Friday, 29 July 2011

Internet access and censorship

Mr Justice Arnold gave judgement yesterday in the case of Twentieth Century Fox Film Corporation and Others v British Telecommunications plc. This concerned the Newzbin internet site, which is largely devoted to providing illegal downloads of films, in breach of copyright. A number of film companies sought an injunction against BT, which would require BT to block access to the site from their customers in England and Wales. Arnold J agreed to make such an order. The precise terms of the order will be settled at a further hearing to take place after the summer vacation in September.

The question to begin with is, why was this order necessary at all? Why not attack the source, namely Newzbin? The reason appears to be that the company and its internet site is located in the Seychelles. Either the film companies feel that the law of the Seychelles does not enable them to have the site closed down (an unlikely position), or that if they obtained such an order from the court in the Seychelles, Newzbin would just resite somewhere else, resulting in a never ending game of chase. The second is much the more likely reason, as such resiting has happened once already, the current Newzbin being already in its second incarnation.

I do not support breach of copyright. Although I do not watch films over the internet, I do stream audio, legally, via a paid-for site (Spotify) which has all the necessary copyright permissions and where a proportion of my subscription goes to the artists I listen to. Accepting the position that breach of copyright is wrong, the next question to ask is whether civil proceedings involving what amounts to a third party the internet service provider is the right way to do it.

This is because in such proceedings there is another and very important stakeholder unrepresented at the table, namely the public interest in the maintenance of freedom of access except on pressing public interest grounds which might override this right, and which is properly supervised and not done secretly. The important point here is that civil proceedings before a court are only concerned with whether a civil wrong is being committed, and if it is, what order should be made by the court to prevent it. Once on a test case such as this the court finds that there is a matter to be remedied under English civil law, a precedent is then set for other similar cases, and in theory there would be no need for further references to a court for a shut down of this kind: future blocking could simply be done by agreement.

This judgement is founded on a number of interacting pieces of legislative material, beginning with Council Directive 2001/29/EC (the Information Society Directive), as transposed into domestic law by the Copyright and Related Rights Regulations 2003 and Council Directive 2004/48/EC. The 2003 Regulations enable the court to grant an injunction "against a service provider, where that service provider has actual knowledge of another person using their service to infringe copyright" and "against a service provider, where that service provider has actual knowledge of another person using their service to infringe a performer’s property right". Arnold J thought the case fell within these grounds and that in the exercise of his discretion he should make such an injunction.

However, as mentioned the outcome of this case is that, on the principle of precedence in the law of England and Wales, the film companies could now in theory write to any internet service provider and ask them to block any particular site they do not like, and if they do not agree take the case to court and have their costs awarded against the ISP. ISPs do not like to spend their time in court, nor paying other parties' costs, particularly as they are not to blame, so they are likely in the end just to amend their terms and conditions of service with their customers so allowing them to block any site where requested by a copyright owner.

If it resulted in this, we would then have censorship without any checks of any kind, by a court or anyone else. This is wrong in my view. There has already been "feature creep" on this. The technology employed by BT to block customer access is called "CleanFeed". This was introduced by BT to prevent highly illegal internet child pornography being downloaded. Now by court order this originally limited purpose of child pornography is being extended to copyright infringement. Where next? And it invites the question, what is the difference between this new internet censorship in the UK and the "great firewall of China" established by the Chinese government?

The answer to the last point is no doubt that this one (Twentieth Century v BT) is about copyright infringement, and the other (Chinese censorship) is about political views. But where does this end? Whilst this case is based on a statutory provision (the 2003 Regulations), the court has a wider power at common law to injunct against civil wrongs, and there are many other grounds for tortious intervention which might exist under civil law. Should the ISPs next be required to block any site on receipt of a complaint from someone else that it, say, breaches their privacy? And after that?

This "what next" question has no obvious answer.

