Copyright Amendment Bill: two-phase proposal; "Debt Intervention" National Credit Amendment Bill: new draft

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Trade and Industry

08 May 2018
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

Copyright Amendment Bill:
The Department of Trade and Industry (DTI) presented its proposals for a two-phase approach to amending the Copyright Act: Phase 1 would focus on the Copyright Review Commission recommendations.

DTI proposes retaining the Act’s fair dealing doctrine for now due to the contestations and competing views about fair use. DTI is aware of the innovative nature of fair use and its influence on economic growth and development but this policy issue needs further debate. DTI will only consider the 'fair use' doctrine during Phase 2 as it needs to be dealt with in depth to the same extent as the Farlam recommendations on the music industry. For people in the libraries and archives, fair use speaks to access and is important for development but for a publisher it is a threat to livelihood. These competing views need to be taken into account, and there are other policy factors that have not yet been dealt with in the same way DTI has dealt with musicians. If the proposed two-phase approach is adopted by the Committee, Phase 2 will address all policy issues that have not been dealt with to the extent that the Farlam recommendations were dealt with. The private copy levy had not been included in the Bill, but it was raised in the public hearings. The private copy levy requires further debate.

For Phase 1, DTI is saying that musicians and other role players in that industry have been deprived of their rights, incentives and economic benefits for many years. Musicians do not have enough rights and they have not benefited from the current legislation, hence the need to tighten it up. The Copyright Review Commission provides a basis to address this. Although other sectors are important, it is proposed that the music industry within which much work has been done, where lessons have been learnt should be prioritised as a quick win. With other creative sectors such as painters, photographers, sculptors, more work still needs to be done. DTI proposes that it spend the next year debating fair use. There are strong debates with diverse opposing views. The issues for people with disabilities remain core, but they are currently not provided for sufficiently in the Bill. DTI will look at measures to see how they can be accommodated in the Amendment Bill.

Members asked if the change in approach was approved by Cabinet and if all Ministers and technical experts supported DTI’s proposal for the Copyright Amendment Bill. Due to time constraints, DTI was unable to complete presenting its clause by clause proposals. Committee members were asked to take the DTI presentation to their party caucuses for consideration.

'Debt Intervention' National Credit Amendment Draft Bill
The Parliamentary Legal Advisor presented the newly revised Bill (Draft 6). Once the Committee gives the go-ahead on Draft 6, the Bill may then be certified. She went through the concerns raised by the public and noted how each had been addressed. Some key points were:
- On deprivation of property, the Bill provides a debt intervention measure for the targeted group as failure to do so amounts to unfair discrimination on socio-economic reasons;
- Negative impact of the Bill has been minimised including: systems, economic and moral hazard;
- The Bill provides for over-indebtedness criteria – previously this was not accounted for in the Bill;
- Procedural fairness is made clear in the Bill;
- The Bill has a compelling justification for retrospective deprivation of property;

Consequences for consumer and credit providers:
- the consumer may not enter into more credit agreements and the credit provider may not litigate;
- no more obligations whether from common or contract law;
- applicant must attend financial literacy or capability training
- applicant may apply for rehabilitation to escape the limitation period granted that all cost of credit has been paid as of the date of order, training completed and financial circumstances improved.

Meeting report

The Chairperson acknowledged the presence of the Department of Arts and Culture.

Subcommittee Report on Copyright Amendment Bill flagged clauses
Ms L Theko (ANC) reported that the Subcommittee had a fruitful meeting and a report had been consolidated. The Minister of Arts and Culture had been invited and he had delegated officials to attend meetings until the Bill is finalised. She requested that the Department of Arts and Culture work hand in hand with the DTI, and outline any concerns where consensus has not been reached – those would then be dealt with in the Committee. She asked the Committee to adopt the Subcommittee Report, which it did.

Farlam Copyright Review Commission recommendations: briefing by DTI
Dr Evelyn Masotja, Deputy Director-General: Consumer and Corporate Regulation, explained that the Subcommittee had requested that DTI present its proposed approach to some of the clauses in the Bill based on the Farlam Copyright Review Commission recommendations. DTI would identify the other clauses that still required further research for approximately a year.

