Droit de Suite (2002)

The Arts Council of England recently published its Research Report on the implementation of a Directive from the European Parliament and the Council of the European Union requiring all 15 Member States to enact legislation to give a resale right to authors of original works of art.*

The resale royalty right/droit de suite was first introduced in France in 1920, Belgium in 1921, and was later incorporated into the laws of any more EU countries, and California, USA. Although 11 EU Member States have now enacted their own legislative provisions giving artists a resale right, four of the Member States have not yet done so (UK, Ireland, Austria and the Netherlands); Italy and Luxembourg do not enforce the right which simply lies on their statute books.

Hence the new Directive, which was developed by the EU Commission to address its concerns about distortions within the EU’s contemporary art market (not all Member States require the seller to pay to the artist a small percentage of the profit on resale), and as a result of a landmark European Court case involving the contemporary singer/song-writer, Phil Collins, in 1993. He successfully argued that intellectual property rights, from which he was entitled to benefit in some EU States, were wrongly being denied him in those States on the grounds that he was a UK national and UK law did not give the same rights to non-UK EU nationals. In other words, the European Court decided that Phil Collins was wrongly being discriminated against on the grounds of his nationality. It was the judgment in this case that drove the EU Commission to develop the Artists’ Resale Right Directive in 1996.

During the next five years fierce negotiations were conducted between EU Member States in which the UK Government strongly opposed the proposed new Directive on the grounds that, if it were enacted into UK law, the thriving contemporary art market in the UK – London, in effect – would transfer to the USA and/or Switzerland. However, in September 2001 a compromise agreement was reached, through which all 15 Member States accepted the proposed new Directive. The Directive must be enacted into the laws of all EU Member States by January 2006, so as to benefit living artists, and by January 2012 so as to benefit artists who died within the previous 70 years. Thereafter the right will apply for the artist’s lifetime plus 70 years after death.

The resale royalty rates of payment will be low on high sale prices (0.25% of sales exceeding €500,000) and high on low sales (4% of sales up to €50.000); with a sliding scale between those two extremes, and subject to a maximum royalty payment of €12,500 on any one sale. Member States may elect to apply a rate of 5% for sales up to €50,000: (see AM 251 for more details).

The UK’s Patent Office led the negotiations in Brussels, and will develop legislation for the UK’s implementation. Work on this is now underway, and the Patent Office is committed to consulting widely amongst the visual art community In the UK: organisations representing artists, dealers, collectors and art administrators will be a high priority for consultation. ACE’s recent Research Report is a major contribution to the wider debate that the Patent Office wishes to promote: its aim is to draft legislation which will be the most effective in meeting everyone’s needs (and fears), and will be in compliance with the Directive. A website will soon be established at the Patent Office for this purpose; it is in ‘listening mode’. The Patent Office will analyse the results of its wide consultation, and advise the Government accordingly. Draft legislation will be prepared, and there will be formal public consultation on its provisions. The aim is to legislate well before the January 2006 deadline. In the forthcoming public debate, a number of key issues will be addressed.

Subject matter of the resale right
The artist’s resale right will be ‘inalienable’, meaning that it can never be transferred away by the artist. The seller will be the payer of the royally but Member States may elect to require the purchaser or dealer also to have that responsibility: views will be invited.

Works of art to which the resale right relates
‘Original works of art’ is the term used by the Directive to describe the works that will attract the resale right. The Directive goes on to explain that this would include ‘graphic or plastic art such as pictures, collages, paintings, drawings, engraving, prints, lithographs, sculptures, tapestries, ceramics, glassware and photographs, provided they are made by the artist himself [sic] or are copies considered to be original works of art’. Moreover, ‘copies of works of art’ are also included, so long as they have ‘been made in limited numbers by the artist himself [sic] or under his [sic] authority. Such copies will normally have been numbered, signed or otherwise duly authorised by the artist’.

These provisions will inevitably produce much debate, and will require very careful consideration before UK legislation is drafted. Clearly, industrially manufactured and retailed work is meant to be excluded from the scheme, but not works such as original mixed media assemblages, installations, readymades, artists’ film and video works, and so on which, on the face of it, may appear to be excluded from the Directive’s requirements.

Threshold
Member States can elect to set a minimum resale price which will attract the royalty payment, but this cannot be more than €3,000. What minimum resale price should be set for UK sales?

Tax
Royalty payments will be made net of tax, but the Directive does not specify which tax – income, inheritance, capital gains or VAT. Helpfully, the UK’s Customs and Excise Commissioners have already indicated that they would not wish to see VAT payable on resale royalty payments. As for the other UK taxes, views will be invited.

Persons entitled to receive royalties
Authors of works will be entitled to the royalty payment, or their heirs for 70 years after death. However, Member States may elect to legislate for compulsory or optional collective management of the royalty payment. This is a highly contentious and important provision, and will no doubt become the subject of much debate; it is the focus of ACE’s Research Report, mentioned at the outset. The heart of the matter is likely to be whether the UK Parliament is persuaded that an artist’s collection organisation exists, or could be established, which could efficiently and effectively collect the royalties for all UK artists entitled to them. Only if it is so convinced, is it likely to contemplate legislating for the royalty payment to be collected compulsorily. The leading artists collection body in the UK today is the Design and Artist’s Copyright Society (DACS), established by UK artists in 1983 to enforce their copyrights, collect and distribute copyright licence fees, on a non-profit basis.

