Description of sector

The Government defines the Creative Industries as ‘those industries which have their origin in individual creativity, skill and talent and which have the potential for wealth and job creation through the generation and exploitation of intellectual property.’1

The Creative Industries sector comprises nine sub-sectors:
– Advertising and marketing;
– Architecture;
– Crafts;
– Design: product, graphic and fashion design;
– Film, TV, video, radio and photography;
– IT, software and computer services;
– Museums, galleries and libraries;
– Music, performing and visual arts; and
– Publishing.

The current EU regulatory regime

There is no single piece of specific legislation that governs all Creative Industries, although sector specific and general EU law applies (e.g. State Aid, services directive, e-commerce, and data protection).

State aid
State aid rules restrict the Government’s ability to provide public support to commercial undertakings including in the domestic Creative Industries sector. The UK’s creative sector tax reliefs are subject to EU State Aid rules. Aid for films and other audiovisual works must be granted in accordance with the Commission’s Communication on aid for films and other audiovisual works. In summary, aid must be directed towards cultural works (assessed by national criteria – in the UK’s case this is commonly via statutory ‘cultural tests’) and limits are placed on aid intensity and on required territorial spend for production  activities.

Video games are not included in the Communication on aid for film. Tax relief for this sector has to be separately notified as a cultural aid under Article 107 (3) (d) of the Treaty on the Functioning of the European Union.

Domestic consumption of creative products is growing in developing economies across Asia, Latin America and Africa, as well as in developed ones. This demand has been boosted by rising real incomes in industrialised countries, while real prices of many of these products have fallen. It is also reflective of modern lifestyles linked increasingly to social networking, innovation, connectivity, style, status, brands, andcultural experiences.

EU frameworks and Directives

The value of human inputs (i.e. individual creativity, ideas and innovation) is high within the Creative Industries. The current UK Intellectual Property (IP) framework is a mixture of national, EU/EEA, and international regulation. EU IP law does two main things:
– creates certain IP rights which would not otherwise exist, such as the unitary EUwide registered trademark and design; and
– harmonises rules around national rights so the substantive rules of Member Stateawarded trademarks and designs are broadly similar. EU law has also harmonised many aspects of the copyright framework such as certain copyright exceptions.

There are a number of EU directives concerning the copyright framework that have been implemented into UK law and much of this framework is underpinned by international treaties which continue to apply. These international treaties include the Berne Convention, the Rome Convention and the World Trade Organisation (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

However, there are some uniquely cross-border reciprocal copyright mechanisms and arrangements which are not covered by the international framework. These include, for example, the country of origin rule in the Satellite and Cable Directive and sui generis database rights introduced by the Database Directive.

More generally the EU Digital Single Market strategy aims to remove digital trade barriers between EU countries. This includes reforms in several areas of substantial interest to the broadcasting industry and other parts of the creative industries:
– a proposed Regulation on certain online transmissions of broadcasting organisations,which aims to improve cross-border access to broadcasters’ service in Europe, and could potentially introduce a country-of-origin copyright clearance rule;
– Portability Regulation. This measure is important for the sale of distribution rights to content across the EU (allowing consumers to continue to use digital content when traveling within the EU) and the Geoblocking Regulation; and
– a new Directive on Copyright in the Digital Single Market has been proposed.

The main framework creating a single market for broadcasting (including video on demand) and setting out standards on a minimum harmonisation basis is theAudiovisual Media Services Directive (AVMSD).
The AVMSD is the European Framework for television and television-like services and replaced a previous directive, the Television Without Frontiers Directive (1989) (TVWF), in 2011. Its primary purpose is to ensure the effective operation of the internal market for television broadcasting services by ensuring the freedom to provide broadcasting services throughout the EU.

