[2020] Tribunal 153 (KLR)

Kenya Association Of Hotel Keepers And Caterers (Kahc & another v Kenya Copyright Board; Music Copyright Society of Kenya & 2 others (Interested Parties) (Appeal 1 of 2019) [2020] Tribunal 153 (KLR) (23 January 2020) (Ruling)

Neutral citation: [2020] Tribunal 153 (KLR)

Republic of Kenya

In the Copyright Tribunal

Appeal 1 of 2019

HK Mutai, Chair, W Karimi, E Lenjo & A Okulo, Members

January 23, 2020

Between

Kenya Association of Hotel Keepers And Caterers (Kahc

1st Appellant

Pubs, Entertainment and Restaurant Association Of Kenya (Perak)

2nd Appellant

and

Kenya Copyright Board

Respondent

and

Music Copyright Society of Kenya

Interested Party

Kenya Association of Music Producers

Interested Party

Perfomers Rights Society of Kenya

Interested Party

Ruling

Introduction 1. The first appellant is the Kenya Association of Hotel Keepers and Caterers (KAHC), an organization bringing together duly registered hotels, lodges, camps and restaurants in Kenya. The second appellant is the Pubs, Entertainment and Restaurants Association of Kenya (PERAK), a body representing duly registered pubs, restaurants and discotheques in Kenya.

2. The respondent, the Kenya Copyright Board (KECOBO), is a statutory organization established under the Copyright Act, 2001.

3. The interested parties are the Music Copyright Society of Kenya (MCSK), the Kenya Association of Music Producers (KAMP) and the Performers Rights Society of Kenya (PRISK) all of whom are collective management organizations (CMOs) licensed by KECOBO to collect and distribute royalties on behalf of copyright holders in music and musical works.

Procedural Background 4. On 30 April 2019, the appellants filed an appeal in the form of Form No. CR 18 against the “Rejection of proposed music tariff structure for Hotels and restaurants category for 2019/20. ”

5. The grounds on which the appeal was based were, firstly, that the legal obligation to pay copyright license fees was akin to a tax and as such the basic principles of taxation ought to be applicable to copyright levies and, secondly, that the current copyright licensing regime did not conform to any of the basic principles of fair taxation, namely, equity, efficiency, certainty, proportionality and convenience.

6. The appeal sought orders “That the negotiated MOU tariff be considered and gazette (sic) because it meets all the tenets of taxation. That Technology be adopted as a basis for administration of the new tariff 2019/20”. Attached to the appeal were a number of documents, which were, unfortunately, not numbered in any coherent manner.

7. The appeal was served on the respondent who, on 23 May 2019, filed its Reply to Application or appeal to the Authority under Section 48(2) or 21(1) of the Act. The grounds of opposition to the appeal were that:1. The application is flawed as it does not describe the intended respondent as required by Regulation 18(2) of the Copyright Regulations and form number CR 18 of the Copyright Regulations.2. The tariffs are usually negotiated between CMOs and users. KECOBO only supports the process.3. The appropriate parties in this application should be PERAK, KAHC and the CMOs.4. Public participation and negotiations between industry players including KAHC and PERAK were conducted between July 2018 to February 2019. 5.The resulting negotiated tariffs have been submitted to the Attorney General for gazettement.6. Copyright tariffs are not equivalent to a tax.

8. Attached to the reply were a Statement of Facts dated 22 May 2019 in which the respondent stated, inter alia, that copyright tariffs and taxes were mutually exclusive and not related, that KECOBO supported negotiations between users of copyright works and CMOs as opposed to imposing tariffs, that invitations had been sent to various organizations seeking their views on the proposed tariffs, that stakeholders had been invited for a discussion on the proposed tariffs and that following the meeting, various agreed positions had been communicated to the associations in writing. There was attached an affidavit sworn by George Nyakweba, Chief Legal Counsel of KECOBO, also dated 22 May 2019. Annexed to the affidavit were a number of exhibits on which the respondent relied.

