C-270/80

P O L Y D O R L I M I T E D AND R S O RECORDS INC.

and

H A R L E Q U I N R E C O R D S H O P S LIMITED AND S I M O N S R E C O R D S L I M I T E D ,

on the interpretation of Articles 14 and 23 of the A g r e e m e n t c o n c l u d e d o n 22 July 1972 between the E u r o p e a n E c o n o m i c C o m m u n i t y a n d the P o r t u g u e s e Republic (Official J o u r n a l , English Special Edition 1972 (31 D e c e m b e r ) (L 301), p . 167),

POLYDOR v HARLEQUIN RECORD SHOPS

THE COURT

Harlequin Record Shops Limited (herein- 1. The plaintiffs in the main action are after referred to as "Harlequin"), the Polydor Limited and RSO Records Inc.. first defendant in the main action, carries RSO Records Inc. (hereinafter referred on the business of retail sale of records to as "RSO") is the proprietor of the in the United Kingdom. copyrights in a number of sound recordings collectively entitled "Spirits Simons Records Limited (hereinafter Having Flown" featuring the work of referred to as "Simons"), the second artists known as "The Bee Gees". defendant in the main action, carries on in the United Kingdom the business of Polydor Limited (hereinafter referred to importing records, which it sells and as "Polydor") is the exclusive licensee of distributes wholesale to retailers in the RSO under the copyrights in the United United Kingdom.

JUDGMENT OF 9. 2. 1982 — CASE 270/80

POLYDOR v HARLEQUIN RECORD SHOPS

JUDGMENT OF 9. 2. 1982 — CASE 270/80

4. Pursuant to Article 20 of the "binding in its entirety and directly Protocol on the Statute of the Court of applicable in all Member States". Justice of the EEC, written observations Consequently, by virtue of Article 189 of were submitted by Polydor and RSO, the EEC Treaty the Agreement is the plaintiffs in the main action, directly applicable in the Member States represented by R. A. Morritt, Q C , of of the EEC. Lincoln's Inn, instructed by Joynson- Hicks & Co. and assisted by I. Van Bael and J.-F. Bellis of the Brussels Bar, by In considering whether the individual Harlequin and Simons, the defendants in provisions of a Treaty confer rights on the main action, represented by A. individuals which the courts of Member Wilson of the Bar of England and Wales, States must protect, the Court considers by the United Kingdom Government, by "the spirit, the general scheme and the the Government of the Federal Republic wording" of the Treaty (judgment of 5 of Germany, by the Netherlands February 1976 in Case 87/75 Bresciani Government, by the Danish Govern- [1976] ECR 129, at p. 140). Harlequin ment, by the French Government and by and Simons take the view that such a the Commission of the European Com- consideration makes it plain that Article munities, represented by its Legal 14 (2) of the Agreement is indeed of Advisers, Jean Groux and Jacques such a nature as to confer such rights. Bourgeois, assisted by D. A. O. Edward, Article 14 (2) is, moreover, in clear and QC, of the Scots Bar. peremptory terms.

POLYDOR v HARLEQUIN RECORD SHOPS

JUDGMENT OF 9. 2. 1982 — CASE 270/80

copyright is a measure having enforceable in national courts in the equivalent effect to quantitative Community? restrictions on imports within the meaning of Article 14 (2) of the Agreement. Polydor submits that both questions should be answered in the negative. 2. Such enforcement is not justified within the meaning of Article 23 of It stresses first that there is a the said Agreement and constitutes a fundamental difference between the rules means of arbitrary discrimination applicable to the interpretation of the and a disguised restriction on trade EEC Treaty and those applicable to the between Portugal and the EEC. interpretation of classical international treaties.

