND TELEVISION LIMITED

(10) UNITE Interested Parties

- and

(1) OPEN RIGHTS GROUP

(2) ARTICLE 19 and CONSUMER FOCUS Interveners

- - - - - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - - - - - -

Antony White QC and Kieron Beal (instructed by BT Legal and Talk Talk Legal) for The Claimants

James Eadie QC, Robert Palmer and Alan Bates (instructed by The Treasury Solicitor) for The

Defendant

Pushpinder Saini QC and James Strachan (instructed by Wiggin LLP) for The Interested Parties

Hearing dates: 23, 24, 25 and 28 March 2011

- - - - - - - - - - - - - - - - - - - - -

Approved Judgment


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Judgment Approved by the court for handing down. BT/Talk Talk -v- SSBIS

Mr Justice Kenneth Parker :

Introduction

1. This is an application for judicial review in which it is claimed that the online

infringement of copyright provisions (the contested provisions) of the DigitalEconomy Act 2010 (the DEA 2010) and the Copyright (Initial Obligations)

(Sharing of Costs) Order 2011, currently laid before Parliament (the draft Costs

Order) are incompatible with a number of provisions of EU law. Permission was

granted by Wyn Williams J on 10 November 2010.

2. The First Claimant, British Telecommunications Plc (BT), is a public limited

company incorporated under the laws of England and Wales. The Second Claimant,

TalkTalk Telecom Group Plc (TTG), is also a public limited company incorporated

in England. Each carries on business in the supply of telecommunications services

and equipment to both businesses and residential customers. Both BT and TTG are

also internet service providers (ISPs).

3. The Defendant (the Secretary of State) is the Government minister designated with

responsibility for the Department for Business, Innovation and Skills (DBIS).

4. There are ten Interested Parties. These are organisations and associations concerned

with the protection of copyright in works belonging to their members whom they

represent. They also include unions whose members are employed in the creative

industries, and their employers. There are also two interveners, Consumer Focus

(CF) and Article 19. CF is the National Consumer Council in England and Wales,

with statutory duties to represent the interests of consumers and to advise the

Government and regulators on consumer matters. Article 19, the Global Campaignfor Free Expression, a charity registered in the UK, is an international human rights

organisation concerned with protecting and promoting the right to freedom of

expression.

5. The Claimants advance five grounds of challenge in respect of the contested

provisions. They contend that:

i) The provisions constitute a technical regulation and/or a rule on services

within the meaning of the Technical Standards Directive (Directive 98/34/EC

of the European Parliament and of the Council of 22 June 1998 laying down a

procedure for the provision of information in the field of technical standardsand regulations, OJ [1998] L No 204, as amended by Directive 98/48/EC of

the European Parliament and of the Council of 20 July 1998, OJ [1998] L No

217). The provisions, it is said, should have been notified to the EU

Commission in draft, but were not. The provisions are accordingly

unenforceable.

ii) They are incompatible with certain provisions of the Electronic Commerce

Directive (the E-Commerce Directive) (Directive 2000/31/EC of the

European Parliament and of the Council of 8 June 2000 on certain legal

aspects of information society services, in particular electronic commerce, in

the Internal Market, OJ 2000 L No 178).


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iii) They are incompatible with certain provisions of the Privacy and Electronic

Communications Directive (the PEC Directive) (Directive 2002/58/EC of

the European Parliament and of the Council concerning the processing of

personal data and the protection of privacy in the electronic communications

sector, OJ [2002] L No 201).

iv) They are disproportionate in their impact on ISPs, consumers, business

subscribers and public intermediaries. The requirement for the legislation to

be proportionate in its impact on ISPs, businesses and consumers is said to be

derived from a number of sources, including Articles 7, 8, 11 and 52 of the

Charter of Fundamental Rights and/or general principles of EU law, pursuant

to Article 6 TEU and the Human Rights Act 1998 and Articles 8 and/or 10 of

the European Convention on Human Rights.

v) They infringe the Authorisation Directive (Directive 2002/20/EC of the

European Parliament and of the Council on the authorisation of electronic

communications networks and services OJ [2002] L No 108, as amended byEuropean Parliament and EC Council Directive 2009/140, OJ [2009] L 337).

6. The Claimants also seek to challenge the draft Costs Order on each of grounds 2 to 5

above (the Order having been notified in draft to the EU Commission, ground 1 was

not applicable).

Factual Background

The framework within which ISPs operate

7. The Claimants operate within a framework of measures known as the telecomspackage. This includes five European Directives which set out the major provisions

governing the telecoms package. These were introduced by the EU to harmonise

the cross-border provision of telecommunications services within the internal market.

8. The Office of Communications Act 2002 and the Communications Act 2003 (CA

2003) led to a major re-organisation of telecommunications markets in the United

Kingdom, under the regulatory control of Ofcom. The regulation at both an EU and a

national level has been designed to promote competition between telecommunications

providers and protect consumer interests, while ensuring that a universal service is

available for the majority of telecommunications services (access to landline

telephony, mobile phone telephony and internet access).

9. The Claimants each provide an information society service (as defined in the E-

Commerce Directive: see paragraph 96 below). For the relevant purposes of these

proceedings, they do so as mere conduit ISPs. As such each ISP gives access to an

electronic communications network to its own subscribers. A conduit is not allowed

to interfere with traffic. In that capacity, it has neither knowledge of, nor control

over, the information which is transmitted by subscribers. Its actions are merely

technical, automatic and passive: see Joined Cases C-236/08 to C-238/08 GoogleFrance SARL v Louis Vuitton Malletier SA [2010] ECR 1-0000, ECJ, at [110], [113]and [114].


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Background to the relevant legislation

(a) Memorandum of Understanding

10. Software developers have created file-sharing software enabling an internet user on

one computer to access files and material stored on another users computer where thesecond user is also connected to the internet (peer-to-peer or P2P software). P2P

services enable an internet user to search for files being offered by other users who

are connected to the same and sometimes other P2P services, and to request and

receive copies of these files on his or her computer, and make these files available for

further distribution to other users of P2P services over the internet, transmitting exact

copies of files from his or her computer to another users computer. Individuals who

make available and communicate files using P2P services store these files in

directories on their computers that they open to other internet users to view and

access. In this way a copyright work such as a sound recording or film can be stored

in the form of a digital file in the shared directory, and that file can be made publicly

available to vast numbers of other P2P users who are able to search for the file and, onrequest, transfer copies of that file over the internet to others. At any time there may

be hundreds of thousands of individuals accessing a P2P service, many of them doing

so unlawfully by infringing copyright in the relevant work.

11. Music is a popular target of P2P file sharing. The arrival of MP3 software in the late

1990s enabled the conversion of digitally recorded (or remastered) music into highly

compressed computer files. As a matter of history it appears that Napster Inc, in the

United States, was the first to exploit the opportunities for music sharing opened up

by P2P technology, but the early means that it employed exposed it to a successful

claim for copyright infringement and led to its demise, without deterring more

sophisticated successors. It should be stressed that P2P software may be used forlegitimate purposes, such as sharing photographs between family and friends and

transferring digital media files between a desk top and a lap top computer owned by

the same individual or family.

12. In order to combat the increase in unlawful file-sharing, BT, TTG and other ISPs were

encouraged by the Government to enter into a Memorandum of Understanding

(MOU) with the BPI (British Recorded Music Industry) Limited (BPI) and other

rights owners in July 2008. ISPs undertook to work together with other signatories in

an experimental trial in which internet service customers were informed if their

accounts were being used to share copyright material unlawfully and were advised

how to address such infringements. The Claimants participated in such a trial for three

months.

