Germany's arbitration tribunal ruled Dec. 9 in favor of authors' society GEMA in its conflict with the International Federation of Phonographic Industry (IFPI) on royalty rates.

HAMBURG -- Germany's arbitration tribunal ruled Dec. 9 in favor of authors' society GEMA in its conflict with the International Federation of Phonographic Industry (IFPI) on royalty rates.

The German chapter of the IFPI in January applied for the mechanical royalty rate to be slashed from 9.009% to 5.6% of PPD (published price to dealers).

During oral proceedings before Germany's Patents and Trademarks Office in Munich, the tribunal said it saw no justification for the major decrease.

The tribunal also suggested the introduction of a smaller reduction to the rate suggested by the IFPI. The parties have until Feb. 24, 2005 to make submissions. In the absence of a settlement being reached, a final decision would occur by March 2005.

Since the dispute began, the royalties equaling the difference between the previously agreed-upon mechanical rate and the new rate have been held in escrow by the record companies until a final agreement is reached. Despite GEMA's protests, IFPI has refused to reduce the amount being paid into the independent trustee.

In a statement, GEMA says it has been left with no alternative but to proceed with an application to the German Federal Cartel Office. IFPI Germany did not comment on the meeting.