The central principle that underpins the single market for audiovisual media services is the country of origin principle (‘COO’) first created under the TVWF Directive. This acts as a system of mutual recognition of establishment and licensing which enables broadcasters to operate across the EU from a licensed establishment in any one EU country. Each national regulatory authority (in the UK this is Ofcom) is responsible for ensuring the compliance of broadcasters with the minimum broadcast standards set out in the AVMSD (for example, as to advertising content or the prohibition on audiovisual media services containing any incitement to hatred based on race, sex, religion or nationality). The AVMSD was implemented in the UK by a series of regulations which primarily amended broadcasting legislation (the Communications Act 2003 and the Broadcasting Acts 1990 and 1996). For further details please see the separate report on the broadcasting sector.

Other EU law

The Creative Industries and cultural sector are also affected by a range of other general EU law, including:
– Services Directive;
– Mutual Recognition of Professional Qualifications Directive;
– Artist’s Resale Right;
– (Proposed) Directive on Contracts for the supply of digital content;
– Export of Objects of Cultural Interest (Control) Order 2003; and
– Cultural Objects Restitution Regime.

Creative services (excluding audiovisual services) are covered by the Services Directive, which prohibits Member States from imposing national requirements or restrictions that are discriminatory or disproportionate. The Directive also sets up national Points of Single Contact which enable service providers to apply and pay for authorisations (to offer or provide services) online. Removing barriers in this way makes it easier and cheaper for companies to trade cross-border within the EEA, and increases competition and productivity in European service markets.

The Mutual Recognition of Professional Qualifications Directive (MRPQD) supports the principle of free movement of skilled professionals through the removal of barriers by enabling a professional qualification in a regulated profession granted in one Member State to be recognised in all the others. The Directive covers both the temporary provision of services in another Member State, and also establishment by a professional wishing to practise their profession in another Member State.

Creative professions covered by the MRPQD include architects, graphic designers and IT professionals23. For these professions there are two systems by which a professional can have their qualifications recognised – the automatic and the general system. Under the automatic system, if you are a professional in one of 7 professions (including architects) and possess particular qualifications, then your qualifications are automatically recognised across all Member States (these qualifications are listed in Annex V of the Directive).

The general system is for other professionals within scope of the Directive and requires the host Member State to check whether the profession is regulated in the home Member State, and then to apply compensation measures (if necessary) for additional training according to national policy.

The Artist’s Resale Right (ARR) is derived from an EU directive and was implemented in UK law in 2006. The ARR entitles creators of particular works to royalties where their work is resold through arts markets or auction houses.

The (proposed) Directive on Contracts for the supply of digital content is currently being negotiated and covers harmonisation of contracts for the sale of digital content (e.g. music, films, e–books, applications and games), for rental of digital content (e.g. watching a film online, but not downloading), as well as contracts for services, such as cloud computing and social media. For the Directive to apply, the digital content would have to be supplied against some form of counter -performance by the consumer, either monetary (payment of a price) or in the form of data (e.g. the consumer’s personal data).

For video games on recordable media (i.e. disc, cartridge), the PEGI (Pan European Game Information) (age ratings system is used to age classify and label products marketed across Region 2 (Europe). The PEGI age ratings for games that are unsuitable for children younger than 12 are a statutory requirement for the UK market under the Video Recordings Act 1984. The PEGI system is recognised and supported by most other EU members though only has legal backing in a few.

Advertisers and marketers have to comply with the Misleading and Comparative Advertising Directive (2006/114/EC), which sets minimum standards for business to business advertising practice; and the Unfair Commercial Practices Directive (2005/29/EC), which curbs provisions of untruthful information to consumers and aggressive marketing practices. A number of EU Member States impose scheduling restrictions on the broadcast of television programmes and the exhibition of films (the EU has several Most Favoured Nation (MFN) exemptions in relation to audiovisual services which permit such restrictions within the AVMSD framework).

In terms of Museums, Galleries and Libraries, there are certain specific UK laws and EU regulations concerning the movements of a wide range of categories of cultural objects. Objects that are more than 50 years old and exceeding a certain monetary value need a licence to be exported out of the UK under the Export of Objects of Cultural Interest (Control) Order 2003. Cultural objects exceeding certain age and monetary values being exported to a third country outside the EU require a licence under Council Regulation 116/2009 on the Export of Cultural Goods.