13. The MOU was intended to improve communication and cooperation between relevant

industries to promote education of consumers. A combined Principle 2 and Principle

3 Working Group was set up under the MOU to report on commercial solutions to the

problem of copyright infringement. The MOU three-month trial period expired in

January 2009. BT also filed a response to the consultation process undertaken by the

Secretary of State.

14. The ISPs which took part in the MOU were not obliged to inform rights holders of the

fact that notification letters had been sent. The notifications sent to subscribers were

primarily educative and further notifications to the same customer did not escalate in


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tone or make threats or warnings. The notifications also made it clear that they were

being sent as part of a trial, not because of a statutory requirement on ISPs. BT

informally raised concerns about the lawfulness of data processing and retention with

the Information Commissioners Office at the time of the MOU. These legal concerns

were shared by other ISPs.

15. Furthermore, the MOU Principle 5 Group (one of the inter-industry groups

established under the MOU to explore the options for controlling unlawful P2P file-

sharing) examined not only technical measures but also legal measures that might be

adopted by rights holders, including legal action by rights holders against individuals.

This Groups work was not complete when in February 2009 the Government

indicated that, in the light of the Digital Britain Interim Report, it was proposing to

adopt a legislative solution to the problem.

(b) Digital Britain: The Interim Report

16. In January 2009, the Department for Culture, Media and Sport (DCMS) and the

Department for Business, Enterprise and Regulatory Reform (DBERR), now known

as the Department for Business, Innovation and Skills (DBIS), published a paper

entitledDigital Britain: Interim Report(Cm 7548). The paper proposed the enactmentof legislation which would require ISPs to notify alleged infringers of copyright that

their conduct was unlawful (upon the provision of certain evidence by rights holders);

and to collect anonymised information on repeat infringers which could be made

available to rights holders upon production of a Court order.

(c) The Government White Paper

17. In June 2009, the Government published its White Paper on Digital Britain, entitled

Digital Britain: Final Report(Cm 7650).This set out Government proposals designedto put the United Kingdom at the forefront of the global move towards a digital

knowledge economy. The Government in particular set out to tackle unlawful P2P

file sharing.

18. The White Paper followed the Interim Report. ISPs would be required to notify

subscribers of infringements identified by copyright holders and to maintain

anonymised lists of repeats offenders (the identity of whom could be made subject

to a request for disclosure by the copyright holders by Court order). Obligations

would be placed on ISPs to notify subscribers of their alleged unlawful conduct, andto collect information on repeat infringers.

19. The White Paper also raised the possibility of further legislative measures being

adopted if the initial obligations did not produce the desired reduction in unlawful

file-sharing. The envisaged measures included:

i) The blocking of access to websites, internet protocol (IP) addresses or to a

uniform resource locator (or URL, which is the global address of individual

web pages, documents and other resources on the worldwide web);

ii) Protocol blocking (preventing certain internet protocols from accessing theinternet which can prevent certain internet services being used by a computer);


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iii) Port blocking (preventing certain ports from accessing the internet, with the

same aim as protocol blocking);

iv) Bandwidth capping (which reduces the speed at which files might be

downloaded);

v) Volume capping (restricting the amount of data that may be downloaded over

a period of time);

vi) Bandwidth shaping (limiting the speed of a subscribers access to selected

protocols or services);

vii) Content identification and filtering.

20. On 25 August 2009, the Government issued a statement in the course of the

consultation. The statement set out a significant change in the Governments

proposals in respect of technical obligations that might be imposed. The Secretary ofState would be able to introduce technical obligations at any time, including the

disconnection of a subscribers internet access. The statement also indicated that

individual parties would be responsible for bearing their own costs of compliance

with the initial obligations, save that the operating costs of sending notifications

would be split 50:50 between ISPs and rights holders. Previously it had been

intended that Ofcom should determine this matter in the Code. The Claimants

responded to the consultation, and I believe that it is fair to say that, in principle, they

supported a system of notifying subscribers of copyright infringement.

The passage of the Digital Economy Bill

21. The Government published its response to the consultation in November 2009. It

announced that legislation to tackle online copyright infringement would be

introduced in the Digital Economy Bill. The Government stated that the Bill would

introduce two straightforward obligations, whose detailed practical implementation

would be left to be developed in an industry approved Code (or in default by Ofcom).

The costs proposals previously advanced were changed to a proposed flat fee

system, by which rights owners paid an ISP a flat fee for processing each of its

copyright infringement reports (CIRs).

22. On 16 November 2009, the Government published the Digital Economy Bill. It wasintroduced in the House of Lords on 19 November 2009.

23. Paragraph 34 of the Explanatory Notes accompanying the Digital Economy Bill stated

that:

The provision inserts new sections 124A to 124M in the

Communications Act 2003 (the 2003 Act), which impose

obligations on internet service providers (ISPs) to:

Notify their subscribers if the internet protocol (IP)addresses associated with them are reported by


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copyright owners as being used to infringe copyright;

and

Keep track of the number of reports about each

subscriber, and compile, on an anonymous basis, a list

of some or all of those who are reported on. Afterobtaining a court order to obtain personal details,

copyright owners will be able to take action against

those included in the list.

24. Paragraph 35 of the Notes explained that these obligations would be underpinned by a

code approved by Ofcom or, if no industry code was put forward for approval, a code

made by Ofcom. The Notes stated that the Code would set out in detail how the

obligations must be met.

25. Furthermore, paragraph 36 observed that the structure of the Bill was such that if the

initial obligations imposed did not achieve the objective of reducing unlawful file-sharing to a satisfactory extent, then additional technical obligations could be

imposed on ISPs. These would require ISPs to limit internet access by certain

subscribers, for example through bandwidth capping or shaping, or through temporary

suspension in certain circumstances.

26. Paragraph 48 gave the following explanation of the content of the obligation found in

Clause 5:

ISPs will have to keep a record of the number of CIRs linked

to each subscriber along with a record of which copyright

owner sent the report. Under section 124B of the 2003 Act,inserted by clause 5, an ISP may be required to provide a

copyright owner with relevant parts of those records on request

(copyright infringement lists), but in an anonymised form so

as to ensure compliance with data protection legislation.

27. Paragraphs 51 and 52 of the Explanatory Notes stated that the obligations in the

proposed Act would not take formal effect until a Code was published. The Code

would deal with the points of detail. The Governments stated intention (at

paragraph 55) was for the obligations imposed by the Bill to fall on all ISPs except

those who were demonstrated to have a very low level of online infringement.

28. The contents of the initial obligations code were addressed in Clause 8 of the Bill

and paragraph 59 of the Explanatory Notes. A proposed section 124E of the CA 2003

would set out what the Code must contain in terms of a minimum set of obligations to

be imposed on ISPs. The stated reason for setting the fuller details down in the Code

was that the specific obligations and procedures would be detailed and were likely to

have to be adapted over time.

The Governments Impact Assessments

29. The Bill was the subject of a regulatory Impact Assessment issued in November 2009.

It was updated in March 2010 following some amendments to the Bill during its


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passage through the House of Lords. The then Financial Secretary to the Treasury

(Stephen Timms MP) said of the Impact Assessment:

I have read the Impact Assessment and I am satisfied that (a) it

represents a fair and reasonable view of the expected costs,

benefits and impact of the policy, and (b) that the benefitsjustify the costs.

The Impact Assessment set out estimated costs of compliance and anticipated

benefits. The Secretary of State assumed that 70 per cent of infringers would stop

downloading illegally following receipt of a notification letter from an ISP. The

figures behind this assumption were derived from the Digital Entertainment Survey,

conducted by representatives of the rights holders.

