In part 1 and 2 of our discussion of the ISPs challenge to the Digital Economy Act, we have analysed the grounds for the challenge and the applicable law. In this part 3, we analyse the decision of the High Court.

Ground 1: Breach of the Technical Standards Directive

The Court noted that:

·         ISPs' "initial obligations" depended for their content, as well as for their effect, on the making of an initial obligations code.

·         The Digital Economy Act did not provide for any obligation for technical obligations to be brought into effect; if and when they were to be brought into effect, their content was to be informed according to annual progress reports to be produced by Ofcom and consultation with ISPs, and the actual technical obligations that ISPs might be subject to were not provided for by the Digital Economy Act, which just provided an indicative and non-exhaustive definition of what might constitute a "technical measure".

The Court found that the Technical Services Directive applied only in the event the measure "by itself" had "legal effect for individuals". In other words for the Techincal Services Directive to apply the measure must be binding and must be sufficiently precise and specific so as to be enforceable against an affected individual. Applying this to the facts, the Court considered that the contested provisions did not constitute a "technical regulation" so as to require notification under the Technical Standards Directive. On their proper interpretation, the initial obligations enacted by the Digital Economy Act were not yet legally enforceable against any individual, including ISPs such as the claimants. Therefore, they did not have the "legal effect" .

Ground 2: Breach the E-Commerce Directive

The claimants argued that the contested provisions infringed Articles 12, 15 and 3(2) of the E-Commerce Directive.  

Article 12, E-Commerce Directive

The Court rejected the argument that Article 12 should be interpreted widely. The judge said that the specific liabilities in the Digital Economy Act which the claimants said were inconsistent with Article 12 arose as a result of the specific scheme established by the Digital Economy Act. The core obligations of ISPs under the Digital Economy Act, such as receiving CIRs or compiling CILs, did not constitute any liability "for the information transmitted", that is, in respect of the underlying infringement of copyright that had given rise to CIRs and CILs. The liabilities or costs referred to by the claimants were wholly dependent upon the regulatory regime under the Digital Economy Act and were essentially parasitic on the core obligations of the ISPs. In that sense they were one stage removed from the core obligations and did not, any more than those obligations, constitute any liability "for the information transmitted".

Article 15, E-Commerce Directive

The Court found that the Digital Economy Act did not require ISPs to monitor information in the sense of checking whether the information could lawfully be transmitted, or whether the transmission complied with some other norm regulating the nature of information that could be transmitted.

Article 3, E-Commerce Directive

The Court rejected the claimants' argument since the central premise, that through the Copyright Directive, the law of copyright had been entirely or at least sufficiently harmonised within the EU was incorrect: all references to the Copyright Directive, including its very title, spoke of harmonising "certain aspects" of copyright law, indicating that complete harmonisation lay somewhere in the future.

Ground 3: Breach of Data Protection Directive and E-Privacy Directive

Data Protection Directive

The focus in this ground of argument was on the position of copyright owners, since ISPs' processing of personal data under the contested provisions would be permitted under the Data Protection Directive. Specifically, the claimants argued that the definition of "personal data" in the Data Protection Directive would include IP addresses processed to identify computer users because the persons could be identified through means such as through the courts.

Because of this, and because the CIR might identify the nature of the digital material unlawfully copied, so as to reveal special categories of personal data, the claimants argued that the contested obligations were incompatible with the Data Protection Directive.

The judge proceeded on the basis that the relevant data would be personal data and that some of it would be special data. However, he said that the relevant processing was permissible under Article 8(2)(e) of the Data Protection Directive as being necessary for "the establishment, exercise or defence of legal claims", since that was the precise purpose of the contested provisions. The Court rejected the claimants' argument that Article 8(2)(e) applied only if the data controller was sure, at the beginning and throughout the relevant "processing", that at the end of the processing a legal claim would be brought. (While Article 8(2)(e) applied strictly only to special categories of data, the judge said that it would be absurd if it did not also apply generally.)

E-Privacy Directive

The claimants also submitted that the data processed was "traffic data" for the purposes of Article 2 of the E-Privacy Directive, that the relevant processing did not comply with Article 6, and that the derogation under Article 15 did not apply. However, the judge considered that the processing came within the derogation for processing necessary under Article 15(1). Article 15 should be interpreted so as not to exclude from its scope the protection of the right to property or situations in which authors sought to obtain that protection in civil proceedings.

Ground 4: Breach of Authorisation Directive

The Court accepted one of the two arguments concerning "qualifying costs". It was found that Article 12, standing alone, prohibited in any event "administrative charges" which covered costs extending beyond those identified in that Article.

It was found that "relevant costs" were not "administrative charges"; ISPs did not pay them, but would incur such costs internally in order to discharge statutory obligations under the Digital Economy Act, and the draft Costs Order merely enabled to recover a portion of that from copyright owners. Similarly "case fees" could not be regarded as "administrative charges", since they arose because a subscriber had appealed and were intended simply to ensure that the judicial vehicle for resolving disputes under the Digital Economy Act was adequately funded. However, charges imposed to recover "qualifying costs" would ordinarily be regarded as "administrative charges" and would, in principle, appear to be administrative charges under Article 12. Since the "qualifying costs" did not relate to any of the matters specified under Article 12, they were, therefore, unlawful.

The judge also rejected an argument put forward that the proposal in the draft initial obligations code that it would initially cover only fixed-line ISPs with over 400,000 subscribers, that is, the six largest ISPs, was discriminatory contrary to Article 6 of the Authorisation Directive. He said that Ofcom had proposed this initial qualifying threshold as a starting point, and that this was reasonable and proportionate given that the six ISPs who had more than 400,000 subscribers accounted for 93.4% of the residential and SME broadband market. The -exclusion of mobile network operators was also justified since evidence showed that mobile networks were less conducive to online copyright infringement and internet traffic they carried only represented a very small proportion of the overall file-sharing problem.

Ground 5: Proportionality

The claimants argued that the contested provisions represented a disproportionate restriction on the free movement of services and/or the right to privacy and/or the right to free expression or to impart and receive information, and that the need for the measures to be proportionate flowed from various provisions of the Treaty on the Functioning of the European Union (TFEU), the E-Commerce Directive, E-Privacy Directive, Articles 7 and 8 of the Charter on Fundamental Rights, and Articles 8 and 10 of the European Convention on Human Rights.The Court rejected the defendants' argument that a proportionality challenge was premature since the initial obligations had not been brought into effect and technical measures were not yet in contemplation.

Enough was known of the fundamental regulatory structure of the Digital Economy Act to permit a challenge based on proportionality.

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