Int'l treaties: Follow the money

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In this global world of multi­national productions, the very idea of co-production treaties can seem archaic.

After all, countries and regions worldwide are trying to outdo one another with tax breaks for runaway production. Italy and France introduced new incentives this year to compete with their European neighbors and the Czech Republic will follow with a 20% tax break in 2010. So who needs the bureaucracy and legalese of a co-production treaty, with its strict regulations governing who spends what money where on your film?

Quite a few people, actually.

"It is always worth it to apply for treaty status, always," says Sonja Ewers, whose German firm Ariel Films co-produced Samuel Maoz's Venice festival Golden Lion winner "Lebanon," an Israeli-German-French co-production. "It's incredibly difficult to finance art-house movies out of one territory alone. Getting treaty status gives you access to regional financing you wouldn't have otherwise."

"Lebanon" was produced by Metro Communications and Paralite in Israel, Ariel in Germany and France's Arsam International. The anti-war film, set inside an Israeli tank during the 1982 Lebanon war, shot in Israel but most of the co-production was done in Ariel Films' hometown of Cologne. By qualifying under Israeli-German, Israeli-French and French-German co-production treaties it was able to tap financing from, among others, the Israeli Film Fund, Germany's NRW Film Board and French TV network Arte France.

Getting national certification also means "Lebanon" qualifies as French under the country's chauvinistic distribution quotas -- a key to reaching French cinemas and accessing French TV slots.

Ewers compares the relative ease of producing "Lebanon" with her current challenges securing financing for German-Japanese co-production "Zen and the Art of Archery."

"There's no co-production treaty between Germany and Japan, so it means we'll have to split the production in half -- finance the Japanese part out of Japan and the German part out of Germany," she says. "It's twice as hard to do."

But negotiating the world of bilateral film treaties can be daunting. All told, there are a couple hundred international co-production treaties. While they share some basic similarities -- all are meant to encourage cross-border production and cultural exchange -- they can be radically different in their application.

Some territories are catholic in their approach to co-production. Canada, for example, has treaties with more than 50 countries and has years of experience juggling the disparate needs of different regional production partners. Europe, with its large single market and generous film subsidy structures, is another co-production veteran. An umbrella co-production agreement -- the European Convention on Cinematographic Co-production -- has 47 signatories, including non-European Union members such as Russia, Turkey, Albania and Ukraine. In addition, most of the big EU territories have separate bilateral agreements, which provide further incentive to work together.

Others countries like South Korea are more selective in picking production partners. To date, Korea has just two co-production agreements with France and New Zealand that have produced only a handful of films. One of the standouts being "A Brand New Life" from French-Korean director Ounie Lecomte.

Still others -- in particular India and Singapore -- are actively signing up to the co-production game, but it's too early to judge their track record.

In terms of sheer output, it's hard to compete with the factory-style regularity with which Europe churns out co-productions. Virtually every festival fave out of Europe bears a multinational certificate: Michael Haneke's "The White Ribbon" (German-Austrian-French-Italian), Jacques Audiard's "A Prophet" (French-Italian), Lars von Trier's "Antichrist" (Danish-German-French-Swedish-Italian-Polish), Elia Suleiman's "The Time That Remains" (British-Italian-Belgian-French), Jessica Huasner's "Lourdes" (Austria-French-German) or Marina de Van's "Don't Look Back' (French-Italian-Luxembourg-Belgium) to name just a fraction of the most recent.

The European Convention makes cross-border projects easier, as do laws granting every crewmember with an EU passport equal status under regional point systems used to determine a film's "nationality."

But when it comes to co-production treaties, not all European countries are created equal.

Bucking its standoff reputation, France has dozens of bilateral agreements. The U.K. has just seven (Australia, Canada, France, India, Jamaica, New Zealand and South Africa). Some EU countries, Germany and France say, have a bilateral production deal in place with Israel, so producing an Israeli film with German or French partners is commonplace; "Adam Resurrected," "Waltz With Bashir" and "Sweet Mud" are recent examples. Putting together a similar project with Spain or Scandinavia, where no such treaties exist, is much harder.

To complicate matters further, every European country has its own, sometimes incompatible, tax scheme governing film finance. The U.K. tax-relief structure, introduced three years ago, has nearly shut down co-productions with the Island because it is fiendishly difficult to qualify as British. There were only three U.K. co-productions in first-half 2009, down from 14 year-over-year.



The British tax set-up requires projects to spend at least 25% of their budget in the U.K. -- a bit higher than the usual 20% standard stipulated by most co-production treaties, but not unattainable. The problem comes with the "used and consumed in the U.K." rule. This stipulates that only cash spent in the U.K. qualifies toward that 25% budget limit. Brit crews working on the U.K. shoot of Kari Skogland's IRA drama "Fifty Dead Men Walking" (a U.K.-Canadian co-production) or Rachid Bouchareb's "London River" (U.K.-French) qualify. English talent working in Mumbai on Danny Boyle's "Slumdog Millionaire" or in Beijing on Xiaolu Guo's Locarno winner "She, A Chinese," do not.

"Britain has become really impossible -- the culture test to qualify as British is very strict, it's expensive to shoot there and there are no regional subsidies for shooting in London, where the whole local industry is based," says Juliane Schulze of production consultancy group Peaceful Fish.

British film commissioner Colin Brown admits the tax credit plan has hurt co-productions, but insists the benefits, including no cap for rebate claims, outweigh any drawbacks.

Brown can also point to Britain's bilateral treaties including one with South Africa, signed in 2007, and one with India, approved last year. Anthony Fabian's "Skin," based on the true story of a black girl who was born to two white Afrikaner parents in South Africa during the apartheid era, was the first feature produced under the London-Johannesburg agreement. The primary beneficiaries of the U.K.-Indian initiative are likely to be the 50-60 Bollywood productions that shoot in Britain every year. With the treaty in place, many of those Indian titles could qualify as British and take advantage of the U.K. tax credit.

Bollywood, ever hungry for new exotic locales to shoot its Hindi blockbusters, has been actively signing cross-border production treaties. In addition to the U.K., India has co-production agreements in place with Italy and Brazil and is talks with France, Germany and Canada.

"It's interesting that India is getting into the co-production business but we have to wait to see how much of it is about partnerships and how much about flying in a whole Bollywood crew and snatching up the local rebate," says one European producer with experience on the Sub Continent.

But Asian is undoubtedly the place to watch in the co-production business. And the project to watch is "Bubblegum Crisis." The $30 million English-language adaptation of the popular Japanese cyberpunk anime series is being set up as a six-nation co-production between Singapore's Axxis International, Tokyo-based AIC, Arclight Films of Australia, Canada's Wizzfilms, China's Infotainment China Media Co. and Latec International of the U.K.

The project will be the first to make use of the Singapore-Australia, Australia-Canada, Canada-Singapore, China-Australia and China-Canada co-production treaties, potentially allowing it to tap subsidy and soft money capital from the six governments and, benefiting from its Chinese film certificate, qualify for a theatrical release in mainland China. If it works, "Bubblegum Crisis," which is targeting a 2012 release, could prove a model for similarly ambitious pan global co-productions.

But even if "Bubblegum" bursts, the co-production treaty, whatever its flaws, isn't going away. Governments from Beijing to Berlin will continue to use them, if only to help steer their local industries. They may be complicated, bureaucratic and wholly unromantic, but for the international production business, the co-production treaty is as essential as the three-act structure and a happy ending.
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