30. The DEA 2010 received Royal Assent on 8 April 2010. Pursuant to sections 47(1)and (2) DEA 2010, sections 124A and 124B of the CA 2003 came into force on 8

June 2010. Sections 124C to 124E, 124M and 124N came into force on 8 April 2010.

The other relevant provisions came into force on 8 June 2010.

The Draft Costs Statutory Instrument

31. Section 15 DEA 2010 introduced a new section 124M of the CA 2003, empowering

the Secretary of State by statutory instrument to make an Order addressing the

question of costs-sharing or costs allocation arising from costs incurred in complying

with the initial obligations or any technical obligation. The Secretary of State has

exercised that power in drawing up the draft Costs Order. That measure was notifiedto the EU Commission pursuant to the Technical Standards Directive.

32. ISPs, rights holders and Ofcom were incurring costs in anticipation of meeting the

obligations contained in the DEA 2010 and participating in discussions on the draft

Initial Obligations Code. Ofcom also sent to BT a draft Notice under section 135 of

the CA 2003 requesting the provision of information.

33. A consultation was conducted by the Secretary of State and Ofcom concerning the

proposed allocation of the costs of implementation of the DEA 2010 between rights

holders and ISPs.

34. The Government also conducted a specific impact assessment of the draft Costs

Order. The Impact Assessment at page 7 stated:

The intention of the Order is to specify the allocation of costs

arising from the primary legislation in the Act which places

obligations on ISPs when informed by copyright owners

through copyright infringement reports to identify and inform

subscribers of their illegal behaviour and to maintain record

keeping systems.

35. The Government also acknowledged that it had to notify the draft Costs Order

governing costs sharing to the Commission as a draft technical regulation under the


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Technical Standards Directive. It was notified to the EU Commission on 22

September 2010. The Commission has responded to the notified measure, raising

concerns about its compatibility with the Authorisation Directive.

36. The draft Costs Order was laid before Parliament on 21 January 2011. It is subject to

the affirmative resolution procedure. The Costs Sharing Order 2011 is expected toenter into force in due course, subject to the correction of a drafting error identified by

the House of Lords and House of Commons Joint Committee on Statutory

Instruments.

The Prospect of Pan-European Action

37. The Commission on 22 December 2010 published a Report on the Application of

Directive 2004/48/EC on the enforcement of intellectual property rights. The Report

stated:

The analysis of the implementation of the Directive in theMember States shows that the Directive lays a solid foundation

for enforcing intellectual property right in the internal market,

but that certain clarification may be needed to avoid any

ambiguities and adapt the Directive to the new challenges

posed in particular by todays digital environment.

The Commission considered that a number of areas deserved further attention,

including the

use of provisional and precautionary measures such as

injunctions, [and] procedures to gather and preserve evidence(including the relationship between the right of information and

the protection of privacy).

The Commission indicated that it was beginning work on impact assessment and was

encouraging responses to proposed measures.

38. Many of the ISPs operating in the UK are wholly or partly owned by ISPs established

in other Member States. The question of unlawful file-sharing is an EU wide issue. In

October 2009 the Commission commenced its own consultation about the

consequences of de-materialisation of online content. The Reflection Paper issued

by the Commission at the same time observed that the nature of the challenges andproblems presented by cross-border provision of creative content by the internet

suggested that responses to most of these challenges will have to be joint European

ones, instead of being the result of separate or even contradictory national initiatives.

The Contested Provisions

The Initial Obligations Provisions

39. The first ground of challenge, in particular, turns, in my view, upon the legal effect of

the contested provisions. It is, therefore, necessary to examine these provisions in

some detail.


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40. Sections 3-7 of the DEA 2010 insert sections 124A-124E into the CA 2003.

Materially:

i) Section 124A(2) permits a copyright owner to make a copyright infringement

report (CIR) to an ISP if a code in force under section 124C or 124D (an

initial obligations code) allows the owner to do so.

ii) Section 124A(4) creates an obligation on an ISP to notify the subscriber of

such a report if the initial obligations code requires the provider to do so.

iii) An obligation on an ISP to provide a copyright owner with a copyright

infringement list on its request arises under section 124B(1) if an initial

obligations code requires the internet service provider to provide it.

iv) Any such copyright infringement list will relate to each relevant subscriber

a term which is defined by reference to the threshold which will in due course

be set by the initial obligations code: see section 124B(3).

41. Those obligations are referred to as the initial obligations: section 124C(1). Each

of them is dependent for their content, as well as for their effect, on the making of an

initial obligations code under sections 124C or 124D.

42. Section 124D requires an initial obligations code to be made by Ofcom within the

period prescribed by the Secretary of State (currently by 31 March 2011), if such a

code has not previously been made by others and approved by Ofcom under section

124C. But by either route the maker of the Code will design and set the particulars of

the initial obligations. Thus:

i) Section 124C(3) to (5) provides as follows:

(3) The provision that may be contained in a code and

approved under this section includes provision that

(a) specifies conditions that must be met for rights and

obligations under the copyright infringement provisions or

the code to apply in a particular case;

(b) requires copyright owners or internet service providers to

provide any information or assistance that is reasonably

required to determine whether a condition under paragraph

(a) is met.

(4) The provision mentioned in subsection (3)(a) may, in

particular, specify that a right or obligation does not apply in

relation to a copyright owner unless the owner has made

arrangements with an internet service provider regarding

(a) the number of copyright infringement reports that the

owner may make to the provider within a particular period;

and


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(b) payment in advance of a contribution towards meeting

costs incurred by the provider.

(5) The provision mentioned in subsection (3)(a) may also, in

particular, provide that

(a) except as provided by the code, rights and obligations do

not apply in relation to an internet service provider unless

the number of copyright infringement reports the provider

receives within a particular period reaches a threshold set in

the code; and

(b) if the threshold is reached, rights or obligations apply

with effect from the date when it is reached or from a later

time.

ii) Further, where a Code is made by Ofcom under section 124D, section 124D(2)provides that in addition to any of the things mentioned in section 124C(3)-(5),

the Code may also make various provisions as to jurisdiction and enforcement

of the initial obligations, as well as (under section 124D(5)(h)) make other

provision for the purpose of regulating the initial obligations.

43. There are certain criteria that any initial obligations code must fulfil: section 123C(6)

and 124D(6). They are set out in section 124E.

i) Section 124E(1)(a) requires the Code to include provision about the means of

obtaining the standard of evidence that must be included in a CIR, and as to its

required form. The DEA 2010 does not otherwise define the circumstances inwhich a copyright owner will be allowed to make a CIR. That is left open by

sections 124C(3)-(5).

ii) Sections 124E(1)(b) and 124E(3)-(4) require the Code to make provision

specifying the requirements as to the means by which the ISP identifies the

subscriber who is the subject of a CIR, which of the reports the provider must

notify the subscriber of, and requirements as to the form, contents and means

of the notification; they also place an upper limit of 12 months on the period

which may elapse between the date of receipt of a CIR and of its being taken

into account for the purposes of the notification. The DEA 2010 does not

otherwise define what any of those requirements should be, or otherwiseprescribe the circumstances in which an ISP will be required to notify the

subscriber of the report. It does not prevent Ofcom from setting a lower limit

than 12 months on the period which may elapse between the date of receipt of

a CIR and of its being taken into account.

iii) Section 124E does not prescribe the circumstances in which the ISP will be

required to provide a copyright infringement list in accordance with section

124B(1)(b): that is left to be determined by the Code.

iv) Sections 124E(1)(c) and 124E(5)-(6) require the Code to set a threshold for

determining who a relevant subscriber is, but that threshold may be set byreference to any matter; they also set an upper limit of 12 months on the age


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of CIRs to be taken into account, but again do not prevent the introduction of a

lower limit.