3. Articles 14 (2) and 23 of the said Agreement confer rights on The fundamental difference in approach individuals which the courts of between classical international law and Member States must protect. Community law as regards direct effect was made clear by the Court in its judgment of 5 February 1963 in Case 4. Accordingly an importer into the 26/62 Van Gend en Loos [1963] ECR 1. UK of such records may rely on the The distinction between classical inter- said Article 14 (2) as a defence to an national law and Community law was action for infringement of the said restated by the Court in its judgment of UK copyrights." 15 July 1964 in Case 6/64 Costa v ENEL [1964] ECR 585. .

stated by the Court in its judgment of 12 rationale cannot be transposed to the December 1972 in Joined Cases 21 to Agreement, which is intended solely to 24/72 International Fruit Company establish a free-trade area between the [1972] ECR 1219 and in its judgment of contracting parties. 11 October 1979 in the Bouhelier case cited above. Moreover, there is nothing in the text of the Agreement which indicates that the A comparison of the Agreement with the concept of "measures having an effect EEC Treaty demonstrates that there is a equivalent to quantitative restrictions on basic difference in the nature of the two imports" in Article 14 (2) must be

Indeed, in accordance with the rules of inter- Article 2 (1) expressly referred to the national law on interpretation. provisions of Articles 12, 13, 14 and 17 of the EEC Treaty. It was for that As regards the interpretation of Articles reason that the Court concluded that 14 (2) and 23 of the Agreement, Polydor Article 2 (1) of the Yaounde Convention submits that the case-law of the Court of had to be given the same meaning as that Justice on the exhaustion of industrial of Article 13 of the EEC Treaty. and intellectual property rights in the However, there is nothing comparable in Community may not be extended to the terms of Article 14 (2) of the trade between the Community and Agreement.

There is therefore [1974] ECR 1183; judgment of 3 July no reason to read that doctrine into 1974 in Case 192/73 Van Zuylen Frères v Article 14 (2), especially as the EFTA Hag [1974] ECR 731; judgment of 20 Convention and the Agreement share the January 1981 in Joined Cases 55 and same objective, namely the establishment 57/80 Musik-Vertrieb membran GmbH & of a free-trade area.

JUDGMENT OF 9. 2. 1982 — CASE 270/80

corresponds more closely to that of As regards direct effect, Polydor submits Article 10 of the EFTA Convention than that Articles 14 (2) and 23 of the to that of Article 30 of the Treaty of Agreement are not capable of creating Rome. rights which may be directly relied upon before the courts.

Polydor points out that the preamble to the Agreement declares in its last recital First, there is nothing in the terms of the that "no provision of this Agreement Agreement to indicate that the may be interpreted as exempting the contracting parties intended that Contracting Parties from the obligations individuals might be directly concerned. which are incumbent upon them under On the contrary, the use of the verb other international agreements". In view "abolish" in Article 14 (2) implies that of that, Article 14 (2) of the Agreement further intervention by the contracting must be interpreted in the light of the parties is required for the implementation international copyright conventions. of the provision. Thus, there is a marked difference in wording from Article 30 of the EEC Treaty, which provides that quantitative restrictions and measures Polydor submits that the fact that neither having equivalent effect "shall . . . be of the contracting parties has ever prohibited" (judgment of 22 March 1977 intended to give to Articles 14 (2) and 23 in Case 74/76 Ianelli and Volpi v Meroni of the Agreement the same meaning as [1977] ECR 557, and especially at p. that of Articles 30 and 36 of the Treaty 575). of Rome as regards the exercise of industrial and intellectual property rights is confirmed by their subsequent behaviour in the application of the Secondly, placed in the institutional Agreement. context of the Agreement, the provisions on the abolition of "measures having an effect equivalent to quantitative restrictions on imports" (Article 14 (2)) N o step was taken by the Community and on disguised restrictions on trade and its Member States or by Portugal (Article 23) are incapable of being and the other EFTA countries to amend applied as they stand by the courts of the their legislation on copyright and other contracting parties. industrial or intellectual property rights.

