On December 15 2005, the final draft of the Artist’s Resale Right Regulations 2006 were placed before parliament by the UK government for approval by resolution of each House of Parliament, with the aim of their coming into UK law by February 2006.
The regulations represent the fulfilment of the UK government’s legal obligations to enact into UK law the requirements of an EU law (Directive 2001/84/EC) requiring all member states to give UK artists an automatic legal right to receive a payment when their works are resold. This month’s column describes and explains how those regulations will apply to resales from 14 February 2006.
The Resale Royalty Right
An artist will have the right to receive a royalty on any resale of their work after the first transfer of ownership (not necessarily the first sale – it may be a gift) by that artist; in other words, an artist will have a ‘resale right’ to receive a ‘resale royalty’: a resale royalty right. This right will apply to works that are protected by copyright law (works that have been made by independent creative skill and labour – have not been stolen from another artist), and will last for the same length as copyright (the lifetime of the artist plus 70 years after the end of the year of the artist’s death). The amount of the royalty payable is a percentage of the sale price based upon a fixed sliding scale of consecutive portions of that price:
Portion of the sale price % 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%
However, the total amount of royalty payable on any one sale shall not exceed €12,500.
Three types of resale are outside the regulations, and therefore of the new scheme. First, where the sale price is less than €1,000. Second, where the buyer or seller (or agent of the buyer or seller) is not ‘acting in the course of business of dealing in works of art’; in other words, the regulations apply only to sales or purchases by art market professionals. Third, where the seller previously acquired the work directly from the artist less than three years before the sale, and the sale price does not exceed €10,000; in other words, the regulations apply only to sales made three or more years after the artist’s first studio sale or transfer of ownership, and to all sales exceeding €10,000 even if they are made within the first three years after the artist’s first studio sale or transfer of ownership.
Not all artworks are included in the new scheme – only works of ‘graphic or plastic art such as a picture, a collage, a painting, a drawing, an engraving, a print, a lithograph, a sculpture, a tapestry, a ceramic, an item of glassware or a photograph’; also included are copies of works if they are ‘one of a limited number which have been made by the author or under his authority’.
An artist’s signature on a work is presumed by the regulations to identify the author/artist, who is therefore entitled to the resale right. Where a work is made by two or more artists, both their signatures on their works will likewise trigger the legal presumption that they are the joint authors – each of them will have the resale right, and they will share the resale royalties equally, unless they both sign a written agreement stating otherwise. (This reinforces the importance of artists working collaboratively always to have a written creative partnership agreement clarifying all such matters: see AM271).
Who Pays the Resale Royalty?
Sellers and their agents will be jointly and separately responsible for paying the resale royalty; if the seller has no agent, then the seller and the buyer’s agent will be jointly and separately responsible, and if neither seller nor buyer has an agent, then the seller and the buyer will be jointly and separately responsible. This means that where, for example, a work is sold at auction, both the seller and the auction house (as the seller’s agent) will be jointly responsible for paying the resale royalty. Or where, for example, one dealer sells directly to another dealer, both dealers will be responsible for paying the royalty. The legal duty to pay arises automatically on the completion of the sale, but payment may be withheld until the artist proves their entitlement – this raises important issues about the method of payment, collection and enforcement, which are specifically dealt with in the regulations.
Who Collects Resale Royalties?
Artists cannot claim their resale royalties directly. The Regulations provide that artists must do so through a ‘collecting society’, which is defined as ‘a society or other organisation which has as its main object, or one of its main objects, the administration of rights on behalf of more than one artist… for a fixed fee or percentage of the royalty’. For all practical purposes, this will mean that artists will have to transfer the management of their resale rights to an organisation such as the Design and Artists Copyright Society (DACS), which has for over 20 years managed the collection of artists’ copyrights throughout the world for a fixed fee or percentage of the copyright royalties collected. If artists do not transfer their rights to such a collecting society, the regulations empower such a collecting society to manage such artists’ rights automatically. Taken as a whole, the effect of these particular provisions will greatly facilitate the payment, collection and distribution of resale royalties: art market professionals will send their resale royalties directly to, say, DACS which, in turn, pays them directly to artists; artists merely register their contact data with DACS and await payment.