44. The remaining provisions of section 124E operate in a similar way as regards the

initial obligations:

i) Sections 124E(1)(d) and (e) require that the Code makes provision about how

ISPs are to keep information about subscribers and limits the time for which

they may keep that information. They do not specify what provision or for

what period of time.

ii) Sections 124E(1)(f) and 124M require provision to be made about

contributions towards meeting costs, but do not specify what that provision

should be.

iii) Sections 124E(1)(g) and 124E(7)-(8) require provision to be made that Ofcom

has the function of administering and enforcing the Code, and that there areadequate arrangements for it to obtain information and recover its costs for

so doing. They do not specify what provision should be made by the Code.

iv) Sections 124E(1)(i), (j), (k) and (l) respectively provide that the Code must be

objectively justifiable, non-discriminatory, proportionate and transparent.

The Technical Obligations Provisions

45. The DEA 2010 does not provide for any obligation for technical obligations to be

brought into effect: see section 124H(1). If and when they are brought into effect,

their precise content would be informed by the annual progress reports which Ofcom

must produce under section 124F, as well as the product of any consultation with ISPs

and others undertaken under section 124G(5)(a), and would take into account

Ofcoms assessment of whether or not any particular technical obligation should be

imposed on ISPs.

46. The actual technical obligations to which ISPs might be subject are not provided for

by the DEA 2010. The definition of a technical measure provided by section

124G(3) is indicative, not exhaustive: a variety of alternatives is set out, the last of

which reads limits the service to the subscriber in another way. The relevant

subscribers against whom technical measures may be required to be taken are in turn

defined by criteria which are not yet set: see sections 124G(4) and 124B(3). Sections124I-J do not prescribe the contents of the technical obligations. It is expressly

provided by section 124I(3) that a code may do any of the things mentioned in section

124C(3)-(5) or sections 124D(5)(a)-(g), and may also make other provision for the

purpose of regulating the technical obligations.

The Appeals Provisions

47. The obligations that the Code must contain in relation to subscriber appeals are set out

in sections 124E(1)(h) and 124K(2)-(8) in respect of the initial obligations, and

sections 124J(1)(b) and 124K(2)-(11) in respect of the technical obligations.

48. It should be noted, in particular, that:


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i) The scope of the appeal provisions practical application is not yet fixed: no

subscriber appeal can be made until (at the earliest) a subscriber has been

notified by an ISP of a CIR under section 124A.

ii) Although there is a prescribed appeal mechanism in respect of any technical

measures, such measures have not yet been proposed and adopted (see above).

iii) The appeal provisions depend upon the initial obligation provisions and the

technical obligation provisions. The appeal provisions can have no legal effect

until the relevant underlying provisions have been defined and brought into

effect.

49. Section 124G(6) places an obligation on ISPs and copyright owners to give Ofcom

any assistance that it reasonably requires for the purposes of complying with any

direction made under section 124G. But those directions may only be given by

Ofcom, and concern the preparatory steps which Ofcom might be required to take in

advance of the introduction of a technical obligations code, such as the need to assesswhether technical obligations should be imposed on ISPs, to prepare for those

obligations, including by consulting ISPs and assessing the likely efficacy of a

technical measure and to report to the Secretary of State.

50. Section 124L applies sections 94 to 96 of the CA 2003 in relation to a contravention

of an initial obligation or a technical obligation, or a contravention of an obligation

under section 124G(6), allowing Ofcom to impose a penalty on an ISP or copyright

owner in respect of such contraventions. Those compliance provisions are dependent

upon such obligations having come into effect as a result of the making of an initial

obligations code or technical obligations code.

51. Section 17 of the DEA 2010 empowers the Secretary of State to make provision by

regulations in respect of blocking injunctions. Section 17 does not prescribe the

circumstances in which the regulations would allow an injunction to be applied for or

granted by the court, beyond the reference to the court needing to be satisfied that

there was a substantial amount of material being obtained in infringement of

copyright from a particular location, in section 17(4).

The First Ground of Challenge: Breach of The Technical Standards Directive

The Relevant Provisions of the Amended Technical Standards Directive (TSD)

52. Article 1(2) defines service as

Any Information Society service, that is to say, any service

normally provided for remuneration, at a distance, by electronic

means and at the individual request of a recipient of services.

53. Article 1(5) TSD defines rule on services as a

requirement of a general nature relating to the taking-up and

pursuit of service activities within the meaning of point 2, in

particular provisions concerning the service provider, the

services and the recipient of services, excluding any rules


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which are not specifically aimed at the services defined in that

point.

For the purposes of that definition

a rule shall be considered to be specifically aimed atInformation Society Services where, having regard to its

statement of reasons and its operative part, the specific aim and

objective of all or some of its individual provisions is to

regulate such services in an explicit and targeted manner.

and

a rule shall not be considered to be specifically aimed at

Information Society Services if it affects such services only in

an implicit or incidental manner.

54. Article 1(11) TSD defines technical regulations as

technical specifications and other requirements or rules on

services, including the relevant administrative provisions, the

observance of which is compulsory, de jure or de facto, in the

case of marketing, provision of service, establishment of a

service operator or use in a Member State or major part

thereof

55. Article 1(12) TSD defines draft technical regulation as

the text of technical specification or other requirement or of a

rule on services, including administrative provisions,

formulated with the aim of enacting it or of ultimately having it

enacted as a technical regulation, the text being at a stage of

preparation at which substantial amendments can still be

made.

56. Article 8(1) TSD requires Member States to communicate to the Commission any

draft technical regulation along with a statement of the grounds which make the

enactment of such a technical regulation necessary, where these have not already been

made clear in the draft. It also provides that, where appropriate, Member States must

also communicate

the text of the basic legislative or regulatory provisions

principally and directly concerned, should knowledge of such

text be necessary to assess the implications of the draft

technical regulation.

57. Article 9(1) provides for a standstill period of three months from the date of receipt by

the Commission of the notification of a draft rule on services.

58. By Article 9(2), that period may be extended to four months in the event that the

Commission or another Member State delivers a detailed opinion, within the three

month period, to the effect that the draft rule on services notified may create obstacles


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to the free movement of services or to the freedom of establishment of service

operators within the internal market. The Member State concerned must then report

to the Commission on the action it proposes to take on such detailed opinions. The

Commission must then comment on that reaction.

59. Alternatively, by Article 9(4), that period may be extended to twelve months in theevent that the Commission announces its finding that the draft technical regulation

concerns a matter which is covered by a proposal for a directive, regulation or

decision which has been presented to the Council.

The Purpose of the Notification Requirement

60. The main purposes of the notification requirement emerge from the terms of Article 9

itself: it is to allow the Commission and other Member States to propose any

amendments which might remove or reduce any restrictions which a rule on services

might create on the free movement of services or the freedom of establishment, and to

serve the interests of transparency and legal certainty by ensuring that there is anopportunity for Member States to take into account the potential introduction of

forthcoming EU legislation which covers some or all of the same ground that the

national measure is designed to address. (See Case C-42/07 Liga Portuguesa deFutebol Profissional v Departamento de Jogos [2009] ECR 1-7633, by AdvocateGeneral Bot at [53] and [168]-[178]).

