Eight months after the Copyright (Amendment) Act, 2012 sailed through Parliament, I’m told that at least some composers & lyricists are involved in intense negotiations with producers, with both sides trying to interpret to their advantage the new amendments inserted into the Copyright Act. The most contentious provisions are the provisos in Section 18 and Section 19 which mandatorily requires that all royalties earned from exploitation of the music and lyrics as a part of a cinematograph film be shared equally with the composer and lyricist.
Leaving aside these contentious negotiations, I am quite sure that there are a bunch of authors and composers who are more worried about just receiving a one-time down payment, even at the cost of surrendering their right to mandatory royalty sharing provision. Only problem being, that they cannot surrender these rights under the amendments since the provisions have been designed to protect composers and lyricists from themselves and no producer is going to give them down payments without a clear undisputed title to the entire work. So technically although a composer or author can sign a contract surrendering these rights to the producer, he or she can always challenge the contract later and ask a court to declare it void under the 2012 amendments, thereby entitling him or her to a share of royalties earned by the producer.
But is there a way to avoid this entire scenario especially the mandatory royalty sharing provisions of the Copyright (Amendment) Act, 2012?
What if all the parties to the contract were to choose to enter into the contract under a foreign law such as Singapore copyright law or who knows, Sri Lankan copyright law – somewhere close to India? The applicable law to the contract would be Singapore copyright law and not Indian copyright law. There is nothing in Indian law which forbids Indians living in India from entering into such contracts under foreign law at the cost of excluding Indian copyright law. Once Indian copyright law is excluded, I’m guessing that the mandatory royalty sharing provisions under Indian copyright law will no longer be applicable.
A foreign work can be enforced in India by virtue of Section 40 of the Copyright Act, 1957 which mandates reciprocity for foreign copyrights as a requirement of fulfilling India’s treaty obligations.
Will an Indian court apply the mandatory royalty sharing provisions to even foreign contracts and foreign works? I’m not sure about that but I don’t think that the principles of the Berne Convention and TRIPs would allow India to fundamentally alter foreign contracts entered into under foreign copyright law by forcing the mandatory royalty sharing provisions onto unsuspecting foreign copyright owners.
The only possible problem with such an approach could be potential taxation issues but I have no clue about taxation law, so I’ll stay silent on this aspect. What do our readers think? Will such an approach work or am I completely off the mark?
13 thoughts on “Evading the mandatory royalty sharing provisions of the copyright amendments through a choice of foreign law: Is it possible?”
I don’t think Indian copyright law can be excluded since the newly inserted sub-section (8) of Section 19 grants rights to authors in India, and from my reading of it, doesn’t allow the author to even waive such statutory rights granted under the Act.
That is, if my song is performed in India, irrespective of whatever foreign contract I’ve entered into, if such copyright is protected under Indian law, as an Indian author, I’m entitled to claim equal share in royalties.
As far as tax law is concerned, if royalties arise out of performance of song etc in India, it will still be taxable in India. For the purposes of tax, only residence of assessee and source of income count and not place of signing contract.
I’m pretty sure that the amendments don’t affect foreign works for reasons already explained in the post.
The only question is whether two Indian parties can agree to be governed by foreign copyright law sitting in India or whether they actually have to travel to a foreign land to enter into the contract.
Your question seems to be this one: can a work-for-hire contract of foreign origin about literary and musical works overrule the new Copyright Act within India? I let this one to lawyers. Assuming it can, the better question is: can it be operative? The answer would be: no.
Nobody can register a literary and musical copyright without naming its authors; since collective licensing of literary and musical works can henceforth be done only through IPRS, the Society will automatically pay authors’ share to the authors. The next question then will be: can a producer license his copyrights directly to users (broadcasters, telcos, etc.) on the basis of his foreign contract? Look at the bigger picture:
The Amendments were drafted in order to stabilize a content licensing market that was high on friction and replete with litigations. Parliament then passed the Amendments unanimously, so they are politically not contentious. The Amendments, particularly the statutory licensing and the single window licensing of literary and musical works, have been welcomed by all licensees, particularly the broadcasting and telecom industries. Having achieved what they wanted – getting access to all the literary and musical rights of the world though a single window – would they be foolish enough to start negotiating separately for single works?
Finally, the Amendments put the Indian media industries firmly in line with global rules. Indian record labels have for years tried unsuccessfully to force the British PRS to pay them the authors’ share. Anybody who has a modicum of understanding of how royalties flow globally will know that it was a foolish battle to fight because it just couldn’t be won.
Individual producers who bypass or circumvent the Act will find themselves at loggerheads with industries that are incommensurably larger than they are. So why not be reasonable, for a change?
Ho Mr. Forler – I don’t know what the present mood is in the HQs of these music labels but given the degree of irrationality that they have demonstrated in the past, I wouldn’t be surprised if they try to pull a fast one.
Of course, the above prescription works only if there is no unity amongst the composers and authors.
Under most national conflict of law rules, parties can choose the law applicable to a contract, including copyright contracts. However, often compliance with mandatory rules of the forum state (here India, in case exploitation of the work later occurs in India) will nevertheless be required and cannot be ‘contracted out’ by choosing a foreign law.
