Month: December 2015

In our last Newsletter, we introduced the new tax measures applicable to the production of theatrical and audiovisual works as of January 1<sup>st</sup>, 2016.

These measures concerned both the domestic tax credit, applicable to the French producers, and the international tax credit (aka TRIP), which benefits foreign producers.

The French 2016 Finance Act aims at strengthening the domestic tax credit, principally applicable to theatrical motion pictures, mainly due to the impulse of Luc Besson who threatened to produce his motion picture “Valerian” outside of France because of the current legal framework.

“Valerian” is an English-language theatrical motion picture produced by a French producer with the highest budget ever seen for a French film. As a French producer, the only tax credit available to EuropaCorp was the domestic one with the overall result being that EuropaCorp was in a less favorable position that a foreign producer. In the first instance, the English language simply disqualifies the film from being eligible for the domestic tax credit.

Further, assuming that the film was even eligible, the domestic tax credit is limited to 20 % for such works, while, as of January 1, 2016, 30% is available for the same works under the TRIP with funding caps being higher than those applicable for the domestic tax credit.

In light of the current structure, the various subsidies and tax schemes proposed by other European countries became more attractive than those proposed when filming in France.

The internationalization of French productions in terms of the use of English as a shooting language, as well as the level of the production budgets for these types of films, necessitated certain changes to the domestic tax credit system in order to keep the French market competitive and avoid delocalization.

The fact that “Valerian”’s budget approximates 170 Million Euros Illustrates the importance for the French film industry and economy to prevent the delocalization of these types of productions. The 2016 Finance Act therefore provides for two sets of modifications: the expansion of the eligibility criteria and the increase of the amounts of the tax credit available.

The following changes apply in respect of drama and animation works: – With respect to the eligibility criteria: <ul> <li>The language criterion no longer applies to theatrical animation pictures.</li> <li>Live action theatrical motion pictures shot in a foreign language are eligible when (i) at least 15% of the shots are processed digitally for certain specific purposes set by the Act (such theatrical works are assimilated to theatrical animation productions), or (ii) the use of a foreign language is justified by artistic reasons resulting from the screenplay.

</li> </ul> – With respect to the amount of tax credit available: <ul> <li>The tax credit percentages applicable to production companies are modified as follows:</li> </ul> <table> <tbody> <tr> <td></td> <td><strong>Animation</strong></td> <td><strong>Drama</strong></td> </tr> <tr> <td><strong>Audiovisual productions</strong></td> <td>    25%</td> <td>25%</td> </tr> <tr> <td><strong>Theatrical productions</strong></td> <td>    30%</td> <td>20%, or 30% when: (i) the picture is shot in French or in a French regional language; or (ii) at least 15% of the shots are processed digitally for certain specific purposes set by the Act</td> </tr> </tbody> </table> &nbsp; <ul> <li>The tax credit cap has been increased to 30 Millions Euros for theatrical productions.

</li> <li>Although the overall cap remains at 4 Million Euros, the per minute tax credit cap applicable to television drama programming has also been increased. The ceiling, originally set at 1,250 Euros per minute delivered, now fluctuates between 1,250 Euros and 10,000 Euros per minute delivered, based on the production costs per minute actually produced.

These new limits also apply to international television drama co-productions satisfying certain conditions regarding the budget and financing plan.</li> </ul> These new measures must be approved by the European Commission for the purpose of determining their compliance with the European Union legislation applicable to state aids. If so approved, such measures will apply to tax years beginning as of January 1, 2016.


The decision of the European Court of Justice (CJEU) dated October 6, 2015[1] invalidated the “Safe Harbor” framework which authorized, since 2000[2], the transfer of personal data from within the European Union to companies with “Safe Harbor” certifications located in the United States.

For memory, the United States does not provide for an adequate level of protection and consequently the transfer of personal data to companies located in said country is generally prohibited[3]. However, by way of exception, prior to such decision, European companies could transfer personal data to American providers/data processors only if the latter i) self-certified that they will commit to implement processes ensuring an adequate level of protection or ii) entered into agreements with the European data controller, including “model contract clauses” issued by the European Commission[4].