61. Those purposes are reinforced by the recitals to the original TSD 98/34/EC (which

concerned only technical requirements related to products rather than services), which

provided:

(2) Whereas the internal market comprises an area withoutinternal frontiers in which the free movement of goods,

persons, services and capital is ensured; whereas, therefore, the

prohibition of quantitative restrictions on the movement of

goods and of measures having equivalent effect is one of the

basic principles of the community;

(3) Whereas in order to promote the smooth functioning of the

internal market, as much transparency as possible should be

ensured as regards national initiatives for the establishment of

technical standards or regulations;

(4) Whereas barriers to trade resulting from technical

regulations relating to products may be allowed only where

they are necessary in order to meet essential requirements and

have an objective in the public interest of which they constitute

the main guarantee;

(5) Whereas it is essential for the Commission to have the

necessary information at its disposal before the adoption of

technical provisions; whereas, consequently, the Member States

which are required to facilitate the achievement of its task

pursuant to Article 5 of the Treaty must notify it of theirprojects in the field of technical regulations;


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(6) Whereas all the Member States must also be informed of

the technical regulations contemplated by any one Member

State;

(7) Whereas the aim of the internal market is to create an

environment that is conducive to the competitiveness ofundertakings; whereas increased provision of information is

one way of helping undertakings to make more of the

advantages inherent in this market; whereas it is therefore

necessary to enable economic operators to give their

assessment of the impact of the national technical regulations

proposed by other Member States, by providing for the regular

publication of the titles of notified drafts and by means of the

provisions relating to the confidentiality of such drafts;

(8) Whereas it is appropriate, in the interests of legal certainty,

that Member States publicly announce that a national technicalregulation has been adopted in accordance with the formalities

laid down in this Directive;

(9) Whereas, as far as technical regulations for products are

concerned, the measures designed to ensure the proper

functioning or the continued development of the market include

greater transparency of national intentions and a broadening of

the criteria and conditions for assessing the potential effect of

the proposed regulations on the market;

(10) Whereas it is therefore necessary to assess all therequirements laid down in respect of a product and to take

account of developments in national practices for the regulation

of products;

(13) Whereas the Commission and the Member States must

also be allowed sufficient time in which to propose

amendments to a contemplated measure, in order to remove or

reduce any barriers which it might create to the free movement

of goods;

(14) Whereas the Member State concerned must take account

of these amendments when formulating the definitive text of

the measure envisaged.

62. Directive 98/48/EC, which amended the TSD to embrace rules on services, also

provided in its recitals:

(1) Whereas, in order to promote the smooth functioning of

the internal market, as much transparency as possible should be

ensured as regards the future national rules and regulations


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applying to Information Society services, by amending

Directive 98/34/EC;

(8) Whereas, without coordination at Community level, thisforeseeable regulatory activity at national level might give rise

to restrictions on the free movement of services and the

freedom of establishment, leading in turn to a refragmentation

of the internal market, over-regulation and regulatory

inconsistencies;

(9) Whereas, in order to ensure real and effective protection of

the general-interest objectives involved in the development of

the Information Society, there is a need for a coordinated

approach at Community level when questions relating to

activities with such highly transnational connotations as thoseof the new services are dealt with;

(12) Whereas it is therefore necessary to preserve the smooth

functioning of the internal market and to avert the risks of

refragmentation by providing for a procedure for the provision

of information, the holding of consultations, and administrative

cooperation in respect of new draft rules and regulations;

whereas such a procedure will help, inter alia, to ensure that the

Treaty, in particular Articles 52 and 59 thereof, is effectivelyapplied and, where necessary, to detect any need to protect the

general interest at Community level; whereas, moreover, the

improved application of the Treaty made possible by such an

information procedure will have the effect of reducing the need

for Community rules to what is strictly necessary and

proportional in the light of the internal market and the

protection of general-interest objectives; whereas, lastly, such a

procedure will enable businesses to exploit the advantages of

the internal market more effectively;

63. It is common ground that, if a technical regulation within Article 1(11) TSD is notduly notified, it is unenforceable at national level: see Case C-194/94 CIA Security

International [1996] ECR I-2201, at [44] and [45].

The Relevant Case Law

64. In Case C-317/92 Commission v Federal Republic of Germany [1994] ECR-1-2039the Court of Justice held that a legislative measure of the German Federal Minister of

Health, requiring sterile medical instruments to be labelled with specific expiry dates,

should have been notified under the TSD as it then stood and before relevant

amendment. The Court stated at [25]:


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The German regulation in question constitutes a new

technical specification within the meaning of Article 1, cited

above, since non-reusable sterile medical instruments may

henceforth be marketed or used in Germany only if certain

obligations are fulfilled the application of which was formerly

confined to the labelling of medicinal products. Theapplication, to given products, of a rule which previously only

affected other products, constitutes, with regard to the former, a

new regulation and must therefore be notified in accordance

with the directive.

65. The primary German legislation provided that the packaging of medical products had

to show the expiry date by reference only to two stipulated days of the year; and it

appears that the Federal Minister for Health was specifically empowered to extend, by

regulation, this requirement to other medicinal products stricto sensu and also to otherproducts that under German law were regarded as medicinal. The primary German

legislation had been duly notified to the Commission. The German government,therefore, argued that such notification of the enabling provisions covered the

specific regulation extending the contested requirement to products which were not

medicines under Community Law. The Court rejected that argument at [26]:

that enabling measure, taken as such, does not require to be

notified on the basis of Article 8 [of the TSD as it then stood]

aforesaid since it does not constitute a new specification. The

situation is different as regards the implementation of that

measure, which does constitute a new specification which must

be notified.

66. It seems to me that the Court of Justice was not saying that the provisions generally of

the primary German legislation did not in principle require notification. The Court

was simply saying that the enabling provision, standing alone, was not notifiable

because, unless and until the Federal Minister exercised his power to extend the scope

of the contested requirement, the enabling provision imposed no relevant obligation or

liability upon individuals or undertakings.

67. The second case is Case C-194/94 CIA Security International SA v Signalson SA andSecuritel SPRL [1996] ECR I-2201, (CIA). Under Article 12 of Belgian legislationof April 1990:

The alarm systems and networks and their components

may be marketed or in any event made available to users only

after prior approval has been granted under a procedure to be

laid down by royal decree.

68. In May 1991 a decree was adopted on the basis of Article 12, which prohibited the

marketing in Belgium of the relevant products if they had not been approved by a

special committee, such approval to be given only if the products satisfied specified

criteria. Neither Article 12 nor the decree was notified to the Commission in

accordance with the TSD as it then stood. As regards the 1991 decree the Court of

Justice had no hesitation in concluding that it was a technical regulation:


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it contains detailed rules defining, in particular, the

conditions concerning the quality tests and function tests which

must be fulfilled in order for an alarm system or network to be

approved and marketed in Belgium at [26].

69. However, there was a real contest between the parties as to whether Article 12 of the1990 law was a technical regulation. It is common ground in the present claim that

the Courts resolution of that contest is central to the first ground of challenge, and I,

therefore, set out in full the Courts discussion of the issue:

27. As regards Article 12 of the 1990 Law, it is to be recalled

that it provides that the products in question may be marketed

only after having been previously approved according to a

procedure to be laid down by royal decree, which was laid

down by the 1991 Decree.

28. According to the Commission and CIA Security, Article 12of the 1990 Law constitutes a technical regulation within the

meaning of the Directive 83/189 whilst Signalson, the United

Kingdom and the Belgian Government, in their written

observations, submit that this article is merely a framework law

not comprising any technical regulation within the meaning of

Directive 83/189.

29. A rule is classified as a technical regulation for the purposes

of Directive 83/189 if it has legal effects of its own. If, under

domestic law, the rule merely serves as a basis for enabling

administrative regulations containing rules binding oninterested parties to be adopted, so that by itself it has no legal

effect for individuals, the rule does not constitute a technical

regulation within the meaning of the directive (see the

judgment in Case C-317/92 Commission v Germany [1994]ECR I-2039, paragraph 26). It should be recalled here that,

according to the first subparagraph of Article 8(1) of Directive

83/189, the Member States must communicate, at the same

time as the draft technical regulation, the enabling instrument

on the basis of which it was adopted, should knowledge of such

text be necessary to assess the implications of the draft


30. However, a rule must be classified as a technical regulation

within the meaning of Directive 83/189 if, as the Belgian

Government submitted at the hearing, it requires the

undertakings concerned to apply for prior approval of their

equipment, even if the administrative rules envisaged have not

been adopted.