effects of international agreements dures necessary for the entry into force (judgment of 12 December 1972 in the of the agreement have been completed International Fruit case cited above; on the part of the Community or, for judgment of 24 October 1973 in Case agreements in a simplified form, to 9/73 Schlüter [1973] ECR 1135; authorize the President to designate a judgment of 5 February 1976 in the person to sign the agreement. In certain Bresciani case cited above). cases also, the act concluding the agreement provides for measures for the implementation of the agreement. Moreover, provisions equivalent to Articles 14 (2) and 23 of the Agreement That the form of the act, whether it is a have been held not to have direct effect regulation or a decision, concluding an by the Swiss Federal Supreme Court international agreement on behalf of the (judgment of 25 January 1977 in the Community is irrelevant for the purpose Sunlight case cited above). of deciding the issue of direct enforce- ability is also apparent from the approach followed by the Court in Finally, the fact that the Agreement was previous cases dealing with this issue. In concluded on behalf of the Community none of those cases has the Court paid in the form of a "regulation" has no any attention to the form of the act by relevance in determining whether Article which the agreement had been 14 (2) may be enforced before the concluded. In each case the Court national courts. limited its inquiry to the "spirit, the general scheme and the wording" of the agreement concerned (judgment of 12 December 1972 in the International Even though the Treaty does not provide Fruit case cited above; judgment of for a special procedure in this matter, an 24 October 1973 in the Schlüter case examination of the relevant Community cited above; judgment of 5 February practice shows that, prior to its entry 1976 in the Bresciani case cited above). into force, every international agreement to which the Community is a party is the subject of an act of the Council Polydor submits that the extension of the "concluding" the agreement. The act to Community doctrine of exhaustion of which the text of the agreement is rights to the context of free-trade annexed is published in the Official agreements would confer a unilateral Journal. The act concluding the advantage on producers in non-member agreement may be either a "regulation" countries to the detriment of Community or a "decision". industry. Owners of patents, copyright and other industrial and intellectual property rights in the Community would Whatever the form of the act concluding be deprived of the possibility of the agreement may be, that can have no enforcing their rights against imports effect on the problem of the direct from EFTA countries without being able enforceability of the agreement. Its to benefit from the same treatment in essential purpose is, above all, to approve those countries. the agreement on behalf of the Community. A further related purpose of the act is to empower the President of In conclusion, Polydor submits that the the Council to give notification to the questions put should be answered as other contracting parties that the proce- follows:

" 1 . The answer to Question 1 should be national courts within the Com- in the negative. The enforcement by munity. Company A of their United King- dom copyrights against a gramo- phone record lawfully made and sold in Portugal by licensees under the Their observations reiterate the argu- equivalent Portuguese copyrights is ments presented by Polydor. not a measure having equivalent effect to quantitative restrictions on imports within the meaning of They stress that the structure of the Article 14 (2) of the Agreement Agreement and the intentions of its between the European Economic authors are such that infringements of a Community and the Portuguese provision of the Agreement are to give Republic. rise to consultations between the two contracting parties, namely the Community and Portugal, or, possibly, 2. It follows from the answer to to the adoption of safeguard measures by Question 1 that Question 2, which one of the two parties. Such an intention was submitted only in case the is clearly apparent inter alia from the answer to Question 1 should be in combined provisions of Articles 26 (1) the affirmative, has no longer any and 30 (3) (a) of the Agreement. In view purpose. of that it would be contrary to the general scheme of the Agreement to confer direct effect on provisions of this 3. The answers to Questions 3 and 4 type. should be in the negative. Article 14 (2) of the said Agreement does not create rights directly enforceable by In that regard the United Kingdom individuals in national courts within Government adds that the prohibition of the Community." measures having an effect equivalent to quantitative restrictions appears not only in the seven free-trade agreements The United Kingdom Government, the entered into with the EFTA countries, Government of the Federal Republic of but also, and practically in the same Germany, the Danish Government, the terms, in all the agreements concluded French Government and The Netherlands by the Community with the Government maintain that Articles 14 (2) Mediterranean countries (for example the Maghreb and Mashreq agreements, and 23 of the Portuguese Agreement the trade agreements with Cyprus, Israel, should not be interpreted as meaning: Malta and Spain, and the agreements with Turkey and Yugoslavia). The same 1. That they prevent the owner of a provision is to be found in GATT itself copyright in the United Kingdom or (Articles XI and XX). his licensee from being able to rely on his rights in order to restrain the importation of records lawfully The Commission submits that whether or produced and sold in Portugal by a not the relevant terms of the Agreement licensee under Portuguese law; or and the EEC Treaty are the same, their spirit and general scheme are different. It follows that mere identity of wording 2. That they confer rights which cannot be conclusive as to the nature or individuals may enforce before the content of the obligations undertaken, or

