The development of transparency instruments in the areas of public interest such as electronic declarations, ProZorro, and financial reporting is one of the major accomplishments of Ukrainian civil society. However, there are still many grey areas that are not functioning well.
One of such areas is a private copying levy and the functioning of collective management organizations to distribute income from such levies among the entitled persons. The basic reason for introducing the private copying levy (and similar reprographic levy) is to charge certain items a fee that would compensate to authors the reproduction at home and exclusively for personal purposes of works and performances recorded in phonograms, videograms, as well as reprographic reproduction of literary, photographic, visual and other similar works without the consent of the copyright owners.
Thus, businesses and private citizens as end users are supposed to pay a fee for each device that is artificially determined to be subject to levy. This levy is then distributed by the collective management organizations among the authors. However, there is still not enough transparency and accountability as to how the organizations, known as CMOs, should allocate the cost. The CMO has been accused of misusing the funds multiple times, as per journalists’ reports.
Currently, levy rates have to be agreed upon through negotiation between an accredited CMO and users (importers). If parties fail to agree on the rate within 60 calendar days, the court has to step in and decide on that. Therefore, both the list of devices that are subject to levy and the rate at which it should be collected is unknown. Such a procedure is neither fair nor transparent and entices corruption while also overburdening the business with additional costs. Moreover, the lack of legislative certainty in terms of rates undermines the rule of law in Ukraine.
The significant issue in relation to the private copying levy in Ukraine is the amount of discretion in the hands of CMO and, later, courts. It is crucial to enshrine clear and concise rules of the game so that businesses can plan for the future and avoid unnecessary litigation. The legal uncertainty around the levy for the transition period as well as the absence of well-regulated court proceedings to determine the amount to be paid is damaging to the Ukrainian economy. Moreover, the potential levy rates do not correspond with Ukraine’s GDP per capita which is incoherent and damaging.
The levy was first introduced in Germany in the 1960s. With the advent of audiocassettes, lawmakers were convinced that cassette recorders would reduce record sales by making copies of a single purchased album. Today, recordable CDs and equipment that did not exist back then are subject to the levy.
European Union member states differ in their approach towards levy rates. In 2012, Spanish government abolished private copying fees for all. Fees of this kind aren’t collected in Ireland, Bulgaria, Malta, and Luxembourg. The United Kingdom chose not to put them in place at all.
The experts of the Office of Simple Solutions & Results (OSSR) developed a balanced reform for Ukraine in order to help improve the administration of the private copying levy, ensure more transparency, and protect competition.
Most importantly, we propose to enshrine levy rates in the law so that importers do not need to interact with collective management organizations and, potentially, courts. This will ensure that the rules of the game are clear from the start and remove the corruption and bureaucracy element.
Additionally, we also believe it is essential to ensure that future reporting made by collective management organizations includes a list of copyright objects for which the levy was collected and their share in these. An automated and transparent system of functioning of CMOs has to be introduced using effective software.
What it means, is that since businesses are charged with this levy, and regular citizens as end-users are paying extra for their products in order for CMO to function, it is not only fair but also essential that clear reporting and transparency is in place. This transparency is also crucial for authors who are supposed to benefit from the levy. The Ukrainian public should be made aware of what copyright-subject pieces were recognized as such that are worthy of compensation, and what methodology was used to calculate that.
On April 7, 2021, the Office of Simple Solutions & Results (OSSR) hosted an open discussion between the respective stakeholder on the matter, and we call on the interested parties to work together on finding a common ground. In our pursuit of a more prosperous future, we must make sure that legislative certainty, the rule of law, and transparency prevail.
Mikheil Saakashvili has been the chair of the executive committee of the National Reforms Council since May 7, 2020. He served as governor of Odesa Oblast from May 30, 2015, to Nov. 9, 2016. He was president of Georgia from Jan. 25, 2004, to Nov. 17, 2013.
