However the ruling was interesting to ISPs as it could (read on - there may be a sting in the tail) save them significant money in the long run.
In last year's review, the High Court ruled that internet service providers (ISPs) could not be forced to pay the costs incurred by government and Ofcom in setting up Britain's 3-strikes anti-file-sharing law. The challenge failed on all other grounds.
Costs of running the Digital Economy Act fall into 3 categories:
- Qualifying costs amount to the government (ie Ofcom) costs of defining the processes and setting up the bodies necessary to run the notification and punishment system. A response to a Freedom of Information Request filed by me put these costs at around £6m.
- Case fees cover the costs incurred when an ISP subscriber appeals an allegation of copyright infringement levelled against them
- Relevant costs relate to the costs borne by ISPs in despatching a notification letter to an ISP subscriber and maintaining a list known as the "infringement list".
EU telecom law (the Authorisation Directive) prohibits governments from imposing "administrative charges" on telcos, in order to encourage cross-border competition in the provision of telecommunications services.
The original judicial review found that qualifying costs amounted to "administrative charges" under EU law and therefore it was not lawful to require ISPs to pay any portion.
Today, the Court of Appeal ruled (pdf, paragraphs 99 to 107) that case fees also amounted to administrative charge, and therefore under EU law ISPs cannot be forced to pay any portion of these either.
The net effect of the original judicial review coupled with the most-recent appeal is that copyright owners will likely have to pay 100% of the costs of setting up and running the 3-strikes notification system and appeals, bar a £20 appeals fee that ISP subscribers will have to pay (reimbursable on successful appeal).
But that might not be the end of the story. ISPs will still have to stomach a portion of their own relevant costs in handling requests made under the Digital Economy Act.
Ofcom's original and subsequently redrafted plans said ISPs should pay only 25% of their own costs, and copyright owners should pay ISPs the remaining 75%.
Whilst the primary legislation in the Digital Economy Act states that such costs should be shared (Section 15), it doesn't put a figure on the proportion, and I'm left wondering whether ISPs could not be forced to pay a higher portion of their own relevant costs to rebalance the funding equation.
In the original Judicial Review ruling, Justice Kenneth Parker noted [para 193]:
"The DEA could have left ISPs to bear such costs entirely and have provided no mechanism for recovering any part of such costs. However, Parliament provided that in fairness copyright owners should reimburse ISPs for a substantial part of the costs incurred by ISPs in discharging their obligations under the DEA"This leaves the door open for Ofcom to force ISPs to pay more of their own costs.
However the legislation still has a long way to go before it can be passed. Two statutory instruments known as the Costs Sharing Order and the Initial Obligations Code have still to get through both houses of Parliament and the European Commission.
Under EU telecoms law all legislation that affects service providers must be notified to the Commission. Legislation sits for 3 calendar months to allow comment or objection from interested parties or member states.
The Costs Sharing Order was first notified to the EC in September 2010 before being re-written to account for the verdict in the original Judicial Review. It was then submitted to the EC in August 2011 but it is likely to be redrafted again given today's Court of Appeal ruling.
The Initial Obligations Code has never been notified to the European Commission and the last official draft published by Ofcom is 18 months old.
After the Statutory Instruments (SIs) have cleared the EC hurdle they are then laid before Parliament. In this case both houses are required to voted on both SIs. It is possible for the public to note objections to a Statutory Instruments to either or both of the Lords Merits of Statutory Instruments Committee and the Joint Committee On Statutory Instruments.
It is possible that the content of the Initial Obligations Code in particular could face a separate legal challenge for its contemptibility with human rights law.
The judge in the original High Court review noted that some of the claims made by counsel for the ISPs could not be verified from the primary legislation alone (e.g. paras 152, 259) and this opens up the possibility that legislation may face further challenges when published.
However, whether any ISPs or any other organisation is prepared to fund such a challenge is different question.