ARTISTS' RESALE RIGHTS
Commission Opinion on the European Parliament's amendments to the Council's common position on the draft Directive on the resale right for the benefit of the author of an original work of art.
||Article 95; co-decision; qualified majority voting
||24 January 2001|
|Forwarded to the Council:
||24 January 2001|
|Deposited in Parliament:
||13 February 2001|
||Trade and Industry|
|Basis of consideration:
||EM of 1 March 2001
|Previous Committee Report:
||None; but see 20550 : HC 23-xii (1999-2000), paragraph 3 (15 March 2000)
|Discussed in Council:
||12 March 2001|
26.1 The proposal would introduce a resale
right, often referred to as droit de suite, which would
give an artist and, for 70 years after his death, his successors
in title, a right to a percentage of the selling price, whenever
one of his original works is resold in the Community.
26.2 Resale rights exist in various forms
in most Member States, but not in the United Kingdom, Ireland,
the Netherlands and Austria. The right is not enforced in Italy
and Luxembourg. By harmonising the right, the proposal aims to:
distortions in the sale of modern and contemporary art in the
Internal Market; and
redress an alleged imbalance between
the economic situation of authors of graphic and plastic works
and that of other creative artists.
26.3 We have reported on this proposal on
many occasions since it was introduced in 1996 and debated in
European Standing Committee B on 29 January 1997.
The House of Lords has debated it on two occasions, 11 December
and 10 December 1997.
We cleared it on 26 May 1999
before the June Internal Market Council. We last considered it,
on the basis of an update from the Minister, on 15 March 2000.
A Common Position was finally adopted on it, unanimously, on the
basis of a Presidency compromise text, at the June 2000 Council.
26.4 In his Explanatory Memorandum of 1
March 2001, the Parliamentary Under-Secretary of State for Consumers
and Corporate Affairs (Dr Kim Howells) says that the Commission
did not accept the Common Position, taking the view that some
of the changes introduced by the Council would unduly delay harmonisation.
The Commission Opinion
26.5 The proposal we consider here is the
Commission's opinion on the amendments adopted by the European
Parliament at its Second Reading on 13 December 2000.
26.6 The Commission accepts nine of the
European Parliament's thirteen amendments, rejects three, and
is willing to accept one as a recital. Most of the amendments
do not affect the substance of the Common Position, but three
would change it substantially. These amendments would reduce:
from 5 years
to 2 years, the period for implementing the Directive [amendment
from 10 years to 2 years, the transition
period during which Member States which do not already apply a
resale right would be entitled to apply the right to living artists
only [amendment 11]; and
from 4000 euros to 1000 euros, the threshold
below which there would be no obligation to charge the levy [amendment
6, first paragraph].
26.7 The Commission rejects the second paragraph
of amendment six. This would remove the flexibility for Member
States to set a national threshold lower than the one set by the
Community and would have the effect in some Member States of depriving
artists of the right on works sold at a price which, at present,
entitles them to the right.
26.8 The only other amendment with a potentially
significant impact is amendment 14. This amendment was
also accepted by the Commission. It would constrain the Commission
to submit proposals to raise or abolish the 12,500 euro cap on
the total amount of the royalty payable, but not to lower it.
The Government's view
26.9 The Minister comments on the latest
proposal, and how it differs from the Common Position text, as
"The common position
is the culmination of four years of negotiation and five Councils.
It reflects an acceptable balance between the rights of artists,
the international competitiveness of Community art markets and
the needs of the Internal Market.
"The hard-fought agreement, reached unanimously
in the Council last year, is a significant improvement on the
Commission's original proposal, and on its amended proposal following
the Parliament's first reading. Those proposals provided: the
standard implementation period for Internal Market measures (18
months to 2 years is the norm); a minimum threshold of 1000 euros
(cf amendment 6); no transition period; and no royalty
cap. The earlier Commission proposals also provided a royalty
rate tapering down only to 2% on high-value works, whereas the
common position rate tapers to 0.25%. Happily, the Parliament
has not changed this; nor the 12,500 euro royalty cap. The common
position improvements were introduced largely in response to UK
concerns about the potentially adverse effect of the levy on the
international competitiveness of Britain's art market.
"The Parliament's amendments, however, would
substantially change some of the key common position improvements
and bring the draft Directive back closer to the Commission's
original proposal. The Parliament's package of amendments is not
acceptable to the Government; and it wholeheartedly supports the
Council's intention to reject the Parliament's amended text. Conciliation
between the Council and the Parliament, in accordance with the
provisions of Article 251 (ex 189b) of the EC Treaty, must necessarily
follow Council's rejection of the Parliament's text."
26.10 Commenting further on the proposal,
the Minister says:
"The effect of lowering the threshold from 4000
to 1000 euros would be to apply the resale right to a greater
number of transactions, and thereby increase the burden on business,
particularly small firms handling low-value sales. For them, the
cost of compliance would exceed the benefit to artists.