Unlike copyright – an economic right that can be bought and sold as can any physical object of monetary worth – the artist’s resale right cannot be relinquished by the artist. This is a specific and vital requirement of the EU Directive. The UK regulations therefore strongly provide that a ‘waiver (legal undertaking not to enforce the right) of a resale right shall have no effect’ and that ‘an agreement to share or repay resale royalties shall be void’. These provisions ensure that artists in weak bargaining positions with art market professionals cannot be pressured into relinquishing their resale rights – a factor which also relates to the compulsory collecting society provision described earlier. But the regulations go further, and strengthen artists’ position in the art marketplace: the resale right cannot be ‘assigned’ – that’s to say it cannot be legally transferred to somebody else; nor can artists ‘mortgage’ their resale royalty rights (by borrowing money and offering the benefit of the resale right to the lender if the loan is not repaid in full and on time). In this latter respect, the UK government has commendably followed an excellent suggestion from DACS to make an exception to the basic ‘inalienability’ provisions: the regulations specifically permit resale royalty rights to be transmitted in an artist’s will to the ownership of a charitable organisation inside or outside the UK. (In the absence of such a specific bequest, the artist may bequeath the resale right to a ‘natural person’, and, in the absence of a will, the resale right passes under the ordinary rules of succession to the next of kin.)
Right to Information
Artists (or their collecting society) will have the legal right to ask an art market professional seller or buyer (or their respective agents) – within three years of the relevant sale – for any information necessary to ensure payment of the resale royalty, such as the amount of royalty due or the name and address of the person responsible for making the resale royalty payment. Such requests will require the art market professional to ‘do everything within his power to supply the information requested within 90 days of the receipt of the request’. Failure to supply such information will entitle the artist (or their collecting society) to ask a court to order the defaulter to do so – with a penalty for contempt of a court’s order being the final sanction. Any such information supplied about the resale must be treated as confidential by artists and their collecting society.
The resale right extends far beyond the UK and EU. It can be exercised in the UK by artists who are nationals of an EEA state (that’s to say one of the 25 EU member states plus Iceland, Liechtenstein or Norway), and of Algeria, Brazil, Bulgaria, Burkina Faso, Chile, Congo, Costa Rica, Croatia, Ecuador, Guinea, Iraq, Ivory Coast, Laos, Madagascar, Mali, Monaco, Morocco, Peru, Philippines, Romania, Russian Federation, Senegal, Serbia and Montenegro, Tunisia, Turkey, and Uruguay.
These new regulationas do not apply to (re)sales of works contracted before they came into force (sales before 14 February 2006), but they do apply to any further sales of those works contracted after the regulations came into force (sales contracted on or after 14 February 2006). For example, sales of contemporary artworks of EEA artists conducted at a London auctioneers/saleroom/dealership during January 2006 (before the new regulations came into force) will be outside the new resale royalty scheme; but further resales of those works in February 2006 or at any subsequent date will be within the scheme and resale royalties would therefore be payable.
As for artists who died before the new regulations came into force (say, before the end of January 2006), their heirs and successors to ownership of their resale royalty rights will not be able to enforce them in respect of sales made before January 1, 2010. This is because the UK government has chosen to exercise the option (permitted to member states by the EU Directive) not to apply the resale royalty right to dead UK artists until January 1, 2010. So, although the estates of, say, Eduardo Paolozzi, Francis Bacon and Patrick Heron will have automatically acquired their respective resale royalty rights at the end of January 2006, they will not be able to exercise them until January 1, 2010, at the earliest. (This derogation by the UK government from the EU Directive’s spirit and intent to provide that the heirs and successors of artists should benefit from the resale royalty right for 70 years after the artist’s death, was said to be a measure intended to mitigate the potential economic damage likely to be suffered by UK’s art market professionals from having to suffer the loss of paying a maximum resale royalty of €12,500 on the sales of the works of dead artists from February 2006).
How Will it Really Work?
It is very likely that DACS will be the only collecting society in the UK that will be ready, willing and able to manage the artist’s resale royalty right on behalf of UK artists – and others qualifying throughout the world – from February 2006. DACS is the only artist’s rights management body in the UK: it has a significant and successful 20-year record of doing so, and has invested substantial financial and intellectual capital in developing and field-testing a computerised and straightforward business model capable of effective and efficient worldwide resale rights management. The one thing that DACS’s management model cannot guarantee is that UK art market professionals will cooperate in fulfilling their new legal responsibilities. Everyone is confident they will do so.
The Department of Trade and Industry (note: not the Department of Culture Media and Sport) has been responsible for developing and implementing this legislation through one of its specialist units, the Patent Office, which has issued a very helpful leaflet Guidance for Business on Artist’s Resale Right .
© Henry Lydiate 2006