The idea behind official co-productions is that they allow a film that is made in two countries to access benefits in both countries.
According to Screen Australia (the official Australian Government agency responsible for providing support to the film industry), Australia's International Co-production Program was established:
- to facilitate cultural and creative exchange between co-production countries;
- to allow these countries to share the risk and cost of productions; and
- to increase the output of high-quality productions.
The Screen Producers Association of Australia (SPAA) recommends the addition of a fourth objective, this being to prioritise co-production as a means to increase Australian production levels and to enable and promote trade with key international partner territories.
A treaty or Memorandum of Understanding (MoU) is, in essence, an agreement to treat companies from each other's country the same way as they treat companies from their own country.
Those countries who currently partake in the International Co-production Program via treaty are: the UK, Canada, Ireland, Israel, Italy, Germany, Singapore and China. Australia also has MoUs with New Zealand and France. A co-production treaty is currently being negotiated with the Government of South Africa.
A recent development is the current formulation of a MoU with Malaysia. The creation of such a MoU has the potential to assist Malaysian filmmakers, especially those who are shooting low-budget, independent productions. Australia's committment to this MoU was demonstrated by the decision to hold the Australian Film Festival in Malaysia from March 4 to 7 of this year.
It is important for producers to note that each co-production must comply with every article and annex that appears in the relevant treaty or MOU.
Producers must apply to Screen Australia for approval as an official co-production. Official co-productions require there to be a producer from each country. Australian financial equity in the project should match the level of Australian creative components present in the project. Each official co-production usually requires a minimum creative and financial contribution from each co-producer of between 20 and 30 percent.
A project may be based on an underlying work from any country. However, the screenplay needs to have been written by a national or permanent resident of one of the co-producing countries. The co-producers should not be linked by common management, ownership or control.
The co-producers must between them contribute 100 percent of the cost of a proposed co-production. Actual sources of finance must be stated in the application form and applicants must provide copies of financing agreements, term sheets etc, with their applications. Screen Australia will make a provisional decision on an application pending receipt of executed financing agreements.
Another point to note is that an Australian producer must retain a share in the co-production copyright.
Persons involved in the production of an official co-production should be 'nationals' or 'residents' of one of the co-producing countries. However, there is some degree of flexibility with regards to this requirement. For example, 'exceptional circumstances' will in some cases permit the 'competent authorities' to approve leading roles. This is very important where an American director or lead artist is attached to the project.
Screen Australia requires that each Australian producer applying for co-production status enter into a formal undertaking, the main points of which are:
- the producer must obtain Screen Australia's prior approval of any amendment to the approved co-production;
- the producer must obtain Screen Australia's approval of the full credits for the film, prior to having them designed and shot.
The largest number of co-productions entered into by Australian producers were with Canadian producers (42) and had a total budget of $430 million. This treaty came into force on 26 September 1990 and these figures were correct as at 3 December 2009.
The largest number of co-production feature films entered into by Australia producers were with producers from the UK (21), while the most 'series' were completed with Canadian producers (23).
A major hurdle to obtaining the Producer Offset (a 40 percent offset on qualifying Australian production expenditure (QAPE) for feature films and 20 percent offset for non-feature films and TV), is the requirement to satisfy the Significant Australian Content (SAC) test. A project automatically meets the SAC test where it is approved as an official co-production.
The lawyer's role
Co-productions are complex from a legal and regulatory standpoint. A lawyer's advice should be sought at the commencement of the process. Legal advice should be obtained as to whether a project will fit on a creative and financial level within the relevant regulations. A lawyer will also need to negotiate with all stakeholders as to the contents of any legal documents (such as co-production agreements). A co-production agreement sets out respective rights and obligations, as well as financial interests in the production. It is crucial that the provisions of this agreement be carefully worded in order for the producers to avoid adverse financial and creative consequences in the future.
Short-form agreements are often the precursor to long-form co-production agreements. All treaties provide that the co-production agreement must set out the financial liabilites to be borne by each co-producer, the division of receipts between co-producers and the dates by which each co-producer will complete their respective contributions to the project.
There are obviously numerous other legalities that must be satisfied in order for an co-production to proceed, such as copyright issues, financial definitions, termination issues etc.
1. Each treaty has a 'competent authority' appointed by its government, which has the role of granting official co-production status to productions that comply with the relevant regulations. In Australia, the 'competent authority' is Screen Australia.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.