She emphasised that DTI is concerned about the challenges impacting creators in the country because people were not managing to make a livelihood and they were being exploited in the industry. The challenges are still pertinent. There is policy that still needs to be addressed, for example “fair use” where there are still competing views and tensions. For people in the libraries and archives, fair use speaks to access and is important for development but for a publisher it is a threat to livelihood. These competing views need to be taken into account, and there are other policy factors that have not yet been dealt with the same way DTI has dealt with musicians. Other concerns such as the private copy levy were not included in the Bill, but it was raised in the public hearings. The private copy levy requires further debate.

DTI thus proposes two phases to amending the Act: Phase 1 focuses on the Farlam Report and its recommendations. DTI still needs to consider how it may include people with disabilities. She stated categorically that for now fair use will not be an option. It will retain the fair dealing doctrine currently in the Copyright Act given the contestation. DTI is aware of the innovative nature of fair use and its influence on economic growth and development. This policy issue still needs to be debated. Fair use is not an option that DTI wants to take up at this stage. It will only look at it extensively in Phase 2 - if the proposed two-phase approach is adopted by the Committee. Phase 2 will address all policy issues that have not been dealt with in-depth now when compared to the extent that the Farlam recommendations have been dealt with.

For Phase 1, DTI is saying that musicians and other role players in that industry have been deprived of their rights, incentives and economic benefits for many years. Musicians do not have enough rights and they have not benefited from the current legislation framework, hence the need to tighten it up. The Copyright Review Commission (CRC) provides a basis to address this. Although other sectors are important, it is proposed that the music industry within which much work has been done, where lessons have been learnt should be prioritised as a quick win, hence the Farlam Report. With other sectors (painters, photographers, sculptors, etc.), more work still needs to be done. So DTI proposes that it spend the next year debating fair use, but with musician issues such as royalties, collecting societies, and contracts are sorted out – this is a quick win. There are strong debates with diverse opposing views. The issues for people with disabilities remain core, but they are currently not provided for sufficiently in the Bill. DTI will look at measures to see how they can be accommodated in the Amendment Bill.

DTI appealed to the Committee that musicians be made aware that collecting societies would now be regulated; their royalties would be paid. The proposed phased approach would be a much more expeditious process.

The Copyright Review Commission recommendations were:
- The right to communicate literal and musical works to the public and the right to make available copies of sound recordings;
- Allow the Registrar to take over the administration of any relevant collecting society;
- Allow for one collecting society per set of rights;
- All music-rights collecting societies to fall within the ambit of the regulation issued under the Act;
- Retention of music usage information to be compulsory for essential music users;
- Rights holders to engage the Copyright Tribunal in disputes about the appropriate tariffs to be applied

Needle-time divided equally between the owners of the copyright in the sound recordings and owners of the neighbouring right to needle time. DTI is looking at the best approach that will not disadvantage the musicians. The matter was flagged by the Subcommittee and DTI is working on it.

DTI make the following proposals:
- Remove IP Tribunal provisions and replace with Copyright Tribunal and strengthen the provisions
- Give certain powers to the Commissioner and the DTI
- Widen the scope of the Copyright Tribunal and its mandate
- Requested Companies and Intellectual Property Commission (CIPC) to advise which clauses must be removed. This was flagged as the proposal comes with issues that might infringe on the Patent Act.
- In terms of the blind and visually impaired, the DTI proposed that they are included
- Ratification of treaties is underway, and the Bill can be ratified before the domestic law is in place.

Other proposals included:
- Administration fees must be regulated – South Africa’s fees are higher than anywhere else in the world
- Royalty rate – there are significant gaps; re-look at the royalty rates as they are among the world’s lowest.
- Retention of royalties – how these can be retained by the collecting societies and the longevity of retention must be reviewed. There must be a certain time period a collecting society can retain an artists’ royalty.

On local content, the CRC report recommended the local content quota for radio stations should be 80% for public broadcasters and 60% for private broadcasters. In 2016, the SABC announced a 90% local content quota for public broadcasters only to be subsequently withdrawn. Local content is not in the Bill as it falls under the Department of Communication mandate.