Through the EU, the UK is subject to the Cultural Objects Restitution Regime provided for by Directive 2014/60/EU.25 This allows EU member states to circulate details of objects which have been removed unlawfully from their territory, and ask for assistance from fellow members for the return of the objects. The Rental and Lending Directive (Directive 2006/115/EC) is also relevant in relation to public lending in the UK. This Directive provides for exclusive right of authors to authorise or prohibit lending of their work and Article 6 of the Directive allows member states to derogate from this lending right in respect of public lending, provided the author receives remuneration. In the UK the mechanism for remunerating authors for the lending rightis the Public Lending Right scheme under the Public Lending Right Act 1979.

Devolved administrations

Creative Industries and cultural policy is largely a devolved matter. However, the regulation of broadcasting and advertising is reserved. Tax and international treaties are also reserved to the UK, for example, IP policy, creative content tax reliefs and co-production treaties are carried out at a UK level. Funding for the sector is also largely devolved, although there is UK-wide funding for film which is distributed via the British Film Institute (BFI).

Existing frameworks for how trade is facilitated between countries in this sector

The arrangements described in this section are examples of existing arrangements between countries. They should not be taken to represent the options being considered by the Government for the future economic relationship between the UK and the EU. The Government has been clear that it is seeking pragmatic and innovative solutions to issues related to the future deep and special partnership that we want with the EU.

The basis for international trade in services, including among the Creative Industries,is the WTO’s General Agreement on Trade in Services (GATS). GATS provides a framework for trade in services among WTO members setting out the general principles and obligations which members must abide by as well as the commitments each member has made to open and non-discriminatory trade in relation to particular service sectors.

Additionally, WTO members have agreed a range of further sector agreements – including rules on IP (the multilateral Agreement on Trade-Related Aspects ofIntellectual Property Rights, or ‘TRIPS’). A further agreement among 23 WTO members including the EU, the US, Australia and Japan, to liberalise trade inservices – the Trade in Services Agreement (TiSA) – is not yet signed. Both are pertinent to the facilitation of trade in the creative sectors.

However, there are limited precedents for agreements with the EU on culture due to the ‘cultural exception’, an exception to WTO rules, first introduced by the EU during 1993 negotiations on the General Agreement on Tariffs and Trade. The cultural exception enables cultural goods and services to be treated differently to other goods and services in trade agreements. It is not uncommon for culture to be excluded from Free Trade Agreements altogether.

As far as the EU’s international agreements are concerned, the EU-Canada Comprehensive Economic and Trade Agreement (CETA)26 grants exceptions inchapters on investment, subsidies, government procurement, cross border trade in services and domestic regulations with respect to audiovisual services for the EU and to cultural industries for Canada (broadly the publishing, musical and audiovisual 26 EU-Canada Comprehensive Economic and Trade Agreement (CETA) industries). Elsewhere CETA recognises the Parties’ rights to regulate domestically in order to protect and promote cultural diversity. The CETA chapter on IP aligns with the WIPO Copyright Treaty and is important for creative industries based in the EU wishing to provide their services in Canada or vice versa.

Moreover, the Deep and Comprehensive Free Trade Agreement between Ukraine and the EU27 includes a chapter on culture, which is intended to promote cultural cooperation and foster cultural exchanges. It also encourages the development of cultural industries in the EU and in Ukraine and aims to implement properly the UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions of 200528.

The EU-[South]-Korea agreement29 includes a protocol on on cultural cooperation, which contains provisions to to facilitate co-operation between the Parties in relation to audiovisual works and services30 (this is explained more fully in the broadcasting report) and in relation to the performing arts, publications and cultural heritage sites and historic monuments. The proposed Transatlantic Trade and Investment Partnership agreement31 includes a chapter on regulatory cooperation, which touches on cultural diversity and state aid.

Switzerland also has a series of bilateral agreements with the EU. One agreement enables it to participate in the MEDIA strand of Creative Europe, an EU fundingprogramme governed by its own EU Decision. Additionally, the UK has a number of Memoranda of Understanding on culture worldwide with countries such as Brazil, China, India and Indonesia.

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