European briefing | Defining possession in the European Court of Justice

The right of property is part of the accepted core of fundamental rights. Article 17 of the European Charter of Fundamental Rights provides that “No one may be deprived of his or her possessions, except in the public interest and in the cases and under the conditions provided for by law, subject to fair compensation being paid in good time for their loss. The use of property may be regulated by law in so far as is necessary for the general interest.” But this right poses challenges when it comes to economic regulation. If the right is broadly understood, almost every sort of business regulation may be vulnerable to attack.

There is a second conceptual puzzle in such cases. Our core conception of ‘possessions’ is of physical things: a house, a car, a fistful of coins. But the boundaries must be drawn much wider than that, to cover such intangibles as intellectual property rights and, indeed, contractual rights (for what, after all, is cash at the bank except a contractual right to be paid by the bank?). At this point the law starts to chase its own tail: for it is the law itself that creates and defines these incorporeal “possessions” and it can hardly be expected that they will be unlimited. How then is one to distinguish between the limitations inherent in the grant of property rights, and a law that restricts a right? Those limitations that are inherent in the grant of a right (part, as it were, of its DNA) do not, on the face of it, bring article 17 into play at all, whereas regulations on the use of property once granted do. How then is one to tell ?them apart?

More than commercial interest

The ECJ grappled with both these difficulties in Case C-283/11 Sky Osterreich GmbH (Grand Chamber, 23 January 2013). In 2007 the ECJ first introduced rules which provided for exclusive broadcasting rights. They required broadcasters who acquired exclusive rights to allow brief clips to be used in other broadcasters’ programmes. They could charge no more than the out-of-pocket costs of providing the feed. That regime was continued in 2010, with minor changes (for instance, making it clear that the clips could only be used in “general news” programmes). In proceedings in Austria, Sky – which had acquired exclusive rights to broadcast Europa League matches for 2009 and 2010 – maintained that the provisions for compulsory grant of licences to others interfered with its property right.

The ECJ first considered whether article 17 applied at all. It started from the proposition that for there to be a “possession”, there must be something more than a commercial interest. Drawing on existing case law, the ECJ defined property as “rights with an asset value creating an established legal position under the legal system, enabling the holder to exercise those rights autonomously and for his benefit”.

Although it accepted that Sky had more than a mere economic “interest”, the ECJ did not think that it had acquired an established legal position, because since EU legislation required national law to make exclusive broadcasting rights subject to rivals’ right to show short clips. In itself, this reasoning risks being circular. But closer examination shows that the ECJ had something slightly different and more convincing in mind. The point it was making is that Sky had acquired its rights at a time when the relevant regime had already been set up. It had lost no right that it had ever possessed. It had elected to obtain rights that were already “encumbered”. So understood, the ECJ’s reasoning seems soundly practical. Rather than attempting some formal distinction between “grant” and “restriction”, it defines “restriction” concretely and chronologically: there is restriction only if a particular person actually enjoys rights at one time which are later cut down. The mere fact that a person acquires less extensive rights today than he might have been able to acquire five or ten or 20 years ago is not relevant. To amount to a restriction, something must actually have been lost.

Notably thorough

Having reached this conclusion, however, the ECJ nevertheless went on to consider whether the rule could be justified as a proportionate interference with the right, should that have been necessary. It held that it could be. As Benedikt Pirker perceptively comments at www.europeanlawblog.eu, the ECJ – which has sometimes been criticized for taking a glib or slapdash approach to this sort of question – was notably thorough and careful on this occasion. It offered a full explanation of the reasons for its conclusion that the rule was justifiable.

Yet, despite all the complexity, it might be thought that the real key in such cases is likely to lie, as it did here, in the ‘fair balance’ test. In cases involving EU freedoms the key stage in the proportionality analysis is the stage at which the court asks whether the objectives could be satisfactorily achieved by a less restrictive method. That seems not to be so in property cases, where the ECJ is quick to conclude that less restrictive means would have meant a less effective measure. It is not in the play of means and ends, but in the more fundamental balancing of inconsistent objectives, that the battle is fought. The fact that the measure here evidenced a carefully calibrated compromise between the right-holder and those seeking to use short clips seems to have been crucial in the ECJ’s decision: it fairly balanced rights, and as such it passed muster.