I think this area is too important to be developed by the courts unsupervised by appropriate controls applied via democratic processes, which need to be at least as good as the rights of appeal to a tribunal set out in the "three strikes and you are out" proposals of the Digital Economy Act 2010. That is itself a controversial Act with a number of shortcomings, but at least it provides for some safeguards for members of the public (and the public interest) as represented by the requirement for the Department for Culture, Media and Sport to make safeguarding rules after balancing the rights of members of the public to information and freedom, and whether the complainant had got their facts right, before the "three strikes" procedure can come into effect. Furthermore Arnold J's decision on what amounts to "actual knowledge" with respect to each of their customers renders impotent the provision of section 17 of the 2010 Act empowering the Secretary of State by regulations to make provision "about the granting by a court of a blocking injunction in respect of a location on the internet which the court is satisfied has been, is being or is likely to be used for or in connection with an activity that infringes copyright", which could have contained appropriate safeguards.

The fact of the matter is that civil procedure does not deal with hidden unrepresented interests of this kind well and why should it, as civil procedure is based on the proposition that there is a dispute between two parties to be conducted in an adversarial manner, where costs are always at stake. The increased use by the courts of secret injunctions should be a warning to us on this. And it is simply not good enough for ISPs to make comfortable arrangements to introduce censorship by the back door under penalty of costs, which we may never get to hear about. We only know about this particular case because it required proceedings in open court. Later ones may not.

I have written to the Department for Culture, Media and Sport to ask how the Secretary of State intends to deal with this. It will be interesting to see what he has to say.

Keep calm and carry on

We are getting more predictions of financial armageddon if Congress does not raise the US government's borrowing ceiling by next Tuesday. That is the point at which the US Treasury says that it will not have the resources to fund current levels of federal spending.

The story doing the rounds is that the US may be forced to default on its sovereign debt. This is simply nonsense, and serves no one's interests because it clouds the real issues surrounding the US budget deficit, which genuinely is becoming problematic.

First, the US's existing debt obligations. Contrary to these doomsday scenarios, the US is not going to default on its sovereign debt, because there is absolutely no reason to do so. The debt ceiling is just that, a ceiling, and it does not prevent roll-over when bonds expire at maturation. The US government will just roll over the debt by issuing new bonds to replace the old, as it usually does and will continue to do: there is zero chance that the US will default on its repayments of principal. What the US administration will be precluded from doing without Congress's agreement is issuing new bonds to fund new deficits on the current account.

There is of course the issue of interest on the debt. Will the administration choose to go into temporary default on interest payments? That is highly improbable, because it has plenty of revenue to meet its debt servicing obligations: interest expenses represent under 10% of federal tax revenues annually (excluding payments into the Social Security Trust Fund for accrued future social security obligations) of which about a half is held by non-US lenders, and it is pointless defaulting on interest when there is no need to do so, because it would very significantly drive up borrowing costs when existing debt is rolled over, possibly to unsustainable levels. Anyway, arguably the US constitution requires the administration to give priority to debt servicing, as section 4 of the 14th Amendment provides that:
"The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned"
This was originally designed to boost market confidence following the US government's repudiation of the debts of the Confederate government after the end of the civil war, but still stands as a general guarantee of government borrowing. Having said that, there is not too much distinction between a contractual obligation under bond warrants to repay at the due date fixed for maturation and meet interest obligations, and a constitutional obligation to really, really repay at the due date fixed for maturation and meet interest obligations. The amendment is window dressing, but window dressing with a purpose.

So whilst the US Treasury have said they will reduce allocations pro rata to all federal departments beginning late next week, this will almost certainly not include the Treasury's own interest obligations on its debt.

So the dangers lie elsewhere. These are two fold. First, the accumulating debt is going to become unsustainable: it is currently $14.46tn, which is around 96% of GDP, and going up at an astonishing rate of over $1tn a year. The US administration simply has got to get the budget under control. It could do this relatively easily by raising tax rates, but the republicans, who control the House, are blocking this. On the other hand, the democrats, who control the Senate, are blocking major cuts in federal expenditure. So there is stalemate.

