Parliamentary Report: UK Artists’ Resale Right

The committee describes the ARR as a ‘controversial initiative to improve artists’ incomes’, that has been operating in different ways throughout most of Continental Western Europe (where it is known as droit de suite) for most of the last century.

Last issue’s column (AM288) considered the recent report of the House of Commons Culture, Media and Sport Committee on the Market for Art (HC 414; available at www.legislation.gov.uk); in particular its examination of the UK art market, artists’ ‘dual status’ for national insurance/income tax benefits, artist-gallery contractual relationships, professional practice training and support for artists, and the public sector. This piece explores the report’s other main findings, relating to the UK’s implementation of the Artists’ Resale Right (ARR) on January 1, 2006.

The committee describes the ARR as a ‘controversial initiative to improve artists’ incomes’, that has been operating in different ways throughout most of Continental Western Europe (where it is known as droit de suite) for most of the last century. EU law (Directive 200I/84/EC) has required that a new ARR will be introduced on a consistent, harmonised basis by all EU member states from next year. Having consulted widely during this and recent years, the UK Government is currently drafting its own domestic legislation to be introduced into Parliament in October 2005.

As the committee accurately reports ‘the right will provide entitlement to an artist and, for 70 years, his or her successors in title, whenever an original work is resold with the involvement of an art market professional (ie an auctioneer or dealer)’ of a small percentage of the resale price. This initiative has been – and remains – controversial in the UK (above all other EU member states) because the UK Government, UK-based art market professionals and a minority of UK artists, have for decades ‘strongly opposed’ its introduction. The committee characterised opposing views: ‘Supporters of the measure point to it as being an income generator for artists, and just recognition of their creativity; they add that it might also have less tangible benefits in signalling the value a society attaches to art. Opponents argue that applying resale rights would simply displace the art market to New York or Geneva, hitting profits and leading to job cuts in the UK. Experience on the Continent indicates that the benefits are uneven, with disproportionate gains accruing to the heirs of deceased artists.’ Notwithstanding these old and, some say, now tired arguments, the committee rightly declared that ‘droit de suite is a fait accompli’, and sought to address the effects of implementation of ARR in the UK, its likely impact on the UK art market in particular – noting that the UK government can delay implementation, for the estates/heirs of deceased artists, until January 1, 2010 (possibly extendable until January 1, 2012) to give the art market more time to adjust.

Having considered the possible negative effect on the UK art market (of professional sales being diverted from London to New York or Geneva), the committee believed that this could be ‘avoided, or at least minimised’ if the USA and Swiss Governments could be persuaded to introduce a similar ARR. The committee therefore recommended that the UK Government ‘should renew its efforts to achieve universal adoption of droit de suite, through all available international channels’. Furthermore, the committee was not satisfied by the evidence it had received of the likely effect on the UK art market, and therefore recommended ‘that the Government closely monitors the impact droit de suite has on the market. The Government should publish its conclusions in time to inform the first review of the Directive’s impact which, according to its own provisions, must take place by 1 January 2009.’ Regarded by the committee as a ‘concession’ to the UK art market, the EU-wide scheme fixes a ceiling or ‘maximum levy’ on any one resale transaction of €12,500, which ‘prevents the levy from increasing when sales exceed €2m’.

The EU Directive has given EU member states discretion to decide how best to administer the ARR, and this was carefully considered by the committee. It rehearsed opposing arguments (too costly to administer; effectively and efficiently manageable), and recommended ‘a system of compulsory collective administration for artists’ resale right. This is the preferred model throughout the European Union. It is relatively efficient and better secures compliance, seeing that money reaches the artist.’ In this way, sellers or dealers would be required to send artists’ royalties to an artists’ collecting society (similar in function to the PRS that collects and distributes musicians’ performing rights royalties, or the Design and Artists Copyright Society (DACS) that collects and distributes artists’ and designers’ copyright royalties).

EU member states have been given further discretion to decide whether to lower the minimum threshold to which the ARR applies from the Directive’s stipulation of €3,000 (in France and Germany, for example, their schemes currently require the ARR to apply to sales of €15 and €50 respectively). Having rehearsed the arguments and evidence received, the committee concluded that it was ‘not intrinsically opposed to the introduction of the artists’ resale right into UK law, though we do believe it should not benefit solely the richest artists. We recommend that the Government lowers the threshold at which the resale right applies from €3,000 to €1,000.’

Finally, the committee addressed a third discretion given to EU member states to decide whether to raise from 4% to 5% the royalty rate for sales between €3,000 and €50,000 (there is a sliding scale of rates, decreasing from 4 / 5% for the lowest tranche down to 0.25% for the highest tranche of €500,000 or more). The committee expressed its belief that ‘a modest increase in the royalty rate for the lowest price band would … have important symbolic value, provide a measure of assistance to a substantial number of artists; all at relatively little additional cost to the market.’ It therefore recommended that ‘the Government apply a royalty rate of 5% to the price band up to €50,000’, noting that ‘Just as the art market adapted to the introduction of the buyer’s premium in auction sales, it should be able to do so in connection with the smaller droit de suite royalty. The buyer’s premium in the major auction houses is now charged at 20% compared to our proposed 5% for droit de suite royalties,’ and urged the UK government to reduce the current 17.5% VAT rate on art sales.

In that connection, it is important to note the 5% import VAT paid on the value of art brought into any EU member state from outside the EU (say, from New York to London). This could be a significant factor when considering the concerns of UK art market professionals over the possible diversion of significant numbers of sales from London to, say, New York: would buyers from EU member states prefer to buy a work in New York (as against, say, London or Paris) in order to avoid paying the ARR, knowing that they would have to pay New York City sales tax, and 5% import VAT when bringing their purchase back into their EU homeland?

The influence of the committee’s report on the UK government’s approach to exercising its discretion, and parliament’s reception of that instrument in the next few weeks, should be significant; the more so, because the committee’s members represent all shades of political viewpoints.

© Henry Lydiate 2005

 

 

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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.