Third country nationals entitled to receive royalties
Because of the Phil Collins legal precedent (mentioned at the outset) the Directive requires Member States to provide that authors who are not UK nationals shall enjoy the resale right, but only if legislation in the country of which the author is a national permits resale right protection in that country for EU nationals. For these purposes the EU Commission will publish periodically an indicative list of those ‘third’ countries to which the scheme will also apply. In addition, Member States may elect to legislate to treat authors who are not EU nationals (but have their ‘habitual residence’ in the EU) in the same way as EU nationals for the purpose of resale right protection.

Right to obtain information
Artists will be entitled to require ‘any market professional’ (sellers, buyers, intermediaries, salesrooms, art galleries and art dealers) to provide information needed to secure payment of royalties. This right to information will last for up to three years after the resale, and so the question will arise as to whether the resale right will, in effect, become unenforceable three years after the resale. Some would argue that case, but many would argue the opposite.

Although in this piece (as in the Directive) the royalty rates are expressed in euros, the UK legislation is very likely to express the rates in sterling (unless the UK enters the enro-zone within the next few years).

ACE’S Research Report
The Report thoroughly maps out the implementation issues, examines and reviews existing models of good practice for collecting and distributing the resale right outside the UK; assesses the capacity and mechanisms needed for successful implementation of the scheme in the UK, and explores possible models accordingly.

Collection models
The Report tackles the vexed question of how a successful collection and distribution scheme should operate in the UK, with minimum disruption to the art market and maximum benefit to artists: a robust collection and distribution system is required, and the Report offers three models.

Model 1 is a simple and direct system in which dealers or auction houses would be responsible for collecting the resale royalty and distributing it directly to artists. It would require payers to recoup their extra administrative costs, and would require an agreement between sellers’ representatives and, say, the British Copyright Council, the Patent Office, or ACE. A drawback of this model would be that sellers would be required to deal with a large number of artists for distribution purposes, but the Report suggests that one central distribution body could be identified to receive all such payments.

Model 2 suggests that both collection and distribution functions are carried out by one organisation. Such a body would hold information on eligible sales and sellers, and on eligible artists or their heirs.

Model 3 is more complex: it separates collection from distribution, and involves one central collection body receiving payments which it then passes on to artists’ representative organisations for them to distribute. It is potentially the most expensive option, because the number of different organisations handling the transactions would increase time and costs. However, the Report suggests that a body such as DACS could deal with distribution using its existing administrative processes; the advantage being that only one aspect of the new scheme would be dealt with by a new organisation (ie a new collecting body), which would only have one key function to perform.

Alternatives to the three models suggested are also explored in the Report. One arrangement is similar to the UK’s Public Lending Right scheme, where a representative national selection of sellers are sampled to determine the range of artists’ work sold over a period of time: the collection/distribution body would charge sellers a licence fee based upon their turnover; fees would be paid to the representative artists according to the findings of the sample. Alternatively, existing systems of sales registration and reporting, such as quarterly VAT returns, may be amended to include returns and a payment method for the resale right. Furthermore, a scheme similar to the licensing of motor vehicles could be developed, by which all sellers would register and pay an annual licence fee – and the licence fees from such a scheme would be pooled and used as a special fund for the benefit of all living artists (not only those who enjoy many highly-priced resales).

ACE’S recommendations
ACE’s Report is very thorough, and offers a wealth of information, including key features of the schemes operating in Belgium, Denmark, Finland, France, Germany and California in the USA: it reviews the collection and distribution of other rights in England, such as copyright, performing rights and public lending rights; and offers eight key recommendations.
Briefly, they are:

  • UK legislation should be as simple and clear as possible.
  • Collection should be undertaken by one central institution to maximise efficiency and minimise administrative costs.
  • The collection agency should be the national authors’ society, to maximise cost savings and economies of scale.
  • Any collection agency should belong to a network or umbrella organisation to enable reciprocal exchanges of rights and funds for artists internationally, and at low cost through common administrative systems.
  • Dealers and auctioneers should be legally obliged to report their turnover in eligible works of art, possibly also making periodical lump sum payments (as in Germany currently).
  • Full examination should be conducted into the feasibility of imposing a levy on resale payments by way of a contribution to an artists’ social fund (as in Germany currently).
  • The collecting society should have legal rights to inspect the accounts and documentation of selling agents, within the bounds of respect for their confidentiality; with legal sanctions for failure to comply.
  • Systems should be put in place for ongoing monitoring, evaluation and review of the UK legislation and the implementation scheme.

Envoi
Now that the EU has set in train implementation of the resale right throughout the EU, its Council of Ministers is turning its attention to extending the right beyond the EU and are planning to strengthen the international intellectual property treaties accordingly.

*Clare McAndrew and Lorna Dallas-Conte, Implementing Droit de Suite (artists’ resale right) in England: Research Report 23, The Arts Council of England, London, £10, 07287 0860 4

© Henry Lydiate 2002

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.