Secondly, the problem if Congress does not raise the debt ceiling is that there will have to be very significant and immediate cuts in federal expenditure, probably over 20% (I have not seen the US Treasury put a figure on it) which is going to cause major disruption to the US economy. A period of (albeit probably temporary) deflation is not going to help a world barely coming out of recession. It is going to be particularly bad news if it pushes more US financial institutions into distress and insolvency. This also seems to be an unknown. The only way to handle the budget deficit is on a planned basis, not by a single big hit taking place overnight between Tuesday evening and Wednesday morning.

So if a deal can't be reached, the problem is not default on US sovereign debt, but default on commercial debt in the US brought on by deflation, and its domino effect on the world financial system.

The smart money of course is on the House and the Senate doing a deal some time next week.

Thursday, 14 July 2011

MPs get tough

Update: That was quick. It appears that a visit from the Deputy Serjeant at Arms was sufficient to persuade the Murdochs to appear next Tuesday after all. Quite what they think they have achieved by their side show before appearance is not clear.

There has been plenty of hypocrisy from the leaders of all the main parties in the phone "hacking" scandal involving the News of the World, and Gordon Brown's attempted explanation yesterday of his earlier close links with the newspaper proprietors concerned was both to type and frankly ludicrous. However this affair is now throwing up some very interesting legal and constitutional issues.

This is because the Culture, Media and Sport Select Committee of the House of Commons is reported to have ordered this morning the Serjeant at Arms to issue formal summonses to Rupert Murdoch and his son James to appear before them on Tuesday, the Committee having had their earlier informal invitations to appear refused by the two. There has been some suggestion, most recently on the BBC's website, that because the Murdochs are American citizens they can ignore the summonses.

In my view that is wrong, and that to ignore the summonses would be extremely foolish with respect to the Murdochs' business interests in the UK.

The House of Commons has the same powers at common law as courts of law to summon attendance of people before them and for the production of papers by them. A failure to obey such a summons is a contempt of Parliament (in the case of a summons by the House of Commons) or a contempt of court (in the case of a summons by a court). Such a contempt is punishable by a fine or imprisonment. There is no need for the House of Commons to apply to court for the levying of such a fine or for imprisonment: upon finding contempt it can of its own motion commit a person to the Tower of London, or another place of detention, for imprisonment should it wish, or levy a fine.

The House of Commons has, by its standing orders for public business, delegated the power to summon people and papers to a number of its select committees. The Culture, Media and Sport Select Committee is a departmental select committee established under standing order 152, and under order 152(4)(a) it is one of the committees to which that power has been so delegated. So the summonses issued by the committee are punishable as a contempt in the event of non-compliance.

I explored international jurisdictional issues involving courts of law in articles on the conflict of laws and on last year's Liverpool football club litigation. The principles concerning judgments of the House of Commons are similar. Presumably the BBC's reporter considers that contempt of Parliament may only be committed by subjects of Her Majesty, but I think they have that wrong.

Any warrant for commitment or fine issued by the House of Commons would not be enforceable in or by foreign jurisdictions. However, in my view it may be enforced against anyone within the United Kingdom and against any possessions within the United Kingdom. The fact that someone is a foreign citizen does not prevent them, whilst in the United Kingdom, being arrested, fined and imprisoned under a warrant of the House of Commons, any more than a foreign citizen remaining in the United Kingdom may escape arrest, trial and imprisonment for an offence committed whilst here. International law on such matters generally works on the basis of "my gaff, my rules" (to quote the "pub landlord" Al Murray). On criminal matters, there are various extradition treaties under which a foreign citizen who flees may be compelled by his own courts to return to the place where a serious offence was committed for trial, but that does not apply in this case.

So if either of the Murdochs fails to appear and remains in the United Kingdom, he may be arrested. Their options now are to appear, or to leave the UK. Leaving means in theory never setting foot within the UK again. But even if they leave, a fine may be levied against their assets within the UK, which includes by all accounts a large equity stake in a number of UK newspapers. Furthermore, a failure to appear before the committee may also affect any "fit and proper person" tests to which their UK-based activities are subject in the future.

So my strong guess is that (i) they will appear, and (ii) they will thereby make themselves look stupid by refusing the earlier informal invitation.