9. Thereafter, on 21 June 2019, the first appellant, KAHC, filed a Notice of Appointment of advocates to act on its behalf. It also filed an affidavit sworn by Mike Macharia, the Executive Officer, in response to the respondent’s grounds of opposition and affidavit. Annexed to the affidavit was an undated document entitled “Memorandum of Understanding Agreement between Kenya Association of Music Producers and Performers Rights Society of Kenya and Music Publishers Association of Kenya and Kenya Association of Hotel Keepers and Caterers and The Pubs, Entertainment & Restaurants Association of Kenya.”

10. The matter was then set for hearing on 18 July 2019, where after hearing the parties, orders were made by consent of both parties that, inter alia, the applicants do serve the CMOs with their pleadings within seven days, and that implementation of the tariffs affecting the applicants be stayed for a period of not more than 30 days after which the tribunal would set a date for a further hearing.

11. Subsequent to that hearing, on 23 July 2019, the respondent filed an application under a certificate of urgency seeking that the orders of 18 July relating to the stay of the tariffs be set aside as they were made in the absence of the CMOs thus occasioning an injustice as the tariffs were central to their operations.

12. This application was followed by an application filed on 24 July 2019 by the MCSK, KAMP and PRISK, seeking inter alia, that they be enjoined as parties in the suit and that the orders of 18 July be reviewed and or set aside. The application was supported by an affidavit sworn by Richard Sereti, the legal officer of MCSK. Attached to the affidavit were a number of supporting documents.

13. The two applications were jointly heard on 25 July 2019, after which the Tribunal issued orders setting aside Order no. 3 of 18 July, directing the interested parties to file their reply within 14 days of service of the pleadings, and directing the appellants to pay 50% of the gazetted tariffs to the interested parties pending the determination of the appeal.

Summary of the Submissions: 14. In their written submissions filed on 30 October 2019, the appellants identified two issues on which they wanted to submit, the first being the role of public participation in legislation and the second being the various principles of taxation. With regard to the role of public participation, they submitted that public participation had to be real and not illusory and that as far as possible, the product of legislation ought to be a true reflection of the public participation. In this instance, they argued that though consultations were done, the incorporation of the various proposals by stakeholders were ignored or not incorporated by KECOBO.

15. On the issue of taxation principles, they submitted that the legal obligation to pay copyright license fees was akin to a tax and that the tariffs as gazetted did not conform to any basic principles of taxation. In this instance, they argued that little regard was given to observing these principles by KECOBO in gazetting the tariffs. As a result, they submitted that they would continue to suffer much prejudice if the tariffs were not revisited whereas the respondents would suffer no prejudice whatsoever.

16. The respondent filed its written submissions on 4 November 2019. In its submissions, it started by noting that it was not in dispute that the applicants’ public performance of copyright works always requires a license and that the license fee is collected by the CMOs on behalf of the copyright owners upon approval and publication by the Attorney General of the tariffs. It then submitted on the two issues of the 2017 MOU and whether the 2019 tariffs published under Legal Notice No. 107 were reasonable. With regard to the MOU, the respondent submitted that since the MCSK was not privy to the MOU between KAMP, PRISK and MPAKE executed on 4 August 2017, MCSK did not have any responsibility under it. Further the decision not to renew the MPAKE licence for 2019 effectively terminated the MOU. There was however, nothing preventing the parties from mutually agreeing to and executing a new MOU.

17. With regard to whether the 2019 joint collection tariffs were reasonable, the respondent submitted, inter alia, that the obligation to pay copyright license fee was prescribed in the Copyright Act and was not related to the obligation to pay taxes. It submitted further that the task of negotiating tariffs was one left to the CMOs and users to negotiate and agree, with the regulator simply supervising and mediating the process. In this instance, the respondent had facilitated the process of tariff negotiation through various stakeholder engagements which the applicants had been involved in. However, the process had not succeeded in the parties reaching an agreement on the proposed tariffs. In light of the fact that the previous gazetted tariff had expired on 31 December 2018, the Attorney General had thus been under an obligation to approve and publish tariffs under section 46A of the Copyright Act.

18. For these reasons, the respondent prayed that if the users and the CMOs could not mutually agree on a tariff then the one provided by the CMOs ought to be adopted and that the Tribunal should find that the tariffs approved and published were reasonable.

