Do Companies have a right to reputation under the European Convention on Human Rights, Part 2 – David Acheson

21 06 2018

The first part of this post considered the question of whether Art 8 of the Convention protects corporate reputation and concluded that the Court’s case law does not provide any good justification for this.

In Firma EDV Für Sie v Germany (‘EDV’), the Court also left open the applicability of Article 1 of the First Protocol (“A1P1”) to corporate reputation ([34]). A1P1 states that

Every natural or legal person is entitled to the peaceful enjoyment of his possessions.

The Court has ruled in several cases that the ‘goodwill’ in applicants’ businesses can be a ‘possession’, and as such can be protected by A1P1 (eg Van Marle v The Netherlands). As corporate reputation is often described as an element of goodwill, the argument that it might therefore be treated as a ‘possession’ under A1P1 seems plausible (Oster, 263).

Unfortunately, as with its decisions on reputation under Art 8, the Court’s jurisprudence on goodwill under A1P1 is not at all clear. For example, its justification for protecting the goodwill and clientele of the applicants’ law practices in Wendenburg v Germany was that they were ‘entities of a certain worth that have in many respects the nature of a private right and thus constitute assets and therefore possessions’. Answers on a postcard, please…

But there are good reasons to think that the Court’s treatment of goodwill as a possession should not extend to corporate reputation as such. Treating reputation as a possession would be inconsistent [£] with the principle that A1P1 does not protect expectations of future earnings (Marckx v Beligum). As Moses LJ explained in R (Malik) v Waltham Forest NHS PCT, at [86], since a business cannot sell its reputation, its financial value lies solely in its effect on future income. As such:

‘If the principle that the ability to earn future income is not a possession within [A1P1] is to be maintained, it must follow that if the element of goodwill which has [been] or may be damaged is reputation, … that element is not to be identified as a possession.

Further, on one interpretation of this case law the ECtHR has not in fact been protecting ‘goodwill’ as a possession at all. Instead, the Court has been protecting its contribution to the value of a distinct asset owned by the applicant – ‘the underlying business or professional practice in question’ (Malik v UK, [94]). An injury to goodwill causes a fall in the value of the underlying business, and this diminution in value is the interference with a ‘possession’ that the Court has treated as engaging A1P1.

In contrast, if the element of ‘goodwill’ that is injured is a company’s reputation, as it would be in a defamation claim, then the injury will cause a fall in the value not of an asset owned by the company, but of the company itself. In these cases, there is no interference with a ‘possession’ owned by the company, because the company cannot own itself. This could explain why, in the two applications brought by companies complaining of injuries to their own goodwill, the Court has held A1P1 inapplicable on the grounds that the complaints were, in substance, of a loss of future income.

Conclusion

One theme of the above discussion is the opacity of much of the relevant case law. Eoin O’Dell has written that ECtHR judgments:

‘…tend to combine lapidary repetitions of general principle, derived from earlier decisions and expanding with each case, with ad hoc applications of these principles to the facts, a style which can make it difficult to predict the future effect of individual decisions.’ (‘Defamation Reform in England and Ireland after McLibel’ (2005) 121 LQR 395, 399)

This style must also make it difficult for domestic courts to apply the Convention where there is no direct Strasbourg precedent – although, thankfully, English courts have been sensible in their application of both Art 8 and A1P1 to corporate reputation. More importantly, though, the abstruse explanations given for some of the Court’s decisions suggest not just an inability to communicate its reasoning, but a failure to properly think through the issues in the first place.

Although EDV was only an admissibility decision, the Court’s justification for leaving open the applicability of Art 8 exemplifies this problem:

‘The Court recalls that the private-life aspect of Article 8 of the Convention encompasses a natural person’s reputation (Axel Springer AG v. Germany). Regarding legal persons, the Court has consistently held that a legal person’s business premises (Buck v. Germany, Niemietz v. Germany) and its correspondence (Wieser and Bicos Beteiligungen GmbH v. Austria) fall under the ambit of Article 8. The Court has further held that the protection of a company’s reputation may be the legitimate aim of a restriction under Article 10 § 2 of the Convention (Heinisch v. Germany, Steel v. UK).’ (para 21)

The Court’s first point – that Art 8 protects individual reputation – is relevant, but not sufficient to justify extending that protection to companies. The second point – that the Court has extended other elements of Art 8 to companies – is true, but again is not necessarily a reason to protect the ‘private life’ or ‘reputation’ of these applicants as well (which the Court in fact recognized, at [60], in one of its decisions protecting corporate ‘correspondence’).

And the last point – that the protection of corporate reputation can be a legitimate reason to restrict expression under Art 10(2) – is irrelevant. Bizarrely, the cases cited in relation to the protection of corporate business premises – Buck and Niemietz – were both brought by human applicants. The Court could, of course, have referred to Société Colas Est v France. It might be pedantic of me to point out that the Court is apparently unable to cite its own case law properly. But the error adds to the impression that the decision in EDV was not sufficiently thought through. It seems entirely possible that the Court might, in future, rely on similarly inadequate reasoning to extend a Convention right to reputation to companies – and, given the potential impact on domestic defamation law, that possibility is concerning.

David Acheson is Lecturer in Media Law at the University of Kent’s Centre for Journalism. Email: d.acheson@kent.ac.uk

This post is derived in part from an article published in the Journal of Media Law on 19 April 2018, copyright Taylor & Francis, available here: David J Acheson, ‘Corporate Reputation under the European Convention on Human Rights’ (2018) 10(1) Journal of Media Law 49.


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