"The reduction in the implementation period
from 5 years to 2 would more than halve the time available for
firms to plan for, and adjust to, the new right; and for mechanisms
to be set up to collect and distribute royalties on a pan-European
basis (possibly beyond). This will not be easy, especially for
small firms with limited resources.
"The reduction in the transition period means
there would be only two years (instead of up to ten) in which
to phase the new right in, by first applying the right only to
living artists, and later to successors in title. The effect of
this reduction, combined with the reduction in the implementation
period, would be to reduce from a maximum of 15 years to just
4 the time available to the Commission to try to negotiate an
agreement extending the right at international level. But this
will not be easy; and the Government would have preferred a period
of more than 15 years in which to do this.
"Adjustment of the royalty cap
"The amendment whereby it would be possible
for the Commission to submit proposals to only raise or abolish
the 12,500 euro royalty cap would preclude the possibility of
lowering the cap should experience of the Directive show that
the level set in the common position was failing in its aim of
minimising the incentive for owners of works of art to sell their
collections on markets where the levy is not charged. Britain
is by far the EU's largest and most important market for modern
and contemporary art; and any significant increase in, or abolition
of, the cap could impair its ability to compete for high-value,
international sales against its main competitor, the United States,
and other markets which do not charge the levy."
26.11 On this question, the Minister comments:
"The Commission, in
rejecting the second paragraph of Amendment 6, argues that any
disparity in the Internal Market resulting from application of
the right below 1000 euros in some Member States is unlikely to
have a significant effect on intra-Community trade. It therefore
concludes, in accordance with the principles of subsidiarity,
that Member States should be allowed to establish thresholds lower
than the Community one. Likewise, in rejecting amendment 8 (modifying
Article 6(1) so as to specify the persons entitled to inherit
the resale right), the Commission concludes that inheritance rights
are a matter for the individual Member States."
Regulatory Impact Assessment
26.12 The Minister says that a regulatory
impact assessment will be produced as soon as the likely impact
of the Directive on United Kingdom business can be ascertained.
26.13 The Minister recalls, however, that
a regulatory impact assessment was made for the original proposal.
A sensitivity analysis in it considered three scenarios. The worst
case scenario assumed that all UK sales subject to the resale
right would be driven offshore to markets where the levy is not
charged. The middle case scenario assumed the displacement of
sales originating from sources outside the EU, while the best
case scenario assumed no displacement at all. He says:
"The results of the analysis were as follows:
||Worst case scenario
Loss of earnings
Possible job losses
Loss of VAT revenue
Cost to artists of collecting royalty
"An independent study
of the proposal, as it later stood under the German Presidency,
was commissioned by the Government in March 1999. At this stage,
further improvements to the proposal were under consideration,
notably a royalty rate of 0.5% on the highest price tranche and
a minimum threshold of 2000 euros.
"The study concluded that the relevant market
in modern and contemporary art (on a worst case scenario) could
decline by as much as 78% i.e. from £280 million to £61
million, resulting in a loss of earnings of £57 million per
annum. Moreover, total art sales could fall by as much as £750
million or 23%, owing to the shipping of mixed lots for sale outside
the EU i.e. batches containing works only some of which would
be subject to the resale right. The study estimated this could
cost up to 8,000 jobs.
"The proposal was progressively improved during
subsequent Presidencies, in particular to provide a royalty rate
of just 0.25% on the highest price tranche and a 12,500 cap on
the royalty payable (meaning no more to pay on a work fetching
2 million euros or more). The effect of the common position improvements
should be to further reduce the incentive for owners to sell their
collections outside the EU. The position would improve still further
were the Commission able, within the combined period of the common
position's implementation and transition periods, to level the
global playing field by negotiating an agreement extending the
right at international level."
26.14 The Council's formal rejection of
the Parliament's amendments is expected in March, possibly at
the 12 March Internal Market Council. The first conciliation committee
discussion will take place on 27 March. The committee must prepare
a compromise text by 22 May. The Council and the Parliament will
then have six weeks (extendable by two) to accept or reject the
26.15 The Minister describes the voting
procedure as follows:
"The Council acts by
a qualified majority. This will continue to be the case ... in
the conciliation between the Council and Parliament; and in deciding
whether to accept or reject a joint text. However, the Parliament's
representatives on the conciliation committee act by majority;
and the Parliament, in deciding whether to accept or reject the
joint text, acts by an absolute majority of the votes cast."
26.16 It is regrettable that the European
Parliament has sought to alter the balance achieved in the Common
Position. Concern for the impact of the proposal on jobs in this
country remains and we urge the Government to argue for a review,
after two years, of progress being made by the Commission in negotiating
an agreement extending the right at international level. The Directive
should provide for the transition period to be extended if the
prospect of success in these negotiations is not good.
26.17 We now clear this document.
57 Official Report, European
Standing Committee B, 29 January 1997. Back
Report, 11 December 1996,
col. 1160ff. Back
Report, 10 December 1997,
col. 196ff. Back
6992/98; see HC 34-xxi (1998-99), paragraph 10 (26 May 1999). Back
- ; see headnote to this paragraph. Back