On fair use versus fair dealing, the Bill provided for the former while the Act was based on fair dealing. Fair use enables legitimate use of copyrighted materials and permits certain uses without the copyright holder’s permission, whilst fair dealing is not even defined in the Act. With fair use, users can use copyright work without permission or payment when the benefit to society outweighs the cost to the copyright holder. This exception is considered an infringement under fair dealing which is a much more closed list for exceptions and usage of copyright and it is only fair if specifically provided for in the Act. Fair dealing limits the digital space; it is outdated and provides no flexibility and requires constant updating. In contrast, the fair use test determines the fairness in using the material and countries that make use of fair use are innovative with evidence of economic growth.

The Chairperson indicated that due to time constraints, DTI would have to cut short its presentation. Members would take the DTI presentation to their party caucuses for consideration.

Discussion
Mr D Mahlobo (ANC) said that the Chairperson has given guidance on the way forward. The presentation in the main was about the change of approach by DTI. He wanted to know when did Cabinet sit and change the approach or approve it – is this a Cabinet decision or not? He was uncertain if there was a mandate for DTI to do this. He asked if all Ministers are on board and if the technical people are supporting DTI’s proposed approach. Only then the Committee will be able to make an informed decision appropriately.

Ms P Mantashe (ANC) said she did not understand the DTI proposal about Phase 1 and 2. Would that not delay the work further? She asked why this was not proposed in the Subcommittee.

The Chairperson said that when the Bill was first tabled, it was noted that the Intellectual Property Laws Amendment Bill had two phases. The Committee agreed that it will have a base and then add onto that base.

Dr Masotja confirmed.

The Chairperson said that with respect to the cabinet decision, the DDG is only the DDG to the Minister. Those questions would have to be directed to the Minister. She noted the Minister had tabled the Bill in Parliament. Therefore, it is within Parliament’s parameters now, and only Parliament will decide what to do with it. At this point, the Minister may only withdraw the Bill or Parliament can send it back. That is the legal position of the Bill.

Ms L Theko (ANC) said that the Subcommittee heard the proposal. She asked that the Portfolio Committee allow the Subcommittee to deal with the DTI proposal. No decisions will be taken by the Subcommittee. Only after the Subcommittee has dealt with the proposal will it present its position to the Portfolio Committee.

Mr B Radebe (ANC) said that now that DTI has presented it, it must be referred to the Subcommittee for consideration.

Dr Masotja referred to IPPLA, saying DTI supports the Department of Science and Technology (DST) legislation on indigenous knowledge. DTI had to work with DST on timelines and wait for IPPLA to come into operation as it provides strongly for constitutional mechanisms needed to strengthen DTI’s legislation. The DTI’s constitutional mechanisms are not very strong and DTI will be working very closely with DST on this.

The Chairperson said now that DTI has made it clear what was causing the delays (waiting for the DST legislation), she wanted to know within this piece of legislation, what is impeding the work that has been done thus far. The Department can respond to this at the Subcommittee level. She thanked the DDG and her team and the Department of Arts and Culture for its presence.

Draft 6 of National Credit Amendment Bill: briefing
Adv van der Merwe said that this is a new draft before the Committee. Comments have been taken into account from the public hearings and discussions with stakeholders. Once the Committee gives the go-ahead on Draft 6, the Bill may then be certified by the Chief Parliamentary Legal Advisor.  