In that respect it is relevant to note that the case-law of the Court on intra- With regard to the interpretation of Community trade establishes a very close Articles 14 (2) and 23 of the Agreement, link between Articles 30 and 36 of the the Commission submits that the EEC Treaty and that the Court replies to case-law of the Court on the interpre- questions of interpretation referred to it tation of Articles 30 and 36 of the EEC by taking these two provisions together. Treaty cannot as such be transposed to the interpretation of the provisions in question. The reasoning underlying the decisions of the Court depends on the The decision as to the extent to which a major premise that the EEC created, and restriction based on the protection of was intended to create, a common or industrial and commercial property is single market. Moreover, it is a charac- justified in the light of the requirement teristic of the common market created by of the free movement of goods involves a the EEC Treaty that the Treaty also balancing of two opposing interests. In creates the institutional framework and the context of agreements concluded by machinery which enable the Community, the Community, the assessment of that acting as such, to eliminate disparities balance of interests is very closely linked between national laws or to counteract to the objectives of the agreements. divergences in national policies.

The objectives of the Agreement, namely The Commission doubts whether an "to eliminate progressively the obstacles obligation to abolish "measures having to substantially all their trade" and "the an effect equivalent to quantitative harmonious development of their restrictions on imports" can under inter- commerce", are both less ambitious and national law be construed as preventing less precise than those of the EEC owners and licensees of copyrights Treaty. They involve an assessment in within the Community from relying on

The scheme of international protection of such rights depends upon the III — Oral p r o c e d u r e protection afforded by the national law of sovereign States. The limitation of rights to the territory of the State which grants the protection (or to nationals of that State) is inherent in the scheme At the sitting on 13 October 1981 oral of international protection. Further, argument was presented by the the existing scheme of international following: R. A. Morritt, Q C , of protection gives rise to the legitimate Lincoln's Inn, assisted by Ivo Van Bael expectation of rights on the part of the and Jean-François Bellis, of the Brussels owners of a property right such as Bar, for Polydor; A. Wilson, of the Bar copyright. of England and Wales, for Harlequin and Simons; G. Dagtoglou, acting as Agent, assisted by Robin Jacob, Q C , of Gray's Inn, for the United Kingdom In that context, it is not probable that Government; M. Seidl, acting as Agent, for the Government of the Federal international law would, by implication Republic of Germany; G. Guillaume, only, construe a bilateral free-trade acting as Agent, for the Government of agreement in such a way as to restrict the French Republic; and C.-D. the exercise of such rights in a manner Ehlermann, the Director-General of the which is generally recognized as Commission's Legal Department, and legitimate and conforms with the J. Bourgeois, Legal Adviser to the expectations of the owners of the rights. Commission, acting as Agents, assisted by D. A. O. Edward, Q C , of the Scots Bar, for the Commission of the European Communities. Moreover, since the scheme of inter- national protection of copyright is itself based on international conventions involving lengthy and complex nego- At the sitting the Commission put tiations, it is improbable that inter- forward the following view: national law would imply a derogation from the principles laid down by such conventions. According to the judgment of 12 De- cember 1972 in Joined Cases 21 to 24/72 International Fruit Company NV and The Commission states in conclusion Others v Produktschap voor Groenten en that it is inclined to consider that the Fruit [1972] ECR 1219, a private party obligation undertaken by the Community may invoke a provision of international under Articles 14 and 23 of the law against the validity of an act of the Agreement does not require the law of Community if, first, the provision is the Member States to prevent owners binding on the Community and, and licensees of copyright within the secondly, if the provision has direct Community from exercising their rights effect. Under those circumstances, the

