The need to make international co-productions work is more compelling now than ever. Film-makers looking to work on a certain scale - and not just to make low-budget movies for local consumption - are rarely able to raise their budgets in their own countries.
'As an independent producer without a billionaire backing our company, the way to get the medium-budget films we like to do is with partners,' says UK producer Chris Curling, a co-production veteran (Wah-Wah, The Last Legion, Hannibal Rising) now shooting Michael Hoffman's $20m (EUR13m) The Last Station in Germany.
According to Hans De Weers, the Oscar-winning Dutch producer of the pan-European collaboration Antonia's Line in 1995, a film-maker in the Netherlands is unlikely to be able to raise more than $3.1m (EUR2m) at home for a project. De Weers' $6.2m (EUR4m) My Father's Notebook, which is reteaming him with director Marleen Gorris, is set up as a Dutch-German-French co-production. Set in Iran, it plans to shoot in Germany.
'We felt we could raise half (the budget) in Holland through the new matching fund (which requires 25% of the financing to be either equity or pre-sales). We needed some other partners,' De Weers explains. 'Germany (Joachim von Vietinghoff and Christoph Hahnheiser of Black Forest Films) is a good partner.
'We can do some studio and location work there. France has a historical interest in stories from Iran. Our French co-producer, Christopher Granier-Deferre of Poisson Rouge Pictures, thinks he can come up with 15%. We are doing 60%, France 15% and Germany 25%.'
It is a similar story outside Europe. 'We have no choice but to encourage Canadian producers to move to co-production,' explains Brigitte Monneau, director of international co-productions at Telefilm Canada.
'There is not enough money for everybody. We want to help the industry, we want to help emerging and young producers. Unfortunately, we don't have unlimited budgets. The only way to help them find other sources of financing is through co-production.'
What is the secret of putting together an international co-production' As Monneau acknowledges, the paper trail is growing ever longer. 'Now, in Europe, many countries develop regional funds. It's common to have projects with 12 or more sources of financing. Now because (tax incentives) are more selective, producers have to find bits and pieces of financing everywhere. The puzzle is becoming more and more complex.'
The cultural hurdle
In Europe, national incentives are available for international productions but they are often firmly tied to local spend. Producers have to pass 'cultural tests' to access funds.
During the sale and leaseback era of a few years ago, international producers lined up to work with UK companies and thereby access the generous tax breaks available under Section 48 and Section 42.
However, now the tax benefit is no longer on 100% of the budget but purely on the UK spend, and producers need to reach a threshold of 25% of UK minimum spend to access it, the UK can be a daunting place to work.
'It's very hard to do something now in the UK,' says De Weers. 'The system is okay if you are fully shooting in the UK but otherwise it is hardly interesting.'
'In the UK, they've gone from one system where there was too much abuse, to another system that is too local,' suggests Sylvain Bursztejn, the Paris-based veteran producer of European-Asian collaborations such as Summer Palace and Luxury Car. 'It is going the same way in Germany, the same in France, Spain and even Italy. The consequences are that now it will be much easier to make a national project than an international one. A big part of the financing now is linked to where you shoot.'
For independent producers considering Asia, the situation is not necessarily any easier. Some Western countries do have co-production treaties with Eastern partners - for example, France's treaty with South Korea - but these are not always easy to use.
Canada struck a co-production treaty with China back in 1997, but this has rarely been used. As Monneau points out, 'The challenge with China is that the kind of project you can co-produce has to please both markets and it is difficult to find suitable films for both China and Canada. Most of the time, it's films with historical backgrounds. It's very difficult to export non-Asian films to Asia outside of the big US studio films. It's a very difficult market to penetrate, both for co-productions and for sales.'
Ireland is one of the territories stepping into the co-production breach. Unlike the UK for one, Ireland is a member of Eurimages which supports three-way European co-productions with development finance. The Irish Film Board (IFB) has set aside reserved funding specifically for minority co-production.