19. In their written submissions filed on 29 October 2019, the interested parties submitted on two issues. Firstly, with regard to the issue of whether the respondents were justified in gazetting the tariffs on 1 July 2019, the interested parties submitted that copyright owners were entitled to enjoy the fruits of their labour in the form of the gazetted joint collection tariffs, that to suggest that royalties paid for the use of copyrighted works was akin to tax was misplaced and misguided and that the proposed joint tariffs and the gazetted tariffs were gazetted as agreed and that the claim that the agreed tariffs were never gazetted was untrue.

20. Secondly, with regard to whether the 2017 MOU was binding on the parties, the interested parties submitted that the first interested party was never a party to the negotiations that led to the conclusion of the MOU and could therefore not be bound by it.

21. For these reasons, the interested parties therefore prayed that the appeal be dismissed with costs.

Identification of the Issues: 22. From a reading of the pleadings and submissions made before this Tribunal, two issues arise for determination:1. The validity of the 2017 Memorandum of Understanding.2. Whether the respondent was justified in forwarding the proposed joint tariffs to the Attorney General for publication.

Issue 1: 23. The validity and applicability of the Memorandum of Understanding is an issue that can be dealt with briefly. From the submissions and material placed before the Tribunal, it is clear that the parties to that MOU were the Music Publishers Association of Kenya (MPAKE), PRISK and KAMP together with the appellants herein. A perusal of the MOU shows that clause 5. 3 provided that “This Agreement shall stand terminated in the event the Parties cease to be the representative body of their respective members.” Therefore, one can conclude that its validity ceased when one of the parties to the agreement, MPAKE, did not have its licence renewed by the regulator, KECOBO. As such, it would have been advisable for the appellants to seek to negotiate a fresh MOU as soon as KECOBO licensed a new CMO to represent rights holders. We therefore find that the 2017 MOU has been overtaken by events and is no longer applicable as a basis for the publication of tariffs.

Issue 2: 24. The second issue concerns whether the respondent, KECOBO, was justified in forwarding the proposed tariffs to the Attorney General for gazettement.

25. In order to determine this issue, the Tribunal has carefully considered and reviewed all the submissions, evidence and annexures adduced by all parties herein in support of their claims.

26. The first relevant piece of evidence is Attachment No. 7 to the Appeal filed on 30 April 2019. This document is a letter dated 26 February 2019, entitled “Status of the Tariff Discussion”, from the KECOBO Executive Director addressed to the Chairs of the MCSK, KAMP and PRISK and copied to a number of stakeholders who had participated in the discussions, including the CEOs of the appellants. The letter noted that a partial tariff had been agreed between various stakeholders but that no agreement had been reached on tariffs for:1. Hotels and multi-room/accommodation establishments;2. Aired shows;3. Broadcasting - radio; and4. Broadcasting - television; and5. Restaurants, Bars and Similar Establishments.

27. A perusal of the unsigned document entitled “Joint Collection Tariffs for 2019 and 2020 - Part One” attached to the KECOBO letter confirms that the tariffs for hotels and restaurants, etc. were indeed not a part of the tariffs.

28. The second piece of relevant evidence is the affidavit dated 22 May 2019 sworn by George Nyakweba together with Annexure 8 to that affidavit. In paragraph 16 of his affidavit, Mr. Nyakweba avers “THAT the resultant negotiated tariffs were submitted to the Attorney General’s Office on 29th April 2019 for gazettement. (Annexed hereto is a copy marked Annexure 8)”. A perusal of the Annexure shows that it is in two parts, Annexure 8(a) is the letter of 26 February 2019 from the KECOBO Executive Director, and Annexure 8(b), which is an undated document titled “Proposed 2019 & 2020 Joint Collection Tariffs for KAMP-PRISK-MCSK”. The document is signed by the Chairs of MCSK, KAMP, and PRISK and, in a significant departure from the document annexed to the same letter in the Appellants’ appeal, it contains Tariffs for Categories 13 “Restaurants, Bars & Similar Establishments - sitting capacity” and 14 “Hotels, and Multi-Room/Accomodation Establishments”.