In its decision dated October 6, 2015, the CJEU underlined that the “Safe Harbor” certification no longer provided a sufficient level of privacy protection, in view of the disclosures of mass surveillance programs of the NSA by Edward Snowden in 2013. The decision being effective immediately, any and all transfer of personal data made on the basis of said certification are consequently illegal and should in theory be terminated or otherwise modified to conform to the decision.

Following this decision, the French Data Protection Authority (CNIL) and its European counterparts (Article 29 Working Party) met on October 15 to prepare a common action plan to permit the creation of a new legal framework. Accordingly, the Article 29 Working Party called on the European institutions and governments to implement a new legal framework enabling the transfer of data between Europe and the United States, before January 31, 2016. Such solutions could be sought during intergovernmental agreement negotiations and the implementation of a new “Safe Harbor” framework could be considered.

The Working Party continues its analysis of the consequences of the CJEU decision on the other means available to transfer data to the United States, particularly regarding the aforementioned “model contract clauses”. The Working Party indicated that, pending the implementation of the new regulations, European companies are still permitted to employ these “model contract clauses” for the transfer of personal data to the United States.

However, the personal data of European companies or individuals which have been transferred to American providers using these “model contract clauses” may still be subject to the intrusion of the NSA to the same extent as when the “Safe Harbor” framework was employed. A court decision or a CNIL recommendation could also invalidate the use of such clauses[5].

Pending the signature of a new intergovernmental agreement or the implementation of new transfer means, what strategy should the companies adopt today?

Given the current context, European companies wishing to transfer their data to the United States should act with caution and accordingly should implement legal and technical solutions to limit the potential risk taken when transferring their personal data. The foregoing essentially involves setting up restrictive contractual clauses with the providers receiving said data in the United States.

Such clauses should notably include:

  • at a minimum, all of the obligations provided in the “model contract clauses”;
  • the following additional obligations for American providers operating a Cloud Computing service:
  • information regarding data processing (compliance with the French Data Protection Act[6], definition of the processing methods in place, obtaining client’s consent should the data processing be entrusted to another data processor, limitation of the data retention period and ensuring that said obligations are included in subcontracting contracts);
  • the implementation of a complaints system and measures to avoid security flaws;
  • the possibility for the client to audit the provider;
  • the destruction of data and its restitution at the end of the services provided or in case of early termination of the contract, in a format chosen by the client;
  • the detailed specification of the provider’s obligations regarding data security (including physical and technical security measures, traceability, continuity of services, level of service, backup) and specification that the latter can only act on instructions from the client;
  • the cooperation of the service provider with the relevant data protection authorities and obligation to provide the client with any and all useful information in order to make the statement concerning data processing to said authorities;
  • the clear and exhaustive indication of the countries hosting the data and guarantee of an adequate protection in said countries.

iii) finally and most importantly, to prevent any potential changes of position by the CNIL, the following specific obligations to ensure the legality of the transfer under any circumstances:

  • the obligation to take all necessary technical and legal measures in order to comply with the developments of the French Data Protection Act and with the CNIL recommendations;
  • in the event of the inability or impossibility to comply with the developments of the French Data Protection Act, the inclusion of an automatic termination clause with the obligation to restitute such data in addition to the removal of such data without additional charge for the client.

Up until now, the recourse to “Safe Harbor” data processors was principally insured by signing standard terms and conditions or boilerplate agreements which European clients were unable to negotiate. The situation of the formerly “Safe Harbor” American providers is unclear and will necessarily force said providers to amend their contracts in order to adapt them to the requirements of their European clients. The decision of the CJEU may have the merit of rebalancing the forces in play between the European data controllers and the American service providers.

[1] CJEU decision dated October 6, 2015, Case C-362-14 Maximillian Schrems v. Data Protection Commissionner

[2] Commission decision dated July 26, 2000

[3] Indeed, under directive 95/46, the transfer of personal data to countries outside the European Union which do not provide an adequate level of protection should be prohibited.

