House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Sixth Report

4 Artists' resale right

40. One, controversial, initiative to improve artists' incomes is the forthcoming introduction throughout the European Union of a harmonised droit de suite or artists' resale right. Droit de suite is a right given to the creator of an original work of art (painting, sculpture, etc) so that each time the work is resold[31] the creator gets a percentage of the price. This means, for example, that a painter who starts off as unknown and sells paintings for a few pounds can benefit from any subsequent fame achieved. It also means that, if a work falls in value, the subsequent seller's loss is compounded.[32]

41. Though this right has not yet been introduced in the UK, the position will change as a result of the adoption, on 27 September 2001, of European Parliament and Council Directive 2001/84/EC on the resale right for the benefit of the author of an original work of art. 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 (i.e. an auctioneer or dealer). This right was first introduced in France in 1920 (to auction sales only) and has been adopted in various forms in some other EU Member States. Provision is made for the right in the main international copyright convention (the Berne Convention, administered by the World Intellectual Property Organization)[33] - though this has not been adopted by some countries outside the EU (notably Switzerland and the USA, except California).

42. The UK Government and the British art market were strongly opposed to the directive, which was adopted under qualified majority voting. 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.[34]

43. For lower value sales, which are less likely to be displaced overseas, the cost of applying the right may at some point prove disproportionate to the benefit to artists. Studies have shown that typically 10% to 25% of the amount collected in royalties could be retained by collecting societies to cover administration costs.[35] In the UK the latter would be a matter for the Design and Artists' Copyright Society (DACS).[36]

44. Droit de suite is a fait accompli. Whatever the arguments and the likely distribution of benefits, the UK has to implement the Directive by 1 January 2006. However, as a country where a version of the resale right does not already exist, the UK can delay bringing it into force—but only in relation to the estates/heirs of deceased artists—until 1 January 2010 (possibly extensible to 1 January 2012). This concession is designed to give the market, auction houses in particular, more time to adjust.[37]

45. The negative impact of droit de suite could be avoided, or at least minimised, if, during this period of grace, countries such as the USA and Switzerland could be persuaded to implement similar measures of their own. The Government should renew its efforts to achieve universal adoption of droit de suite, through all available international channels.

46. Implementation of the droit de suite Directive is the responsibility of the Patent Office and the Department of Trade and Industry. A consultation document has been published, accompanied by a draft Statutory Instrument. The latter derives its definition of qualifying art works from section 4 of the Copyright, Designs and Patents Act 1988, but with architectural and computer-generated works specifically excluded.[38] Though some new media works may thus be left out,[39] the definition in the draft Statutory Instrument appears broadly consistent with the Directive's definition of original works of art as being "works of graphic or plastic art such as pictures, collages, paintings, drawings, engravings, prints, lithographs, sculptures, tapestries, ceramics, glassware and photographs, provided they are made by the artist himself or are copies considered to be original works of art."[40]

47. We received conflicting evidence on the likely effect of droit de suite on the UK art market, and on the costs and administrative burdens associated with its introduction. These have been insufficiently clarified by the impact assessment accompanying the draft Statutory Instrument.[41] We recommend 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.

48. The British Art Market Federation's submission to the Committee focused on droit de suite, reflecting major concerns over what its Chairman, Anthony Browne, called a "huge experiment with the future of the market."[42] The BAMF evidence acknowledged the concessions won by the UK Government and its allies. The most important is the already-mentioned derogation to permit those member states not already operating the right to apply it only to the work of living artists, until 2012 at the latest. Thereafter it will also apply to the heirs of dead artists which account for over 80% of relevant art auction sales. Such sales include many of the 20th Century masters that, the BAMF pointed out, London must continue to attract for sale to maintain its position in the international market.

49. A second concession is a maximum levy per transaction of 12,500 euros; this prevents the levy from increasing when sales exceed 2 million euros. This is intended to limit the loss of the UK's share of the mobile top end of the art market. Thirdly, there will be a starting threshold of 3,000 euros below which sales will not be liable to the levy. During negotiations on the directive, the UK Government argued for a starting point of 10,000 euros on the grounds that sales below that figure were unlikely to be diverted from one member state to the other (so no internal market justification existed).