She took the Members through the main concerns raised by the public:
• Constitutionality:
- Equality:debt intervention is available to all natural persons as well as to persons who own joint estate.
- Deprivation of property: the rationale for this must be clear – this is the failure to provide a debt intervention measure for this group of consumers amounts to unfair discrimination based on socio-economic reasons. Draft 6 has ensured that the negative impact where possible is minimised.
- Proportionality: previously there was no requirement for the consumer to be over-indebted, that has now been included – over-indebtedness is one of the key requirements to qualify for debt intervention. The Bill now ensures that the role of the credit provider and the consumer are not ignored.
- Retrospectivity: to make the Bill retrospective is not unconstitutional but the fact that the Bill affects a constitutional right is significant. A retrospective deprivation of property could be seen as a more severe form of deprivation, thus the Bill must have a compelling justification and a clear, fair and certain process. People with assets are able to get a fresh start through sequestration but the same measure is not available for people without assets. This is what the retrospectivity of the Bill is trying to address. Legal advice cannot guarantee that it is unconstitutional even if a second opinion is sought on this; it will be at the discretion of the court to decide. A ‘retrospective clause’ had been added so if the Bill goes to the Constitutional Court and the Court strikes down the retrospectivity provision, it needs only to remove that clause. However, Adv van der Merwe highly doubted that the Court will do so as the clause is important because of the unprotected rights which the Bill attempts to protect.

• Reckless lending reporting: What has changed is that debt counsellors must always consider if a credit agreement could be reckless. The current Act states that debt counsellors must consider reckless lending only if the customer asked. Secondly, if there is reasonable ground for suspicion of reckless lending, debt counsellors must report – before there was no requirement to report. If there is a debt review, the report must be sent to the magistrates’ court. If there was no debt review, the report must be sent to the NCR.

• Administrative penalties: This was taken out because it was noted that this is already covered in the Act.

• Suspension of reckless lending by NCR: getting such credit agreements declared reckless is a delayed process. One of the suggestions was that the regulator be given the power to suspend the reckless credit agreement but the concern was that this makes the NCR both the investigator and adjudicator. DTI, NCR and the Tribunal had researched any precedent but they could not find any other regulator in the world that can both investigate and adjudicate. This was supported by the De Lange v Smuts CCT 26/97 case. Therefore the Committee was cautioned on the constitutionality of such a provision.

As a way forward, NCR proposed a mediation process, and the Tribunal proposed specialised consumer courts to deal with appeals. Her proposal was that the Committee must determine where the delays are.  NCR indicates why these matters are taking so long, and the Committee looks at whether the NCR has the capacity to investigate and whether the Tribunal has the capacity to adjudicate.

Adv van der Merwe outlined the process for debt intervention:
 The application is free and will be done through the NCR – in a process similar to debt review. The NCR will provide counselling to the consumer on financial literacy. (The training aspect is regulated via regulations which Treasury is already developing). There are two main outcomes from the evaluation:
• Rejection of the application; or voluntary debt rearrangement; or if credit agreements were granted recklessly, they may be referred to the Tribunal – same process as debt review.
• Confirmation that the consumer is over-indebted. This leads to these options;
- If the matter can be solved within five years, it will be referred to the Tribunal for rearrangement of obligations (extended period of payment, lower monthly payments, etc.) – same as a referral by a debt counsellor.
- If it cannot be solved within five years, the application is referred to the Tribunal for other debt intervention options such as suspending part or all of the obligations for 12 months. If the person does not earn enough to suspend only part of the debt, then all credit agreements will be suspended. If after 12 months the person can pay, then that will be considered. However, if after 24 months there is no improvement in financial circumstances, after looking at what the consumer has done to improve the situation, the debt may be extinguished.

In Clause 14, the applicant may apply to the NCR to be declared over-indebted and have their obligations rearranged. If the credit provider has acted 100% in accordance with the Act, this is where fairness in the process took a stand. The Regulator will play the role of “debt counsellor” for debt intervention applicants that are:
- over-indebted as natural persons
- only have unsecured credit agreements
- is not sequestrated or under administration
- has a total unsecured debt of a maximum of R50 000
These amounts would need to be prescribed again from time to time.
The debt review process followed by the Regulator will be long term but the extinguishing may happen after 24 months. On extinguishing, the Committee must still debate whether it should be 12 or 24 months

Penalties have remained the same except for offences related to the actual debt intervention measure which is two years. Reckless lending as an offence is removed, because there are too many different calculations possible and there is legal uncertainty. Until that is fixed it is difficult to make it an offence.

The Chairperson said the Committee would commence reviewing the revised Draft Bill the next day.

The meeting was adjourned.
 

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