In a surprise setback for companies such as Google and Facebook that leverage user-generated content, Australia has dropped plans to extend its copyright safe harbor provisions. The move follows intense pressure from copyright holders, who said that a change in the law would hurt artists' ability to get fairly paid for their work.

Due to what some have described as a drafting error in Australia’s implementation of the Australia – US Free Trade Agreement (AUSFTA), so-called safe harbor provisions currently only apply to commercial Internet service providers Down Under.

This means that while local ISPs such as Telstra receive protection from copyright infringement complaints, platforms such as Google, Facebook and YouTube face legal uncertainty.

In order to put Australia on a similar footing to technology companies operating in the United States, proposed amendments to the Copyright Act would’ve seen enhanced safe harbor protections for technology platforms such as search engines and social networks.

But that dream has now received a considerable setback after the amendments were withdrawn at the eleventh hour.

In a blow to Google, Facebook and others, the government dropped the amendments before they were due to be introduced to parliament yesterday. That came as a big surprise, particularly as Prime Minister Malcolm Turnbull had given the proposals his seal of approval just last week.

“Provisions relating to safe harbor were removed from the bill before its introduction to enable the government to further consider feedback received on this proposal whilst not delaying the passage of other important reforms,” Communications Minister Mitch Fifield said in a statement.

There can be little doubt that intense lobbying from entertainment industry groups played their part, with a series of articles published in ‎News Corp-owned The Australian piling on the pressure in favor of rightsholders.

This week the publication accused Google and others of “ruthlessly exploiting” safe harbor protections in the US and Europe, forcing copyright holders into an expensive and time-consuming battle to have infringing content taken down.

While large takedown efforts are indeed underway in both of those regions, companies like Google argue that doing business in countries without safe harbor provisions presents a risk to business development and innovation. Being held responsible for millions of other people’s infringements could prove massively costly and certainly not worth the risk.

Startup advocacy group StartupAUS criticized the withdrawal of the amendments, describing the move as “a blow to Australian entrepreneurs.”

“Australia’s copyright laws have still not caught up with the realities of the internet. As a result, the laws still struggle to provide clarity and protection for organizations doing business online,” said CEO Alex McCauley.

“Copyright safe harbor is international best practice and without it Australian startups will be held back from participating in the rich global market for content and ideas. We strongly urge the government to reconsider the need for safe harbor provisions.”

But for players in the entertainment industry, safe harbor protections are not something to be quickly revisited without significant preparation.

Welcoming their withdrawal, Dan Rosen, chief executive of the Australian Recording Industry Association, called for a “full, independent and evidence-based review” in advance of similar proposals being raised in the future.