First Year Report
On February 14, 2007, the UK Artists’ Resale Right (ARR) will have been operating for a full year, and this piece considers how well it has been implemented, principally in the UK.
In September 2006 we reported (AM299) on the first six months after the introduction of AER in the UK, highlights of which included the following: the UK government was obliged by EU law (directive 200I/84/EC) to enact the ARR into UK law, thereby giving artists an automatic legal right to receive a payment when their works are resold. ARR applies to works protected by copyright law, and lasts for the lifetime of the artist plus 70 years after death. The amount of the royalty payable is a percentage of the resale price based upon a fixed sliding scale of consecutive portions of that price:
Portion of the sale price – Percentage amount
From €1,000 to €50,000 – 4%
From €50,000.01 to €200,000 – 3%
From €200,000.01 to €350,000 – 1%
From €350,000.01 to €500,000 – 0.5%
Exceeding €500,000 – 0.25%
The total amount of royalty payable on any one resale is €12,500. Resales lower than €1,000, and those made within three years of the artist’s first studio sale or gift, are outside the scheme. Resales between two private people are also outside the scheme, which therefore applies only to resales involving at least one art market professional. Resales of works of dead artists will not come within the UK scheme before January 1, 2010. The art market professional must pay the ARR royalty directly to an artists’ collecting society, which will pay the artist. Artists cannot claim their ARR royalties directly, and so they should register with an ARR collecting society; the ARR of artists who have not registered with a collecting society are automatically paid by the art market professional to the Design and Artists Copyright Society (DACS): www.dacs.org.uk.
Artists have a choice of registering with DACS, the 20-year-old not-for-profit artists’ collecting society; or with the Artists’ Collecting Society (ACS), established in June 2006 as a Community Interest Company by the Society of London Art Dealers and the British Art Market Federation, ‘with the aim of supporting the art trade’. (Our September 2006 report suggested that a third ARR collecting society was being established in the UK, but this now appears not to be the case.)
During the past year DACS and ACS have been in healthy competition with each other to charge artists the lowest commission fee to cover their administrative costs. ACS says it will charge 15% of the royalty payment collected. DACS guarantees to match the lowest of its competitors’ charges, and has therefore also charged 15% during the past year.
DACS invoice art market professionals on a continuous basis, and pays artists every month. By the end of December 2006 DACS had collected over £1m in ARR royalties of which it paid out £709,000 to over 400 artists, 93% of whom are British; collections included ARR royalties received from sister collecting societies abroad where British artists’ works had been resold, including Denmark, Finland, Sweden and France.
ACS will invoice art market professionals quarterly (at the end of December, March, June and September) and will pay artists ‘in a timely fashion’. ACS sent its first invoices to UK art market professionals at the end of December 2006, by which date it had not therefore collected or paid out any ARR royalties. ACS does not collect ARR royalties for British artists whose works are resold abroad.
All other EU member states were required by EU law to introduce ARR (commonly known as droit de suite throughout continental Europe) into their domestic legislation by 2006. Not all did so. Our September 2006 report discussed how the Republic of Ireland government had been successfully sued by an Irish artist for loss of his ARR royalties through its late introduction of ARR into the Republic’s laws. The French government was also tardy, enacting ARR on June 30, 2006. Germany efficiently introduced ARR, applying it to resales of €400 or more. Greece implemented ARR, but has a relatively small official secondary art market, and an unquantifiable (but probably much larger) black market of undisclosed sales by art market professionals, who appear extremely reluctant to pay ARR. Italy’s ARR, applicable from February 2006 to resales of €3,000 or more, requires art market professionals to pay royalties to a single collecting society. ARR in the Netherlands was effective for resales of €3,000 or more effected on or after April 1, 2006. Liechtenstein applies ARR to sales of €3,000 or more. It is widely believed that the Swiss parliament will consider introducing ARR during 2007, even though Switzerland is not part of the EU and is not therefore obliged to do so.
Towards the end of 2006 the Federation of European Art Gallery Associations (FEAGA) launched a campaign to persuade the EU to amend the requirement (of directive 2001/84/EC) that all member states must introduce ARR for artists who had been dead for less than 70 years. The EU directive allows member states to defer application of the ARR to dead artists until January 1, 2010 – an option taken by the UK and some other EU governments. FEAGA’s concerns rehearse the same arguments deployed by many art market professionals during the 1980s and 90s in their attempts to prevent the enactment of EU directive 2001/84/EC, which harmonises ARR throughout the union, and at standard fixed royalty rates. FEAGA says that it is ‘mindful of the damage that may be done to the competitive position of the European art market by the introduction of droit de suite in all EU countries from the beginning of this year, and the risk that their competitive position will be damaged still further when the derogation for certain EU countries limiting droit de suite to the work of living artists comes to an end in January 2010, particularly if, as seems likely, the USA, and Switzerland and other important art markets outside the EU refuse to adopt droit de suite’, and fears that ‘we will collectively face the prospect of Europe becoming a backwater for the sale of the masterpieces of 20th century art after 2010’. FEAGA wants the directive amended to allow EU member states an option of applying the ARR (droit de suite) only to living artists. FEAGA is a federation of art trade associations representing over 2,000 galleries in the UK, France, Germany, the Netherlands, Italy, Austria, Switzerland, Belgium, Denmark, Sweden, Finland, Hungary, Spain, Turkey, Slovakia and Greece. Such arguments had a strong impact on the governments of the UK, Republic of Ireland, Netherlands, and Austria – each of which had resisted enacting droit de suite/ARR until forced to do so by the EU in 2006, on the basis that their secondary art market might have been damaged by its introduction. The number and price levels of modem and contemporary art resales by art market professionals in the UK since February 14, 2006 appear to have been impressive, with record resale prices being reported both at public auction and in private treaty sales. The UK art market does not therefore appear to have been damaged by the introduction of ARR. Most art market professionals are adding on the ARR royalty payment to the price paid by their buyers, through the terms and conditions of their contracts of sale; this is certainly the case with major international auction houses, such as Sotheby’s, Christie’s and Bonhams.
It is too early to judge whether FEAGA’s arguments, which failed to persuade the EU in 2001, will nevertheless prevail over the next three years.
© Henry Lydiate 2007