The article by Kumarov Nurzhan Deputy Chairman of the Chamber of Patent Attorneys of Kazakhstan is devoted to the analysis of the current situation in Kazakhstan regarding possible claims for compulsion to conclude a contract for the payment of funds to pay remuneration

Topical Issues of Application of Article 26 of the Law of the Republic of Kazakhstan On Copyright and Neighboring Rights

One of the topical issues of the application of the law on copyright is the collection of remuneration due to authors, performers and producers of phonograms for the reproduction of audiovisual works or sound recordings for personal purposes.

Clause 1 of Article 26 of the Law of the Republic of Kazakhstan On Copyright and Neighboring Rights allows reproduction of the audiovisual work or the sound recording of the work for personal purposes and without income without the consent of the author of the work, the performer, the producer of the audiovisual work and the producer of the phonogram but with payment of remuneration to them.

The remuneration for the specified reproduction shall be paid by the persons who manufacture or import the equipment and material media used for such reproduction.

The Law stipulates that the amount of remuneration and the terms of payment thereof shall be determined by an contract between the specified manufacturers and importers on the one hand and organizations that manage the property rights of authors, producers of phonograms and performers on a collective basis, on the other hand, and if the parties fail to conclude such a contract – by the authorized body of the Republic of Kazakhstan.

In practice, there are cases when it is necessary to conclude a contract between manufacturers/importers and organizations that manage the property rights of authors(hereinafter referred to as ”Organization”) is the subject of legal proceedings. The organization often resorts to such a judicial method of protecting rights as compulsion to conclude a contract, and goes to court when an attempt to pre-trial settlement of the dispute produces no the result desired.. At the same time, manufacturers and importers adhere to the position that the conclusion of the contract should proceed from the freedom-of-contract doctrine.

This creates a situation where both sides are right in their own way. Now I would like to understand the situation, to study the arguments and reasons of the parties.

The provisions that indicate the conclusion of a contract between manufacturers/importers and the Organization as the basis for payment of remuneration are specified in the clauses 2 and 5 of Article 26 of the Law, as well as in the Instructions for Application of Minimum Remuneration Rates for Performers and Producers of Phonograms, approved by the Order of the Minister of Justice of the Republic of Kazakhstan No. 461 of 10.09.2019 (hereinafter referred to as ”Instruction”).

Clause 10 of the Instructions stipulates that the payment of funds to pay remuneration for the reproduction of phonograms for personal purposes without the consent of the performer and the producer of the phonogram, which is payable by persons importing equipment and material media used for such reproduction, shall be carried out on the basis of a contract concluded by the importer with an organization that manages property rights on a collective basis.

At the same time, manufacturers and importers quite reasonably believe that the norms established by clauses 2 and 5 of Article 26 of the Law and clause 10 of the Instructions indicate only the procedure for raising funds on the basis of a contract concluded between the parties. The meaning of these norms slall not oblige any party to enter into a mandatory contract.

As it is known, the RoK Civil Code gives a clear answer to the question, how should the norms of law be interpreted? Thus, Article 6 of the RoK Civil Code (General Part) provides that the norms of civil legislation shall be interpreted in accordance with the literal meaning of their verbal expression.

Therefore, there is some truth in the arguments of manufacturers and importers who claim that the above-mentioned norms of the Law and Instructions contain no provisions obliging them to enter into a contract with the Organization.

As an example, we can cite the norms of sub-clause 1) of clause 2 of Article 92-9 of the RoK Water Code, as a legal basis (mandatory norm) for compulsion to conclude a contract in court. According to this norm, water consumers using water supply and (or) sanitation services in settlements are obliged to conclude a contract for water supply and (or) sanitation with an organization for water supply and (or) sanitation.

The specified norm of the RoK Water Code is consistent with the provisions of Part 1 of Article 399 of the RoK Civil Code (General Part) where it is expressly stated that in cases when, in accordance with this Code or other legislative acts, the conclusion of a contract is mandatory for one of the parties, this party must send the other party a notice of acceptance, or refusal of acceptance, or acceptance of the offer (draft contract) on other terms (protocol of disagreements to the draft contract) within thirty days from the date of receipt of the offer, unless another term is established by the Law or agreed by the parties.

Thus, based on the meaning of the provision of part 1 of Article 399 of the RoK Civil Code, the obligation to conclude a contract for the parties should follow from the norms of the RoK Civil Code or other legislative act, which is consistent with the provisions of sub-clause 1) of clause 3 of Article 61 of the RoK Constitution.

Now a few words on the application of clause 10 of the Instruction which was developed and approved on the basis of clause 1-1 of the Decree of the RoK Government No. 1373  dated 23.11.2011.In accordance with the RoK Law On Legal Acts, the Instruction refers to derived types of regulatory legal acts and details the application of the Law in any sphere of public relations. This means that the Instructions cannot set higher requirements for any types of public relations than those established at the level of a legal act.

However, in practice, there are often cases when manufacturers and importers have concluded contracts with organizations that manage the property rights of authors from countries that are members of the Eurasian Economic Union.

The Agreement on the Procedure for Managing Copyright and Neighboring Rights on a Collective Basis stipulates that in cases where the use of objects of copyright and (or) neighboring rights in accordance with the Law of the member states is allowed without the consent of the copyright holders, but with the payment of remuneration to them, the organization enters into contracts with users or other persons who are obliged by the Law of the member-states to pay funds for the payment of remuneration, and collects funds to pay remuneration to the copyright holders.

Thus, the international agreement adopted within the framework of the EAEU does not directly indicate the obligation to conclude a contract.

Summarizing the above we can draw the following conclusions:

– In accordance with the RoK Constitution, the issues of legal personality of individuals and legal entities, civil rights and freedoms, obligations and responsibilities of individuals and legal entities should be fixed at the level of laws. Consequently, it is possible to compel manufacturers and importers to conclude a contract on the part of the Organization when such a duty is directly established at the level of a legal act.

– The existing provisions of Article 26 of the Law stipulate the obligation to pay remuneration to manufacturers and importers, but not the obligation to conclude a contract.

– Issues of concluding a contract between manufacturers/importers and an Organization shall be based on freedom-of-contract doctrine set out in Article 380 of the RoK Civil Code (General Part).