31. The reply to be given to the third and fourth questions must

therefore be that a rule such as Article 4 of the 1990 Law does

not constitute a technical regulation within the meaning ofDirective 83/189 whereas provisions such as those contained in


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the 1991 Decree do constitute technical regulations and that

classification of a rule such as Article 12 of the 1990 Law

depends on the legal effects which it has under domestic law.

70. Mr White QC, who appeared for the Claimants and made his submissions (both

written and oral) with great force and admirable clarity, contended that in the passagescited above the Court of Justice was drawing a distinction between, on the one hand,

mere enabling provisions (such as were considered in Commission v Germany: seeparagraph 64 above) and a substantive legal requirement, such as that in Article 12 of

the Belgian law. The latter would be a technical regulation. On that view, it did not

matter whether the legal requirement, when enacted and/or brought into force, had

binding effect, or whether the binding effect of the requirement was rather made

contingent upon the incidence of some subsequent event (such as, for example, a

commencement measure or another measure that might give greater content or

substance to the requirement). Only an enabling measure of the kind found in

Commission v Germany was ruled out as a technical regulation.

71. Mr Eadie QC, to whose lucid submissions I am also indebted, contended that this is

an incorrect reading ofCIA. I accept his submission on this point. In my judgment,the true test that emerges from the cited passages is whether the measure in question

by itself has legal effect for individuals; and that, therefore, for a measure to have

legal effect by itself it must be binding and be sufficiently precise and specific so as to

be enforceable against an affected individual. In CIA the requirement in Article 12 ofthe Belgian law to apply for approval for the relevant product was unambiguous and

self-contained. However, there was uncertainty, simply from a perusal of the text of

the Belgian law, whether the requirement in Article 12 had legal effect, or whether the

legal effect of Article 12 was contingent upon the subsequent enactment of

implementing measures of a kind adopted in the 1991 decree. (In the latter eventthere might well of course have been transitional provisions to enable existing

products to continue to be marketed pending a decision under the new controls). If

the legal effect was made contingent, the measure was not a technical regulation.

Although the Belgian Government submitted (apparently by way of concession) that

the undertakings concerned were bound to apply for prior approval even before the

adoption of the 1991 decree, the Court of Justice quite properly considered that the

correct interpretation of Article 12 was a matter for the Belgian courts, not the

executive, and so for that reason left the disposition of the issue arising under that

Article to be decided by the national court. It seems to me plain that if, and only if,

the Belgian court did in the event agree with the interpretation put forward by the

Belgian government, namely, that the effect of the requirement under Article 12 was

not contingent upon the enactment of the 1991 decree, the measure in question was a


72. In my view, this interpretation ofCIA is reinforced by the observations of AdvocateGeneral Elmer at [45] of his Opinion:

The Law and the 1991 Decree introduced a type approval

procedure for alarm systems and networks. Article 12 of the

Law laid down, as stated, the actual requirement of prior

approval of alarm systems and networks. At the hearing the

Belgian government explained that even without the 1991

Decree Article 12 of the Law would not be without legal effect.


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The provision is thus not merely an enabling provision (see the

situation in Case C-317/92 Commission v Germany [1994]ECR I-203, para 26), but is on the contrary a significant

substantive regulation. Article 8 of the directive can hardly, in

my view, be interpreted to the effect that such a general

requirement concerning prior approval should be exemptedfrom the obligation to inform the Commission, inasmuch as it

can stand alone. Irrespective of its general character, such a

requirement concerns the product's properties. Furthermore, its

enforcement would per se create great uncertainty on the partof traders and thus give rise to not insignificant obstacles to

trade. A provision such as that contained in Article 12 of the

Law must therefore, in my view, be regarded per se as atechnical regulation which must be notified.

73. In other words, Article 12 of the Belgian law standing alone had legal effect and

such effect represented a real impediment to cross border trade. That legal effect andreal impediment was in no way contingent upon the enactment of the later decree.

74. In my view, if Mr Whites interpretation ofCIA were correct, there would have beenno point in the Court of Justice leaving the ultimate issue to be determined by the

Belgian courts. It was plain from a simple perusal of the text of Article 12 of the

Belgian law that that Article was not a mere enabling provision: it constituted, as the

Advocate General in terms observed, a substantive requirement. If that was the

relevant contrast, no further input was needed, either from the Belgian government or

the Belgian courts. However, that was not the relevant contrast. It was necessary to

determine whether the substantive requirement had legal effect even before the

enactment of the 1991 decree, a question of interpretation of national law that only thenational judge could properly answer.

75. The practical result ofCIA was that, even if the Belgian government had furnished tothe Commission a draft of the 1991 implementing decree, that by itself would not

have saved Article 12 if, but only if, the requirement of that Article standing alone

and in the absence of any implementing measure was legally enforceable against

individuals.

76. The third authority is Sapod Audi v EcoEmballages SA [2002] ECR I-5031, ECJCase C-159/00. In that case a French law required that producers were required to

identify certain packaging, and the relevant issue was whether an obligation toidentify a product or its packaging was, for the purposes of the TSD as it then stood,

a specification which lays down the characteristics required of a product

(emphasis added). Taken literally, an obligation to identify something (such as

pointing out ones luggage to a customs officer) is not coterminous with an obligation

to mark something (such as putting a label on ones luggage). On that linguistic

footing, the French law did not literally fall within the definition (see judgment of the

Court at [30]). However, such a literal interpretation of the French law bordered on

the unreal in circumstances where in fact identification could be achieved only by

marking. As Advocate General Jacobs observed at [36] of his Opinion:

At the hearing it was accepted by all of those present that inorder to comply [with the French law] producers must affix


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some form of distinguishing mark to the packaging in which

they market household goods [The French law] thus requires

products to be identified, but does not insist on the use of a

particular mark or symbol.

77. The Court of Justice decided that, despite the common accord of those present at theoral hearing, the correct interpretation of national law was strictly for the national

court [31], and then continued:

32. Consequently, the Court must also consider the possibility

that, in the light of all the factual and legal evidence before the

national court, that court will reach the conclusion that the

second paragraph of Article 4 of Decree No 92-377 must be

interpreted as imposing on producers an obligation to mark or

label the packaging, although not specifying what sign must be

affixed.

33. In such an event, it would have to be held that that

provision is in fact a technical specification within the meaning

of Directive 83/189 and, consequently, that, since the

obligation is imposed by decree in the case of marketing of

packaged products throughout the national territory, that

provision constitutes a technical regulation.

34. In that case, even though the detailed rules regarding the

marking or the labelling remained to be defined, marking or

labelling would, in itself, be compulsory, also for imported

products (see, in particular, Case C-13/96 Bic Benelux [1997]ECR I-1753, paragraph 23). In addition, having regard to the

aim of Directive 83/189, namely the protection of free

movement of goods by means of preventive control (see, in

particular, Case C-194/94 CIA Security International [1996]ECR I-2201, paragraphs 40 and 48), such a control,

implemented in accordance with the procedure prescribed by

that directive, would be both appropriate and possible.

78. It seems to me that Sapod, for present purposes, therefore, does no more thanemphasise that whether a particular measure is a technical regulation may depend

upon the correct interpretation of national law: in CIA the national judge had todecide whether the measure, on its true meaning, had legal effect; in Sapodwhetherthe measure in fact imposed a legal obligation to put some form of distinguishing

mark on the physical product or packaging.