In the case of a reciprocal agreement, such as that concerned in this case, the The Commission is of the opinion that Court should recognize direct effect only the concept of direct effect, as developed where the provisions are drafted in an in Community law, must not as such be entirely clear way for all the parties or transposed to the field of the where provisions which leave room for Community's international relations, for interpretation have been clarified by the two reasons. The first is based on the contracting parties. different nature and aims of international agreements. The second reason is that it is necessary to maintain in the context of these free-trade agreements a balance of the advantages and disadvantages which In that regard the Commission recalls may exist between the parties to an inter- that the Court has recognized the direct national treaty. effect of the provisions on State aids only where Article 92 of the EEC Treaty has been applied in accordance with Article 93 (2). Moreover, in the second Defienne case (judgment of 8 April 1976 With regard to the different nature and in Case 43/75 Gabrielle Defrenne v aims of international agreements, the Société Anonyme Belge de Navigation Commission emphasizes that those Aérienne Sabena [1976] ECR 455), the agreements do not provide for any Court held that for the purpose of ascer- harmonization of law or for a common taining direct effect a distinction had to policy. Nor do they lay down rules for be drawn between the hard core of the judicial settlement of disputes by Article 119, which had direct effect, and virtue of which the provisions of the what might be termed the surrounding treaties are interpreted in a manner grey area where prior legislative action binding on all the contracting parties. was necessary.

2 The main proceedings concern an action for infringement of copyright brought against two British undertakings, Harlequin Record Shops Limited and Simons Records Limited (hereinafter referred to as "Harlequin" and "Simons" respectively), specializing in the importation and sale of gramophone records, which imported from Portugal and put on sale in the United Kingdom records featuring the popular music of the group known as "The Bee Gees", without obtaining the consent of the proprietor of the copyrights or of his exclusive licensee in the United Kingdom.

3 The proprietor of the copyrights in the sound recordings in question, RSO Records Inc. (hereinafter referred to as " R S O " ) , granted to an affiliated company, Polydor Limited (hereinafter referred to as "Polydor"), an exclusive licence to manufacture and distribute gramophone records and cassettes reproducing those recordings in the United Kingdom. Records and cassettes reproducing the same recordings were manufactured and marketed in Portugal by two companies incorporated under Portuguese law, which

POLYDOR v HARLEQUIN RECORD SHOPS

were licensees of RSO in Portugal. Simons purchased records containing those recordings in Portugal in order to import them into the United Kingdom with a view to their sale. Harlequin purchased a number of those records from Simons for the purpose of retail sale.

4 The Court of Appeal established that under English law Harlequin and Simons had thereby infringed Section 16 (2) of the Copyright Act, 1956. That provision provides that a copyright is infringed by any person who, without the licence of the owner of the copyright, imports an article into the United Kingdom, if to his knowledge the making of that article constituted an infringement of that copyright, or would have constituted such an infringement if the article had been made in the place into which it is so imported.

3. Is Article 14 (2) of the said Agreement dated 22 July 1980 directly enforceable by individuals within the European Economic Community having regard in particular to the said European Economic Community Council regulation dated 19 December 1972 giving effect to the said Agreement?

4. Can an importer into the United Kingdom of the gramophone records referred to in Question 1 rely on Article 14 (2) of the said Agreement dated 22 July 1972 as a defence when sued by Company A for infringement of their said copyrights in the United Kingdom?"

7 According to the well-established case-law of the Court, the exercise of an industrial and commercial property right by the proprietor thereof, including the commercial exploitation of a copyright, in order to prevent the impor- tation into a Member State of a product from another Member State, in which that product has lawfully been placed on the market by the proprietor or with his consent, constitutes a measure having an effect equivalent to a quantitative restriction for the purposes of Article 30 of the Treaty, which is not justified on the ground of the protection of industrial and commercial property within the meaning of Article 36 of the Treaty.

