By Cynthia Nzuki and Caroline Wanjiru

Introduction

In one of our previous blog posts (here), we tackled the legal framework of collective management organizations (CMOs). At that time, the existing law that informed our discussion was the Copyright Act, No.12 of 2001(the Act). On 18^th September, 2019 the President of Kenya signed into law the Copyright (Amendment) Bill, 2019(the Amendment Act) (see here); which introduced a number of changes to the Act. In this piece our focus will be on the changes that affect CMOs.

If one could recall, not so long ago CMOs, and in particular MCSK, were in the hot seat pertaining allegations of issuing out “peanuts” as royalty payment (news piece here). It is notable that the debate on CMOs more often than not, revolve around collection and distribution of revenue. Has the Amendment Act addressed this?

What’s new?

1. CMO defined

The Amendment Act specifically defines a collective management organization (CMO). Section 2 therein defines a CMO to mean an organization approved and authorized by the Board (KECOBO) which has as its main objectives, or one of its main objects, the negotiating for the collection and distribution of royalties and the granting of licenses in respect of the use of copyright works or related rights. This is the same definition of as that of a ‘collecting society’ provided for under section 48 (4) of the Copyright Act.[1]

• Collection and payment of Royalties

The new section 30B provides for the collection and payment of royalties and specifically designates theKenya Revenue Authority (KRA) and any other designated entity by KECOBO to collect royalties on behalf of CMOs representing performers and owners of sound recordings.[2] Where the royalties are collected by KRA, CMOs will claim on behalf of their members[3]. This model of revenue collection is akin to the system regulation of Kenyan airspace. The Air Passenger Service Charge Act imposes a service charge on passengers departing by air from any airport within Kenya. The service charge is collected by KRA who then remits it to the Kenya Airports Authority Fund[4]. The monies collected by KRA are subject to further deductions in the form of administrative charges for collection of the monies[5]. If this model is to be replicated for royalties collected by KRA, the collection expense deductions will be made at least two points before it reaches the artist: by KRA and by the CMO.

As earlier mentioned, the major source of disagreement within the CMOs in Kenya has been the distribution of royalties, specifically the amounts distributed. Section 46D require CMOs to submit a report to KECOBO with details of royalty collection and distribution annually. KECOBO will then publish the information so submitted.

Section 30B affects the performers and owners of sound recordings who are the primary members of MCSK. From this it is possible to authoritatively conclude the section is meant to address the MCSK owing to the various disagreements it has had in the past. However, this begs the question ‘What about other copyright owners?’; the need for better regulation affecting performers and owners of sound recordings could be said to have been of more prominence than those of other groups.

Lastly, copyright and revenue arising therefrom are within the realm of private property. KRA is a government agency, primarily tasked with the responsibility of the assessment, collection and accounting for all revenues that are due to government. As a government agency, the collection can be extended to public income such as the passenger service charge noting that airports and airspace are somewhat public property. What is public about copyright as a right? Whereas copyright can be enjoyed publicly this does not vest in it a public interest as to warrant this amount of public intervention. Why mandate a government agency to collect revenue on behalf of private persons, the payment of expenses notwithstanding? Is this the best use of public resources? What happens when a copyright owner disputes amounts collected by KRA? Whose resources will KRA use to defend such?

 How efficient will section 30B be? Time will tell.

• Administration and Internal Operation of CMOs

The Amendment Act introduces new sections in Part VII of the Act; which addresses the management and administration of CMOs. Section 46B provides that any member of a CMO is eligible to be elected as a director only if they hold a post-secondary qualification recognized in Kenya. A post-secondary qualification means having attained educational qualification beyond high school e.g. college or university education. Further a director and chairperson of a CMO shall serve in office for a term of three (3) years and shall qualify for re-election for one further term; making six (6) years the maximum years of service in those respective positions. However, the CEO’s position is four (4) years, with the opportunity for reappointment for another term. This allows for ease of succession and continuity of organization’s history.

Section 46E provides for the inspection of the books of accounts and records of CMOs which can be done by the Executive Director of KECOBO or a person acting under their authority.  This power may be exercised in any of the following circumstances:

1. where not less than 45% of the membership of a CMO petition for inspection specifying breach of instruments establishing the entity, the regulations or the Act
2. failure of a CMO to account for monies to at least 20% of its members
3. failure of a CMO to account for the exploitation of the copyrighted works assigned or licensed to it
4. where CMOs act ultra vires/ beyond its powers
5. where CMOs alter their memorandum or any other internal rules to exclude a part of its members from participating in its affairs or as to change its core business
6. where a CMO has continually failed to comply with its set administrative budget without a reasonable cause
7. where a CMO has fails to comply with a request for information or records  from its members or KECOBO

When an inspection is called for, the CMO concerned and all its officers and employees are expected to make available all the books, accounts, records and other documents available within seven (7) days or within such a time as the inspector may specify. Anyone who fails to do so shall have committed an offence and upon conviction be liable to a fine of not more than Ksh.200, 000 or imprisonment for a period of not more than 3 months or both. The Inspector shall report back to KECOBO. Section 46F provides for the directions and orders KECOBO may issue out upon inspection of a CMO and it being reported that a CMO conducts its affairs contrary to what is expected and not in the best interest of its members. These directions and orders include;

1. suspension or removal of any officer or employee who, in the opinion of KECOBO, has contributed or caused the contravention of any law
2. measures to be taken to improve the management of the organization
3. require the respective CMO to reconstitute its board of directors
4. demand for a plan to resolve all deficiencies to the satisfaction of KECOBO
5. appointment of a chairperson who is well qualified an competent (in the opinion of KECOBO) to advice and help the respective CMO in developing and executing a corrective action plan. The one appointed will be required to regularly report back to KECOBO

Section 46G states that directors of CMOs shall have the minutes of all meetings be recorded and regularly update. It further states that a representative from KECOBO may attend and advise a meeting of directors of a CMO o matters that affect the members’ interests.

• New CMOs

One of the main objects of the amendment of the Copyright Act was to domesticate the Marrakesh Treaty. Section 26D provides that visual artists may form a CMO to represent their interests. Should they not register such, the Attorney General may designate one of the registered CMOs to represent the interests of visual artists in the country.

Conclusion

The Amendment Act has attempted to address the many challenges facing CMOs and their members in Kenya. This includes regulation of management and operations of CMOs, collection and payment of royalties amongst others. This is expected to raise the standards to be met by the CMOs, and increase their level of accountability and transparency. The Amendment Act raises the prospects of growing the creative industry.

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[1] Under the Amendment Act the term “collecting society” has been deleted and substituted with “collective management organization”.

[2] Section 30B (1), Copyright (Amendment) Act, 2019.

[3] Section 30B (2) of the Copyright (Amendment) Act, 2019

[4] Established under section 17A of the Kenya Airports Authority Act, Act Number 3 of 1991

[5] Section 6A of the Air Passenger Service Charge Act allows KRA to deduct a sum to cover the expenses for the collection of the monies.