VT4 Ltd. v. Vlaamse Gemeenschap: Court of Justice ruling heralds new age of European broadcast and advertising deregulation.

• Author: Trammel, Keith
• Position: Recent Rulings of the European Court of Justice

1. INTRODUCTION

   VT4 Ltd. v. Vlaamse Gemeenschap (VT4) is the latest in a series of European Court of Justice (ECJ) decisions announcing the end of strict national regulation of television markets in EC Member States. VT4 clarifies the earlier ECJ decision, Commission v. United Kingdom, which held that broadcasters come under the jurisdiction of the state in which they are established. In so doing, VT4 sharpens the distinction that Commission v. Belgium and the Joined Cases E8/94 and E9/94 have drawn between EC Member State's regulatory obligations under Articles 2 and 3 of the EC Television Directive. Although the Television Directive purports to require only minimal deregulation, the ECJ has left EC countries little alternative other than to embark upon wholesale deregulation of national television broadcast and advertising markets. This deregulation inevitably extends far beyond even the minimal provisions contained in the Television Directive and heralds a resounding victory for proponents of a single broadcast market in Europe.

2. FACTS AND HOLDING

   VT4 arose from Belgium's (the Flemish Community) refusal to grant VT4 Ltd. permission to broadcast television programming on Flemish cable networks.(1) VT4 Ltd. is a television broadcasting company established and licensed in London under British law.(2) The company operates a branch office in Flanders, where it conducts advertising negotiations. Since February 1, 1995, VT4 Ltd. has broadcast programs via satellite from the UK exclusively to the Dutch-speaking Flemish public in Belgium.(3)

   VT4 Ltd.'s attempt to access the Belgian cable network directly challenged the cable monopoly that Belgium's Cultural Ministry had previously granted to the privately owned Vlaamse Televisie Maatschappij NV (VTM). Under this monopoly, VTM enjoys exclusive rights to broadcast television advertising in Belgium's Flemish community.(4)

   Flemish legislation authorizing the grant of this monopoly was consolidated by the Decree of the Government of the Flemish Community of 25 January 1995, later ratified by the Decree of the Council of the Flemish Community of 23 February 1995 (the Codex).(5) The Codex incorporates provisions of the earlier Decree of 28 January 1987 Concerning the Retransmission of Radio and Television Programs on the Radio and Television Cable Networks (the 1987 Decree).(6)

   Pursuant to Article 80, paragraph 2 of the Codex, "the Flemish Government may authorize only one of the broadcasters belonging to it or approved by it to broadcast commercial and non-commercial advertising aimed at the Flemish Community as a whole.(7) In addition, Article 41, point 1 of the Codex stipulates that "only one private broadcaster may be authorized by the Flemish Government to broadcast to the entire Flemish community."(8) To be eligible for this government authorization, Article 44(1) of the Codex requires that publishers of Dutch-language newspapers and magazines subscribe 51% of the broadcaster's capital.(9) Article 39(2) of the Codex incorporates the provision of the 1987 Decree requiring government-authorized broadcasters to locate their head offices in either Flanders or Brussels.(10) Together, these provisions permit only one private company having its head office in Flanders or Brussels, and 51% of whose capital is held by Dutch-language publishers to broadcast from Belgium all television advertising targeted at the Flemish community. As a consequence of the 1987 Decree and relevant provisions of the Codex, VTM is the only private television company authorized by the Flemish Cultural Ministry to broadcast Dutch-language television programming and advertising to the entire Flemish community.(11)

   The Flemish Cultural Ministry regulates transmissions over Belgium's radio and cable television networks. The Cultural Ministry's current cable regulations appear in the Flemish "Executive Decree of 4 May 1994 on Television and Radio Cable Networks, referred to as the "Cable Decree."(12) Article 10(1), number 2 of the Cable Decree prohibits the operation of cable distribution networks and forbids modification to any programming without the prior authorization of the Flemish Executive.(13) Article 10(2), number 4 of the Cable Decree provides that a cable distributor may retransmit "[t]elevision and radio programs of broadcasters licensed by the government of a [M]ember [S]tate of the European Union other than Belgium, provided that the broadcaster concerned is subject, in that [M]ember [S]tate, to proper supervision of broadcasters broadcasting to the public of that [M]ember [S]tate."(14)

   Pursuant to Cable Decree Articles 10(1), number 2, and 10(2), number 4, VT4 Ltd. requested permission from the Flemish Cultural Ministry to broadcast on Belgium's cable television distribution network. Prior to requesting such access, VT4 Ltd. had obtained a license from the UK to broadcast Dutch-language programming via satellite from British territory to Belgium.(15)

   The Minister of Cultural Affairs refused VT4 Ltd.'s request for access, giving two reasons for its decision. First, the Cultural Minister regards VT4 Ltd. as outside the scope of the Cable Decree because VT4 Ltd. is not licensed by Belgium to broadcast to the Flemish Community.(16) Only VTM is authorized to broadcast cable programs to the Flemish Community.(17) Second, Flemish authorities do not consider VT4 Ltd. a broadcaster subject to the broadcasting and licensing laws of another Member State. Instead, Belgium considers VT4 Ltd. a Flemish broadcaster established in the UK merely to circumvent Flemish regulations. For these reasons, by Ministerial Order, VT4 Ltd. was refused access to the Flemish cable network.(18) The Belgian Raad van State (Conseil d'Etat) intervened by suspending the Ministerial Order and referred the matter to the ECJ for a preliminary ruling to determine which Member State enjoys jurisdiction over VT4 Ltd. under the Television Without Frontiers Directive (Television Directive).(19)

   The ECJ answered the Raad van State's request for a preliminary ruling, holding that under Article 2(1)(20) of the Television Directive, the jurisdiction of a Member State is based on a broadcaster's connection to a Member State's legal system.(21) The ECJ held that a broadcaster's connection to a state's legal system "overlaps the concept of establishment as used in art. 59 of the EC Treaty."(22) Thus, Articles 2(1) and 3(2)(23) of the Television Directive are understood "as meaning that a television broadcaster comes under the jurisdiction of the [M]ember [S]tate where it is established."(24) If a television broadcaster is established in more than one Member State, jurisdiction resides with the Member State in whose territory the broadcaster performs its central activities, in particular, where the broadcaster formulates program policy and makes final assembly of its programs prior to transmission.(25)

   The ECJ also emphasized that the mere fact that VT4 Ltd. broadcasts programs and advertising exclusively for a Flemish audience does not by itself demonstrate that VT4 Ltd. is not established in the UK.(26) In the ECJ's view, the EC Treaty "does not prohibit an undertaking from exercising the freedom to provide services [in a foreign state] if it does not offer services in the [M]ember [S]tate in which it is established."(27)

3. RELATED LEGAL AUTHORITY

   VT4 gave the ECJ an opportunity to review and clarify earlier rulings in Commission v. United Kingdom (United Kingdom) and Commission v. Belgium (Belgium). In both earlier cases, the ECJ confronted ambiguities in the newly adopted Television Directive.(28) United Kingdom resolved questions concerning which Member State may exercise jurisdiction over broadcasters within Article 2(1) of the Television Directive, and Belgium addressed the related topic of Member State regulatory obligations under Television Directive Articles 2(2) and 3(2).

   United Kingdom promulgated the principle that a television broadcaster's place of establishment determines which Member State is required to exercise jurisdiction over that broadcaster pursuant to Article 2(1) of the Television Directive.(29) In United Kingdom, the EC Commission complained that section 43 of the UK 1990...