8 The first two questions, which may be considered together, seek in substance to determine whether the same interpretation must be placed on Articles 14 (2) and 23 of the Agreement. In order to reply to those questions it is necessary to analyse the provisions in the light of both the object and purpose of the Agreement and of its wording.

9 By virtue of Article 228 of the Treaty the effect of the Agreement is to bind equally the Community and its Member States. The relevant provisions of the Agreement read as follows:

12 In pursuance of the above-mentioned objective the Agreement seeks to liberalize trade in goods between the Community and Portugal. According to Article 2 the Agreement is to apply, subject to special arrangements provided for in respect of certain products, to products originating in the Community or in Portugal which fall within Chapters 25 to 99 of the Brussels Nomenclature.

13 In that connection Articles 3 to 7 of the Agreement provide for the abolition of customs duties and of charges having equivalent effect in trade between the Community and Portugal. The same principle is applied by Article 14 to

JUDGMENT OF 9. 2. 1982 — CASE 270/80

quantitative restrictions and measures having equivalent effect. Those provisions are supplemented in Article 21 by the prohibition of fiscal measures or practices of a discriminatory nature and in Article 22 by the abolition of all restrictions on payments relating to trade in goods. Moreover, in Articles 26 and 28 the Agreement contains certain rules on competition, public aid and dumping. By virtue of Article 32 a joint committee is established which is to be responsible for the administration of the Agreement and to ensure its proper implementation.

1 4 The provisions of the Agreement on the elimination of restrictions on trade between the Community and Portugal are expressed in terms which in several respects are similar to those of the EEC Treaty on the abolition of restrictions on intra-Community trade. Harlequin and Simons pointed out in particular the similarity between the terms of Articles 14 (2) and 23 of the Agreement on the one hand and those of Articles 30 and 36 of the EEC Treaty on the other.

18 The considerations which led to that interpretation of Articles 30 and 36 of the Treaty do not apply in the context of the relations between the Community and Portugal as defined by the Agreement. It is apparent from an examination of the Agreement that although it makes provision for the unconditional abolition of certain restrictions on trade between the Community and Portugal, such as quantitative restrictions and measures having equivalent effect, it does not have the same purpose as the EEC Treaty, inasmuch as the latter, as has been stated above, seeks to create a single market reproducing as closely as possible the conditions of a domestic market.

19 It follows that in the context of the Agreement restrictions on trade in goods may be considered to be justified on the ground of the protection of industrial and commercial property in a situation in which their justification would not be possible within the Community.

20 In the present case such a distinction is all the more necessary inasmuch as the instruments which the Community has at its disposal in order to achieve the uniform application of Community law and the progressive abolition of legislative disparities within the common market have no equivalent in the context of the relations between the Community and Portugal.

21 It follows from the foregoing that a prohibition on the importation into the Community of a product originating in Portugal based on the protection of copyright is justified in the framework of the free-trade arrangements established by the Agreement by virtue of the first sentence of Article 23. The findings of the national court do not disclose any factor which would permit the conclusion that the enforcement of copyright in a case such as the

On those grounds,

THE COURT,

in answer to the questions submitted to it by the Court of Appeal by order of 15 May 1980, hereby rules:

POLYDOR v HARLEQUIN RECORD SHOPS

The enforcement by the proprietor or by persons entitled under him of copyrights protected by the law of a Member State against the impor- tation and marketing of gramophone records lawfully manufactured and placed on the market in the Portuguese Republic by licensees of the proprietor is justified on the ground of the protection of industrial and commercial property within the meaning of Article 23 of the Agreement between the European Economic Community and the Portuguese Republic of 22 July 1972 (Official Journal, English Special Edition 1972 (31 December) (L 301), p. 167) and therefore does not constitute a restriction on trade such as is prohibited by Article 14 (2) of that Agreement. Such enforcement does not constitute a means of arbitrary discrimination or a disguised restriction on trade between the Community and Portugal within the meaning of the said Article 23.

Mertens de Wilmars Bosco Touffait Due Pescatore Mackenzie Stuart O'Keeffe Koopmans Everling Chloros Grévisse