Claimants Submissions on the First Ground

79. Mr White submitted that the initial obligations provisions, in particular, (see

paragraphs 39-43 above) were technical regulations within the meaning of Article

1(11) of the TSD, in accordance with the case law of the Court of Justice in respect of

the TSD as it stood at the relevant time.


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80. He contended, first, that the inherent nature of the initial obligations fell squarely

within the description of rule on services in Article 1(5), such a rule being expressly

made by Article 1(11) a technical regulation. That proposition is not disputed.

Secondly, he said that the initial obligations cannot sensibly be regarded as mere

enabling legislation of a kind considered at one point in Commission v Germany (see

paragraph 64 above). That also was not contested. Thirdly, he argued that the initialobligations were of themselves sufficiently precise and specific so as to be

enforceable against individuals, and, therefore, had the legal effect described by the

Court of Justice in CIA. It was irrelevant that the initial obligations were not yetbinding on ISPs (because no Code had yet been promulgated and brought into effect);

and it was irrelevant that what he characterised as the detail of the initial obligations

had not yet been developed by the anticipated Code. In any event, a Code was

mandated by the DEA 2010 (see paragraphs 41 and 42 above) and, therefore, the

ultimate binding effect of the initial obligations was a foregone conclusion.

81. He argued that the foregoing analysis rested upon the best interpretation of EU law,

essentially for three reasons. First, it most effectively promoted the objectives ofArticle 9 TSD (see paragraphs 57-59 above) and legal certainty. The Commission

and interested Member States would, at the earliest opportunity, be able to comment

on the initial obligations from the perspective of Community law, and to propose

amendments which they believed would better advance the aims, and reflect the

principles, of that law. If, close to enactment, a draft Bill containing the initial

obligations had been furnished to the Commission and Member States, the United

Kingdom, through its appropriate institutions, could have sought, in the light of any

proposals received from the Commission and/or Member States, to amend the Bill

before enactment into the DEA. Economic operators, including ISPs, would also

have learnt at an early stage what, if any, comments on the Bill had been made at the

EU level, and what, if any, action the UK intended to take in the light of suchcomments.

82. Secondly, he argued that his interpretation was more in accord with Article 1(12)

TSD. The initial obligations having been enacted and brought into force, the only

draft technical regulation that could be notified under the TSD was a draft of the

Code, because that was the only text that was still at a stage of preparation at which

substantial amendments can be made. However, the Code would largely, if not

wholly, reflect the primary provisions of the DEA, and, if substantial amendments

needed to be made following the procedure in Article 9 TSD, those primary

provisions, as well as provisions in the Code, would in all probability also need

amendment, a scenario not contemplated by Article 1(12) TSD.

83. Thirdly, he argued that any other interpretation would create anomalies. For example,

if an obligation had no legal effect simply because its effect was made contingent

upon some later event, then the duty to notify could be put off so long as that event,

such as a statutory commencement order, was not imminent. He also pointed to an

alleged inconsistency in the Defendants position: why notify the draft Costs Order at

this stage when, apparently on the Defendants case, the Order would have no legal

effect until the Code had been promulgated and brought into force?


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First Ground: Discussion

84. In my judgment, the fundamental difficulty with Mr Whites analysis is that, on their

proper interpretation (which, as the Court of Justice has stressed on at least two

occasions: see paragraphs 74 and 77 above, is a matter for the national court), the

initial obligations enacted by the DEA and brought into force are not yet legallyenforceable against any individual, including ISPs such as the Claimants; and,

therefore, they do not have the legal effect described in the Courts case law. They

are not legally enforceable for two distinct, but related, reasons. First, the incidence

of the initial obligations on ISPs is made expressly contingent upon the promulgation

and enactment of the Code. Without the Code, the initial obligations simply beat the

air in legal terms. Secondly, the initial obligations are not yet sufficiently

particularised as to be enforceable: the actual content of the obligations is to be

spelled out in the Code.

85. As to the first point, I have already set out the relevant provisions at some length and

need not repeat them. I put forward by way of example Section 124A(2) whichpermits a copyright owner to make a CIR to the ISP if a code in force under section

124C or 124D allows the owner to do so. In my view, the Parliamentary meaning

could not be clearer: unless and until a code is in force the ISP is not liable to receive

a copyright infringement report under the DEA and an ISP is not obliged to take any

action in respect of any such report pursuant to the DEA. Copyright owners may send

copyright infringement reports, but they have no consequences under the DEA unless

and until a code is in force.

86. As to the second point, although section 124E sets out the criteria which the Code

must fulfil, it is the code itself which will define the substantive content of the initial

obligations. For example, the Code will specify the circumstances in which acopyright owner will be allowed to make a CIR, the means by which evidence must

be obtained and the standard of proof which is required. The Code will also specify

the circumstances in which an ISP will be required to provide a copyright

infringement list to a copyright owner and determine the number of CIRs that must be

made in respect of a subscriber before he becomes a relevant subscriber.

Importantly, although sections 124E(1)(f)-(g), 124E(7)-(8) and 124M require

provision to be made about contributions towards meeting costs, they do not specify

what that provision should be. That is left to the Costs Order, which will take effect

when the Code itself takes effect.

87. In my view, none of the points made by Mr White undermines this conclusion. It iscontentious whether the Commission or other Member States would have been better

placed to comment upon the initial obligations if the United Kingdom had adopted the

course which he argues it was legally obliged to adopt. Mr Eadie argued strongly

that, in the absence of a draft Code, the Commission and other Member States would

have been left in the dark about significant parts of the content of the initial

obligations, and either would not have been able to comment in a sufficiently

informed and constructive manner, or would have been tempted to make assumptions

that turned out to be unfounded: in short, a premature, pointless, time wasting and

resource absorbing exercise. In my view, this particular debate cannot be

satisfactorily resolved either way, and cannot, therefore, be decisive or significantly

influential on the resolution of the relevant legal issue.


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88. Nor do I apprehend any particular difficulty under Article 1(12) TSD with the

foregoing interpretation. It is common ground that the Code is to be notified in draft,

and the Code may, therefore, be substantially amended before enactment as Article

1(12) provides. It is the Code that in strict legal terms will constitute the technical

regulation. However, it is plain that the DEA itself must be provided to the

Commission and other Member States so that they can properly set the Code in its fulllegislative context. If the Code required such fundamental amendment that the

provisions of the DEA itself required amendment, such amendment could be effected,

if necessary, under the relevant provisions of the European Communities Act 1972.

The essential point is that it is the enactment of the Code which gives legal life and

real content to the initial obligations; and the text of the Code will be furnished under

Article 1(12) at a time when substantial amendments to the Code can still be made

before the Code is enacted and takes legal effect. The purpose of Article 1(12) is to

prevent technical regulations from being enacted and being enforceable against

individuals before the Commission and other Member States have had an opportunity

to comment upon the proposed regulation. For the reasons stated, that purpose is not

defeated or impeded in this case by notification of the code rather than a draft Billcontaining the initial obligations: until the code is enacted and comes into effect there

is simply no relevant legally enforceable obligation on individuals.

89. As to Mr Whites third point, each situation will have to be assessed on its own

particular facts. It may well be that once enacted a measure could be a technical

regulation if all that was lacking was a simple provision to bring the measure into

force. In such a case, in contrast to the present one, it would be difficult to see how

the commencement provision, having no substantial content, could be a technical

regulation, and how the measure itself, having been enacted, was still in draft for

the purposes of Article 1(12). In such circumstances the correct course would

probably be to notify the measure before it was enacted, and so in draft, even if itwas not intended to bring the measure immediately into force.