Whether such concepts of mandatory rules apply in the specific copyright context of India, I don’t know – but it may be worth while exploring further…
Hi Prof Khan – Great to hear from you again, after so long, especially since these amendments seem to be inspired by German law.
As far as I know, India does not have a codified legislation on ‘choice of law’. I’m guessing that Indian courts are going to give ample amplitude to ‘choice of law’ in private contracts.
What do you think would be the position of the German community if their copyrights were subject to those provisions of Indian copyright law which are not found in German law?
Hi Prashant – unity of the authors’ community will be a bonus but not necessary to enforce the Amendments. If it were then the Amendments could never be enforce because who could unite the hundreds of regional composers and lyricists who write in dozens of languages?
My point is that, even if we assume it is legal, it will be impractical. There is just no room in the new set-up for a producer or any rights owner to license separately and collect 100% of performing royalties. And performing royalties are 2/3 of the global income from publishing rights.
Even so, you are right, there are some lawyers and producers who are trying hard to imagine alternatives. It is wishful thinking, a futile effort and misses the larger picture: according to our projections, revenues in 2020 from publishing Indian music which were pegged at 420 crores before the Amendments are now estimated at over 2,000 crores (depending on Copyright Board rates) post-Amendments.
It is also very likely that most SAARC countries – and even beyond – will align their copyright laws on Indian law in the next 5 years. So these countries as a destination for “circumvention contracts” is out. Zimbabwe then? Or fancy Somalia?
Hi Mr. Forler,
After all that I have seen in these last two years, almost nothing is impossible.
Let us wait and watch how this plays out. I wouldn’t be surprised if these guys start contracting out of pirate ships in international waters! 😉 Maybe have Captain Jack Sparrow as the arbitrator.
German copyright law has an explicit provision whereby the copyright contract rule demanding a reasonable renumeration for authors has the character of an international mandatory rule (i.e. cannot be contracted out by choosing a foreign law) – see http://dejure.org/gesetze/UrhG/32b.html for those who read German.
This will be primarily relevant whenever german courts decide on such a case – but foreign courts may equally be willing to apply German mandatory rules in case their is a strong connection of the case to Germany and their own conflict of law rules permit this.
I would imagine that Indian Courts – absent of codified rules on conflict of laws – would apply Common Law approaches and may be guided by decisions in England, etc? One would need to look there for conflict of law doctrines recognising international mandatory rules (IMR). As far as I recall, English conflicts rules do recognise the concept of IMRs, but often the main issue is to qualify a domestic rule as IMR. It would need to be of such important character that India wants it to be recognised and enforced even if parties choose a foreign law – its binding (non-derogatory) nature as such not would not suffice…
Dear Prof. Khan,
Thank you for that information on German Law – it is interesting to note that German law has the reasonable remuneration safeguard as an international mandatory rule.
Indian conflict of law rules will most probably be guided by English conflict of law precedents – there are a few Indian precedents on the point I think, in arbitration law or alternatively, family law. But I am not very well versed in private international law. I will have to read up more on this issue before I can discuss it in any greater detail.
Even though it may seem that there is nothing in Indian law which forbids Indians living in India from entering into contracts under foreign law but I am sure it may not be a piece of cake for Producers to have their way due to some caveats attached to such options.
One of them is that Indian courts can invalidate a choice of law clause if they perceive it as being opposed to Indian “public policy”. If the court decides that a foreign law has been chosen as applicable law just to avoid or evade provisions of mandatory Indian laws, then the choice of law clause may be ruled ineffective on the basis that it is opposed to Indian public policy. Judgement which we can refer on this issue is National Thermal Power Corporation v Singer Corporation, (1992) 3 SCC 551; in which it was said “The expression ‘proper law of a contract’ refers to the legal system by which the parties to the contract intended their contract to be governed. If their intention is expressly stated or if it can be clearly inferred from the contract itself or its surrounding circumstances, such intention determines the proper law of the contract. The only limitation on this rule is that the intention of the parties must be expressed bona fide and it should not be opposed to public policy.” Certainly the Copyright (Amendment) Act, 2012 was passed with such intentions only
Also in a 2008 decision of “TDM Infrastructure Private Limited v UE Development India Private Limited”, the Supreme Court appears to have set down a rule that, as a matter of Indian public policy, Indian nationals contracting between themselves are not permitted to contract out of the application of Indian law.
In view of above I see a big cloud of doubt whether by choosing a foreign law as governing law for their contracts Producers will succeed in circumventing the mandatory royalty sharing provisions of the amended Indian Copyright Act.
It is definitely not going to be a piece of cake but I wouldn’t discount it completely either.
I think both of the cases that you referred to are arbitration cases. Copyright ownership cases are slightly different in that they are dealing with a title to a property right. Can arbitration case law still be used as precedent? Maybe.
I think the true test would be, whether you would apply the mandatory royalty sharing provisions to foreign works? If Bryan Adams is entitled to 90% of royalties and his publisher and music label are entitled to only 10% under his contracts entered into under U.S. law – are you going to allow Bryan Adams only 33% under Indian law? Would this be in compliance with the Berne Convention?
I have not read amended section 19 of copyright act. But if that is made subject to contract to the contrary, parties may waive their statutory rights given under Indian copyright act by entering into a law as per their choice to be governed by.