50. The BAMF submission went on to express concern that applying the resale right to low value transactions will create a considerable burden and cost, particularly to many smaller businesses. The initial compliance cost assessment put the administrative cost at £30 to £40 per sale. We believe that, with modern technology, and within existing arrangements, it should be possible to reduce administrative costs substantially. The BAMF evidence named several prominent artists who are opposed to droit de suite, one of whom, Anthony Green, submitted separate evidence to us.[43]

51. On the other hand, the Design and Artists Copyright Society believes that the "buoyant British art market, which is the strongest in Europe, has nothing to fear."[44] The Society's written evidence welcomed the extra income stream that droit de suite will generate for artists, rebutted the market diversion arguments, and suggested that administrative costs can be minimised by implementing collective management of the resale right.[45] On collective management at least, there appeared to be a measure of consensus in the evidence we heard.[46]

52. We recommend 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.

53. We are attracted to the principle that artists should receive adequate remuneration and recognition for their work. Both BECTU and the Design and Artists Copyright Society have argued that applying the resale right to lower value art works could be administered economically. Together with the British Copyright Council, they have advocated taking the option permitted by the Directive of lowering the minimum threshold to which the right applies from the stipulated 3,000 euros. All three bodies recommend 1,000 euros as being a reasonable price at which resale royalty should begin to apply. The Chief Executive of DACS, Joanna Cave, told us: "We are suggesting lowering the threshold to 1,000 euros which will benefit a much broader range of artists, and will also deliver the objective that the Commission has highlighted in encouraging younger artists, or those at the beginning of their career, where their values have not achieved high levels. If the UK opts for a thousand euros it will still have the highest threshold out of all the Member States."[47] Member States with some form of the resale right in place have lower rates partly for historical reasons; the UK's main EU competitors, France and Germany, having notably low rates of, respectively, 15 and 50 euros.[48]

54. The British Art Market Federation has expressed concerns that even a threshold of 3,000 euros will impose a significant burden on small businesses. Lord Sainsbury told us the Government were inclined not to lower the threshold "because we think at that point the administrative costs become an absurdly high proportion of the actual payments which will go to artists."[49] More generally, Simon Stokes, a solicitor with a background in art and copyright, wrote to us arguing that the UK should not seek to "gold plate" the droit de suite Directive, but to take advantage of concessions hard-won by the UK Government and implement it in a fashion that causes least damage to the market.[50] We believe the application of a measured amount of "gold plating" can bring about material benefits to artists, without compromising the competitiveness of the market.

55. We are 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 euros.

56. As DACS notes in its written evidence, the droit de suite Directive includes for the first time a specific attempt to encourage young, newly emerging artists by providing a higher royalty rate for less expensive works. At the other end of the graduated scale,[51] the amount of royalty from a single resale is capped at 12,500 euros (£9,000). The highest rate of royalty is 4%, at the lowest value range (3,000 euros to 50,000 euros). Member States can elect to increase the royalty rate at this level only, to 5%. Below 3,000 euros any royalty can be applied so long as it is not lower than 4%. A modest increase in the royalty rate for the lowest resale price band would, we believe, have important symbolic value, provide a measure of assistance to a substantial number of artists; all at relatively little additional cost to the market.

57. We recommend that the Government apply a royalty rate of 5% to the price band up to 50,000 euros.

58. 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.[52] The buyer's premium in the major auction houses is now charged at 20% compared to our proposed 5% for droit de suite royalties.[53] Nevertheless, the Government should give consideration to compensating measures, such as a reduction in the rate of VAT applied to art sales (currently 17.5%),[54] particularly in view of a possible future increase (from 5% to 17.5%)[55] in the VAT on imports of artistic works.[56] No-one benefits, least of all the Treasury, from an emasculated art market.