[4] It should be noted that another contractual means to transfer data was provided for companies that are part of a same group (« Binding Corporate Rules »)

[5] In this respect, it should be specified that a German data protection authority expressed its wish to also invalidate the model contract clauses and to authorize data transfer to the United States only subject to changes in its legislations

[6] Act n°78-17 dated January 6, 1978[:]


Considering the changes introduced by our digital environment and the constantly emerging new technologies, the European Commission has launched various studies, brainstorming, consultations and plans of action since 2011 in order to modernize and harmonize copyright protection in the European Union. This initiative forms part of the Commission’s strategy to establish “a single market for Intellectual Property rights”. The former Commission, however, did not succeed in presenting practical measures since the proposed reform was considered insufficient for certain European officials.

The current Commission, which took office in November 2014, made a priority of growth and employment matters and accelerated the reform process; and the president of the Commission considered the single digital market as a key element for economic growth. To achieve said priorities, it was clearly stated that it was necessary to “dismantle national barriers with respect to copyright regulations” in order to “unlock creativity”, with minimal regulations.

Julia Reda, Member of the European Parliament and member of the Pirate Party, was appointed at the end of 2014 to draft a report, which was presented to the European Parliament early 2015. Said draft report suggested in particular:

  • The removal of territorial restrictions to copyright and promotion of cross-border access to content;
  • The harmonization of conditions for protection, especially by introducing a single European title applicable in all Member States (which would also contribute to the removal of obstacles resulting from the territorial restrictions applicable to copyright as indicated above), and the duration of copyright;
  • The harmonization and strengthening of exceptions and limitations to copyright[1].

This text has been the subject of heated debates and substantial lobbying from intellectual property professionals and certain Member States, especially and most importantly France. The disputes were essentially centered around the following competing interests: on the one hand, liberalization of creativity and rights of consumers, and on the other hand, protection and security of authors and rights holders. The debates also focused on the balance of power between industries and authors and artists, as well as the particular interests of each Member State. Another important issue which was discussed was the level of copyright protection each Member State could provide in the event of general harmonization.

In the end, more than 500 amendments were submitted to the draft report: the European Parliament adopted a non-legislative resolution on July 9, 2015[2] which substantially modified certain proposals considered as too “drastic”.

By way of example:

  • Regarding exceptions and limitations to copyright:

(i) Whereas the draft report contemplated a total harmonization and a mandatory application of the exceptions and limitations to copyright, the Members of Parliament considered that each Member State should be free to legislate further on such exceptions according to its specific cultural and economic interests, however with the implementation of minimum standards to said exceptions and limitations;

(ii) Certain exceptions proposed in the draft report, and which could have considerably broaden the forms of exploitation of the works by consumers, have either been removed (including the acknowledgment of a ‘right of quotation’ in the audiovisual sector) or limited (the proposal implementing a compulsory exception enabling libraries to lend books to the public in digital format irrespective of the location of access was for instance regulated regarding the use contemplated, duration, goal, and possible introduction of a fair compensation to the authors).

  • Regarding territoriality and accessibility of content and services:

While territoriality was questioned in the draft report, the Parliament finally called “for a reaffirmation of the principle of territoriality” in order to enable each Member State “to safeguard the fair remuneration principle”. Indeed, certain Members of Parliament argued that territoriality enables an increase of the revenues generated in each territory, thereby contributing to the financing of the works, and consequently ensuring fair compensation to authors and rights holders.

The Members of Parliament, nonetheless, emphasized the importance of improving accessibility and portability of services and content in order for consumers not to be denied access to content services for geographic reasons, and urged the Commission to propose appropriate measures in this regard.

It therefore appears that the debate is still open.

However, the Parliament confirmed its willingness to potentially harmonize the duration of copyright or to invite the Commission to analyze the impact of a single European copyright title for Member States. It also expressed its wish to adapt and create new exceptions in the digital era[3].

Considering the growth of services such as Netflix, the issues at stake in this reform are essential for competitiveness and development of European services as well as for reinforcement of consumers’ rights. Such issues are, however, subject to objections and claims from certain intellectual property actors. Copyright harmonization at the European Union level seems therefore quite complicated and must necessarily take into consideration the various interests. The European Commission should present a proposal of legislative revision at the end of the year and we look forward to hearing the position taken by the Commission.

[1] The draft report contains numerous proposals that we have not presented nor developed for purpose of this article.

[2] European Parliament resolution of 9 July 2015 on the implementation of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society

[3] The non-legislative resolution includes various proposals and suggestions which are not presented nor developed for purpose of this article. You can find the resolution via the following link: