Platforms with Irish HQs win EU case to follow Irish law

The question

Do platforms have additional regulatory obligations in EU states, even if they don’t have a registered office there?

The key takeaway

Tech companies are not required to abide by additional regulatory obligations in EU countries where they are not based, according to a recent ruling by the European Court of Justice (ECJ) concerning Austrian laws.

The background

Many tech companies, including Meta, Google and TikTok have their EU headquarters in Ireland, and are subject to Irish laws. They are protected under the EU’s E-Commerce Directive, as companies are free to provide online services from a Member State to other Member States through the “country of origin” principle. Member States may not restrict this freedom unless very specific requirements are met, meaning a company headquartered in Ireland would not usually be subject to additional regulatory laws in Austria if they are providing online services there.

However, an Austrian law, imposed in 2021, required communications platforms to set up mechanisms to ensure reporting and verifying for potentially illegal content and provide regular, transparent publication reports of illegal content. The punishment for not doing so was a fine of up to €10m. Soon after their attempt to enforce the law, an Austrian court faced fightback from the tech companies who insisted that they should not be subject to the laws of a country where they are not established. The matter was referred to the ECJ who ultimately agreed with them.

The development

The key takeaways of the decision are:

• In 2021 Austria passed a law that would oblige tech companies to set up mechanisms to ensure reporting and verifying for potentially illegal content and provide regular, transparent publication reports of illegal content. This applied to companies providing online services in Austria, even if they were not physically headquartered in Austria.
• Google Ireland, Meta Platforms Ireland and TikTok, all based in Ireland, brought a claim arguing that this was contrary to EU law.
• The ECJ agreed that EU Member States may not oblige communication platforms which are based in other Member States to follow general and abstract obligations.
• The ECJ agreed with the tech companies over their concerns about the “principle of control in the member state of origin” and that a contrary decision would undermine the “mutual trust between member states and contravene the principle of mutual recognition”.
• The ECJ also highlighted that the rules pursuant to the Austrian law “would ultimately amount to subjecting the service providers concerned to different legislation” that would generally undermine the free movement of goods and services across the EU.

Why is this important?

This decision is an important reinforcement of the “country of origin” principle, particularly where individual EU member states (as here with Austria) seek to impose their own additional regulatory requirements and fines.

Any practical tips?

Although the ECJ decided in the platforms’ favour in this instance, it goes without saying that the EU terrain remains an incredibly challenging one for them with the slew of EU regulation coming their way or already landed – not least the Digital Services Act, the Digital Markets Act and the Omnibus Directive to name just a few. Getting their arms round these at speed remains the priority and a huge practical challenge.

Winter 2023