29. The third piece of evidence is the affidavit dated 22 July 2019, also sworn by George Nyakweba, which, inter alia, stated that the tariffs had now been gazetted on 12 July 2019 (see paragraph 7 and annex GN2, which was the cover page of the Kenya Gazette of 12 July 2019 showing that Legal Notice No. 107 - The Copyright Act - Joint Collection Tariffs had been published).

30. The next relevant piece of evidence is the affidavit of Richard Sereti, the legal officer of the 1st interested party/applicant, dated 23 July 2019, sworn in support of the Notice of Motion filed by the Interested Parties on 24 July 2019, together with the attached documents marked Annex R3. One of those documents, which is particularly relevant is the letter dated 11 February 2019 from the CEO’s of KAMP, PRISK and MCSK (the interested parties) to the Executive Director, KECOBO regarding the correct resolution/record of what had been agreed at the consultations held on 7 February 2019 between KAMP, PRISK and MCSK and PERAK and KAHC on the proposed joint tariff 13 on Restaurants, Bars and Similar Establishments. It is also worth pointing out that Mr. Sereti included the KECOBO letter dated 26 February 2019 in his annexures and that the attachment to the letter is identical to that attached to the appellants’ letter and does not feature the signatures found on the attachment to the letter in Mr. Nyakweba’s affidavit.

31. The final pieces of evidence that we considered are to be found in the annexures to the affidavit of Mr. Sereti sworn in support of the interested parties’ “Reply to Application or Appeal to the Competent Authority” filed on 18 September 2019. For purposes of avoidance of doubt, we reproduce the relevant paragraphs of the letter from the CMOs to KECOBO dated 11 February 2019 which stated as follows:We would like to state that what was agreed was as follows:The applicable rate would be the first line of each Class A, B and C (Clusters) but the figures would be reduced by 25% of the proposed joint tariff 13 presented by KAMP, PRISK and MCSK.This would then be subjected to the following minimums; Class A - KShs. 30,000/=, Class B - KShs. 20,000/= and Class C - KSHs. 5,000/=. Kindly note that the above agreed upon minimums were arrived at as 35% of the Single Business Permit (SBP).Attached find a new tariff proposal calculated basing it on the facts above for your humble consideration.

32. From the above evidence it is clear that what was forwarded by the respondent KECOBO to the Attorney General for gazettement with regard to joint tariff 13 did not reflect what had been agreed between the parties at the consultations facilitated by KECOBO on 7th February 2019. It is not clear when the document attached to Mr. Nyakweba’s affidavit was signed. However, given that it does not reflect what the CMO’s themselves agree to having accepted during the 7 February 2019 consultations, we can only infer that it predates those negotiations and was erroneously forwarded to the Attorney General without being revised to reflect what PERAK, KAHC and the CMOs had agreed on 7 Feb 2019.

Findings: 33. For the above reasons, we hereby find as follows:a.That the Kenya Copyright Board did not forward the agreed tariffs for category 13 regarding Restaurants, Bars and Similar Establishments and must therefore submit the true record of tariffs as agreed upon on the 7th of February 2019 to the Attorney General for gazettement.b.The Tariffs above shall be the reference point for all payments of the royalties in this category for the period 2019-2020. c.The order issued by the Copyright Tribunal on 25th July directing that the appellants pay 50% of the gazetted aMOUnt is hereby set aside and the appellants directed to pay the full amount due for 2019 based on (a) and (b) above.d.The Memorandum of Understanding Agreement between the Appellants and the CMOs (MPAKE, KAMP and PRISK) is no longer valid as MPAKE’s license was not renewed and no Agreement was negotiated thereafter after change of parties.e.That no arguments were made with regard to the issue of adopting technology as the basis for administration of the new tariff 2019/20 as the appellants sought in their appeal and no orders can therefore be made on this issue.

Orders: 34. 1.That the Kenya Copyright Board submit the true record of tariffs for category 13 as agreed upon during the consultations held on 7 February 2019. 2.No order as to costs.

DATED AND DELIVERED THIS 23RD DAY OF JANUARY 2020. …………………………………DR. HENRY K MUTAI - CHAIRPERSON…………………………………MS. WANDIRI KARIMI - MEMBER…………………………………MS. ELIZABETH LENJO - MEMBER…………………………………MR. ANTHONY OKULO - MEMBER