Henry Moore’s daughter Mary Moore together with Maggi Hambling recently attracted media attention by publicly voicing their concerns about the failure of UK-based art market professionals to pay the artist’s resale right (ARR).

Such non-compliant dealers and agents are now being threatened with legal action on behalf of artists and their estates, seeking UK court orders to enforce ARR payment. Is legal action possible and, if so, is it necessary or desirable?

The possibility of such action was contemplated by Parliament when it enacted into UK law The Artist’s Resale Right Regulations 2006, which give authors of original artworks an automatic legal right to receive a royalty each time one of their works is resold in a sale involving an art market professional.

ARR only applies to resales of €1,000 or more and is calculated on a sliding scale (up to 4% of resale price), with €12,500 as the maximum royalty payable on any single resale. The royalty is subject to ‘compulsory collective management’, which means that artists cannot claim their royalty themselves. Instead art market professionals are legally responsible for paying the ARR into a not-for-profit-share artists’ collecting society, which then pays its artist members. Two such collecting societies operate in the UK: the Design and Artists Copyright Society (DACS), and the Artists’ Collecting Society (ACS).

Because UK art market professionals are required to pay resale royalties to these collecting societies, the UK’s Regulations provide enforcement powers for them. Collecting societies are not empowered to bring criminal prosecutions, or civil claims for payment, against non-compliant art market professionals; rather, they have the right to obtain information “that may be necessary in order to secure payment of the resale royalty, and in particular to ascertain the amount of royalty that is due; and where the royalty is not paid by the person to whom the request is made, the name and address of any person who is liable.” In other words, if art market professionals do not proactively volunteer necessary information about ARR-qualifying sales to artists’ collecting societies on a regular basis, they risk having to respond to unwelcome and inconvenient legal demands for information – not only about ARR- qualifying sales, but about all their sales so that checks can be made by about whether or not a sale is ARR-qualifying.

Over the past eight years or so regular independent reviews of the UK’s ARR scheme indicate that art market professionals recognise that it is in their own best interests to cooperate with DACS and ACS; and that neither collecting society wishes to become embroiled in messy non-compliance contests.  But what happens if art market professionals refuse to cooperate, even after lawful demands for necessary information have been made by the collecting societies?

UK’s ARR Regulations require that “The person to whom the request [for necessary information] is made shall do everything within his power to supply the information requested within 90 days of the receipt of the request.” And that “If that information is not supplied within [90 days] the person making the request may, in accordance with rules of court, apply to the county court [or in Scotland to a sheriff] for an order requiring the person to whom the request is made to supply the information.” This means that non-compliance with such a court order would risk the art market professional being judged to be in contempt of court, becoming subject to financial penalty and/or imprisonment.

Because an art market professional’s sales information will be commercially sensitive, and may well influence non-compliance with supply to artists’ collecting societies, the UK’s ARR Regulations specifically enact that “Information obtained [by collecting societies] under this regulation shall be treated as confidential.” This provision is intended to encourage art market professionals to supply ARR-qualifying information (and appropriate payment) to artists’ collecting societies, which are required to keep such information confidential.

The legislation strives to balance legal rights on both sides of the ARR equation: on one hand artists’ right to be paid a resale royalty by art market professionals via an intermediary collecting society; on the other art market professionals’ right to privacy of commercially sensitive sales information. Mutual trust is required to make this balanced scheme work. But perhaps trust and patience have now run out; certainly so far as ACS is concerned.

ACS recently announced its intention to take legal action against non-compliant art market professionals. Maggi Hambling is an ACS trustee and member-beneficiary, who recently said “The honeymoon period is now over. The law changed in 2006 and there are people who are still trying to get away without paying … It’s going on all the time … I’m not saying all dealers are crooks. But it’s high time that everyone was doing the right thing.” Harriet Bridgeman, ACS’s managing director, said “I’m pretty horrified. Dealers earn their living theoretically by maintaining honest practice. This is not honest practice … All dealers have a legal obligation to report sales.”

Is legal action necessary or desirable? In the case of public auctions, artists and their collecting societies have little if any difficulty in monitoring public sales and hammer prices; and auction houses evidently make regular ARR payments and supply relevant information to ACS and DACS. In the case of agents and dealers, sales are private and relevant information is not published; and artists and their collecting societies appear to have difficulty knowing the nature and extent of ARR compliance.

DACS also has identified private sales information and monitoring problems. Mark Stephens, an art lawyer and Chairman of DACS, believes that “Overseas galleries are significantly more compliant than those in the UK.” Mary Moore is a DACS trustee and member-beneficiary representing Henry Moore’s estate (ARR lasts for 70 years after death). She recently commented: “The royalties are modest compared with the resale prices of the works, but artists are nevertheless being deprived of valuable income.” DACS has recently begun to take administrative action. Its Chief Executive Gilane Tawadros says:  “What we’re doing now is a regional targeted campaign. Recently, we wrote to dealers in Northern Ireland who we suspected of not paying and have had a measure of success there. We have quite substantive dealers in London who we believe are not paying and who we are beginning to pursue. They are breaking the law. The market is the last great unregulated market and part of the antipathy towards Artist’s Resale Right is that it introduces something which starts to look like regulation.”

In a genuine effort to promote ARR compliance by dealers – and doubtless to deter government thoughts about tighter art market regulation – the Society of London Art Dealers (SLAD) conducts ARR training for its members and encourages compliance. SLAD also signed a unique agreement in February 2014, committing to improving and harmonizing the administration of ARR within the EU and proactively cooperating with other signatories including: ACS and DACS, Christie’s, the European Federation of Auctioneers, the Federation of European Art Galleries Association, Sotheby’s, and The Association of Art and Antique Dealers.

Such efforts to improve trading conditions for artists are dependent upon a responsible and far-sighted approach across the sector. Perhaps we are now witnessing threatened use of legislation originally enacted to encourage rather than penalise.

© Henry Lydiate 2014

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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.