90. Mr White had one final point. In May 2010 Ofcom sent a draft notice to BT and other

ISPs requiring the provision of information. The notice was headed DigitalEconomy Act Initial Obligations Code: [Draft] Notice requiring the provision ofspecified information under Section 135 of the Communications Act 2003. The firsttwo paragraphs of the notice read:

This is a [draft] notice under Section 135 of the

Communications Act 2003 (the Act) addressed to BT Group

plc, whose registered company number is 4190816 and anysubsidiary or holding company, or any subsidiary of that

holding company, all as defined in section 1159 of the

Companies Act 2006.

This notice requires you to provide the information set out

below, in the manner and form specified, for the purposes of

enabling Ofcom to carry out its functions in relation to the

making of a code under section 124D of the Act to regulate the

obligations of internet service providers under sections 124A

and 124B of the Act.


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91. Mr White argued that the obligation to provide information arose under the DEA and

that the existence of such an obligation showed that the initial obligations had taken

legal effect. Mr Eadie submitted that the obligation to provide information did not

arise under the DEA, the implication being that Ofcom had misunderstood its powers.

I do not believe that either submission is correct, for the following reasons.

92. Section 135(1) of the DEA provides:

135 Information required for purposes of chapter 1 functions

(1) Ofcom may require a person falling within subsection (2) to

provide them with all such information as they consider

necessary for the purpose of carrying out their functions under

this Chapter.

93. Section 124D obliges Ofcom, in circumstances which have now arisen, to make a

code for the purposes of regulating the initial obligations. That obligation is a newregulatory function of Ofcom that arises only by virtue of the DEA, and that function

falls squarely within the terms of section 135(1). Accordingly, as a result of the

combined effect of section 124D and section 135(1), ISPs and others come under a

new liability to provide information, if Ofcom requires, for the purposes of Ofcoms

new function. In my view, Ofcom was entirely correct to make the request (even if in

draft) under section 135 and was not mistaken about its powers, as Mr Eadies

argument implied. Furthermore, I cannot at present see why the new liability imposed

on, among others, ISPs, would not itself be a rule on services and hence a technical

regulation falling within the TSD. Neither party, given the confines of their

respective cases, specifically addressed that issue. Nonetheless, the liability referred

to is specific and limited: it is to provide information to assist Ofcom to draw up theinitial obligations code. It does not in itself make the initial obligations legally

enforceable against ISPs, and does not give relevant legal effect to those obligations.

It would appear common ground that this new liability was not notified in draft

under Article 9 TSD, and the inevitable consequence would seem to be that, in the

absence of such notification, ISPs and others could not be legally required to provide

information under section 135 specifically to assist Ofcom to discharge its new

function under section 124D. Whether Ofcom has other compulsory powers that

would enable such information to be obtained was not a matter explored before me.

94. Finally, on this ground, Mr White realistically acknowledged that if he could not

show that the initial obligations were technical regulations then he had little chance ofshowing that the other contested provisions were such regulations. That must be

correct. There is no present obligation to bring any technical obligations under the

DEA into effect (see paragraphs 45 and 46 above). The appeals provisions are

dependent upon the initial obligations coming into effect, as are the provisions

allowing Ofcom to impose penalties on ISPs (see paragraphs 47-50 above). Similarly,

section 17 does no more at this stage than enable the Secretary of State to make

provision by regulations for blocking injunctions (see paragraph 51 above). None of

these provisions, therefore, presently has relevant legal effect for individuals.


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The Second Ground: Breach of the e-Commerce Directive (ECD)

95. It is alleged that the contested provisions infringe certain Articles of the ECD.

Certain propositions are common ground.

96. The provision of ISP services (by way of access to the internet or an emailcommunication service) constitute the provision of information society services under

the ECD (see recitals (17) and (18) and Articles 2(a) and (b) of the ECD).

97. Under Article 3(2) of the ECD, Member States may not, for reasons falling within

the co-ordinated field, restrict the freedom to provide information society services

from another Member State. Article 1 sets out the objective and scope of the ECD.

The objective is the free movement of, among other things, ISP services. Under

Article 3(1) the services provided by an ISP established in a Member State are

intended to be regulated by the Member State of establishment (the country of

origin principle). The Explanatory Memorandum to the Commissions Initial

Proposal stated that Article 3(2):

prohibits in principle all forms of restriction to the freedom to

provide Information Society services, i.e. any actions on the

part of a Member State liable to hamper or otherwise make the

free provision of services less attractive. However, possible

exemptions from the principle are provided for in Article 22(2)

and (3) [later moved into Article 3 of the ECD].

98. It is contended that the contested provisions of the DEA infringe, in particular,

Articles 12, 15 and 3(2) of the ECD, and I shall consider each of these Articles in

turn.

(1) Article 12

99. Article 12 ECD provides as follows:

1. Where an information society service is provided that

consists of the transmission in a communication network of

information provided by a recipient of the service, or the

provision of access to a communication network, Member

States shall ensure that the service provider is not liable for the

information transmitted, on condition that the provider:

(a) does not initiate the transmission;

(b) does not select the receiver of the transmission; and

(c) does not select or modify the information contained in

the transmission.

2. The acts of transmission and of provision of access referred

to in paragraph 1 include the automatic, intermediate and

transient storage of the information transmitted in so far as this

takes place for the sole purpose of carrying out the transmission

in the communication network, and provided that the


28/71


information is not stored for any period longer than is

reasonably necessary for the transmission.

3. This Article shall not affect the possibility for a court or

administrative authority, in accordance with Member States

legal systems, of requiring the service provider to terminate orprevent an infringement.

100. I was referred in some detail to the legislative history of Article 12 (and of Article 15

which is within the same general terrain), including the Press Release publishing

details of the Commissions proposal for what became the ECD, the Explanatory

Memorandum to the proposal, and proceedings in the European Parliament. I need not

rehearse that material, for the fundamental point that Mr White extracted from it was

that, in the words of the European Commission, Article 12 struck a careful balance

between the different interests involved in order to stimulate cooperation between

different parties thereby reducing the risk of illegal activity on-line. The different

interests involved plainly include at least the interest of the copyright owner, wishingto achieve maximum protection for the copyright product, and to secure the most

effective remedies for copyright infringement; and the interest of the ISP, wishing to

realise the most efficient transmission of information, with minimal responsibility for

its actual content. The tension between these interests is obvious and palpable.

101. Mr White invited the Court to infer from the point that he had extracted from the

legislative material that the immunity conferred on mere conduit ISPs by Article 12

(and by Article 15) was a very wide one, and that the precise language of these

Articles could and should be stretched beyond its natural and ordinary meaning to

achieve the assumed legislative purpose. However, I draw a different conclusion

from the material. It seems to me that if the Community legislator, as in this instance,has chosen specific language to give effect to a careful balancing of competing

interests, the judge must be especially cautious before departing from the plain

meaning of the text. To depart from that meaning creates the obvious risk of

promoting the interest of one economic sector to the detriment of the other interested

sector, and hence of seriously upsetting the balance between competing interests that

the legislator has carefully struck. It was for this very reason that the Commission

rejected certain amendments to its legislative proposal that the European Parliament

put forward which would have affected the balance struck by the text of Article 12.

102. It seems to me, particularly in the light of that legislative history, that liability for the

information transmitted is a carefully delineated and limited concept. As regardscopyright material, this language is broadly contemplating a scenario in which a

person other than the ISP has unlawfully placed the material in the public domain or

has unlawfully downloaded such material, and a question then arises whether the ISP,

putatively a mere conduit for the transmission of the information, also incurs a legal

liability in respect of the infringement. That liability could take the form of a fine (in

cr

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BT v Secretary of State for Business, Innovation and Skills - Approved