'The provisional reserve for the year is $1.9m (EUR1.2m) but it is flexible,' explains Simon Perry, chief executive of the Irish Film Board.
Among the projects it is supporting that might once have been set up in the UK are Danis Tanovic's thriller Triage, starring Colin Farrell. The $15.4m (EUR10m) project is set up as an Irish-Spanish-French co-production.
Ireland and New Zealand recently signed a co-production treaty (shortly to be ratified.) Ireland also has treaties with Australia and Canada and is about to sign one with South Africa. 'We need co-production partners and we need them not just in Europe but in English-speaking countries as well,' says Perry.
Germany fills a gap
With its wealth of national and regional subsidies, it is Germany that is fast filling the void left by the UK as the international co-producer of choice. 'We considered using the Belgium tax shelter, but it is very much linked to the spend in Belgium,' says De Weers of My Father's Notebook. 'Germany is a little bit more attractive. Even though we get only 20% on German spend, we have access to some of the funds in the German area.'
Other international productions now shooting in Germany include Stephen Frears' Cheri, an adaptation of the novel of the same name by Colette, starring Michelle Pfeiffer, which is a UK-German-Canadian collaboration; and Sherry Horman's German-Austrian-French-UK project Desert Flower, a biopic about Somalian model Waris Dirie.
The European Convention on Cinematographic Co-Production, which has been in existence for over a decade, remains a standard tool for European producers looking to work together without official treaties in place.
Perry argues three-country co-productions continue to work well. 'But there is generally a need for one country to be leading and putting up the majority of the money,' he says.
On lower-budget films, Perry suggests, two partners might make a better match. If a producer can raise, say, 70% or 80% of a budget through his or her own country, it makes sense to bring in a minority co-producer for the rest.
Pre-sales have again become an increasingly important part of the co-production financing puzzle. As Chris Curling puts it: 'The great thing about having pre-sales is that you are already planning the distribution of your film while you make it. They show there is a market for your film.' Pre-sales also help reassure investors.
There are now various pan-European networks to encourage co-production. The Capital Regions of Cinema - the joint venture between Rome-Lazio, Berlin-Brandenburg, Paris-Ile De France and Comunidad de Madrid - promotes co-production and provides support to European producers. Meanwhile, Cine Regio is an agency drawing together 32 regional film funds in Europe.
'When you are a regional fund and do co-production, it is important we keep a close look on the European level - what the EU is up to,' explains Bengt Toll, chairman of Swedish regional fund Film i Vast of the aims of Cine Regio. 'The other aim is to enhance co-production between the members. By bringing producers from different regional funds together, we believe we can facilitate artistic co-operation. It's not just looking for money. We aim to bring producers from different parts of Europe together to exchange ideas and values and get to know each other.'
Producers have to balance which incentives work best with each other. John Graydon, head of the film unit at UK film accountants Tenon Media, suggests they should look for asymmetry. 'The last thing you want to do is look to merge two fiscal incentives that are very similar because you will get them clashing.'
Monneau underlines Graydon's point, saying that when Canada co-produces with the UK or Germany, 25%-75% splits work far better than more balanced co-productions. 'What I see on my desk are either minority Canadian or minority British projects. It's probably the only way to maximise the incentive.'
The danger is that if co-productions become too onerous to put together, it may usher in a new era of parochialism. 'It's true that you can make very small movies in many countries in Europe, but if you are looking for big movies, the only way is not relying on state policy and soft money but using European studios, people like StudioCanal and Wild Bunch,' suggests Bursztejn.
Piecing together minority co-productions has become more difficult in the age of cultural tests and stiff EC laws regarding state aid. Nonetheless, the upside is that only genuine co-productions can thrive in the new climate. 'Relief tourism' appears to be over.
As JJ Lousberg, European executive at the UK Film Council puts it, the minority co-productions that come to shoot in the UK have a good reason to be there. 'That's a departure from what it used to be, when there was a lot of production that had no real connection to the UK. They have good reason to be here - a creative reason or a reason to do with locations.'