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Artist's Resale Right Regulations 2006: justice for artists or a devastating blow to the British art

March 2006 - Media, Entertainment & Sport. Legal Developments by Harbottle & Lewis LLP.

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The new law on resale rights, which came into force on 14 February, is one of the most controversial pieces of legislation to hit the art world in recent years. The Artist's Resale Rights Regulations 2006 implement an EC directive, requiring the payment of royalties to artists when their work is resold.

Latest developments
Several points regarding the new law have recently been made clear. This includes a decision to cap royalties at ‚ā¨12,500. (There was no cap in the original government proposal.) After much lobbying, the government has also changed the threshold for payments. It was previously suggested that the royalty should only apply on sales of ‚ā¨10,000 and above, although this was later dropped to a proposed threshold of ‚ā¨3,000. This has finally been lowered further to ‚ā¨1,000, the rationale being that this lower threshold will do more to help less well-off artists.

The government has also decided that royalties will be collected and distributed through compulsory collective management. Artists will therefore only be able to receive their royalties through a collecting society and will not be able to claim them directly.

The government had previously suggested making payments to the estates of dead artists. However, it has now agreed to defer its decision in order to consider this further. In any event, if payments are to be made on works by deceased artists then this will not be before 2010, in the hope that this will give the market time to adjust to the changes.

Another significant decision is that UK dealers are to be jointly liable with sellers for making the payment. In effect, therefore, dealers will be forced to work closely with the collecting society, because if payments are not administered then the dealer will incur liability.

An overview: Is the Regulation good for artists and the art market?
Justice for artists…
Artists including Tracey Emin, Steve Bell and Peter Blake have voiced their support for the new law. The Design and Artists Copyright Society also argued that the payments will help to support struggling artists who currently only benefit from an initial sale but not from further trade of their work, even though it is exploited as a profitable commodity by dealers and sellers.

Supporters of the new law therefore argue that it will bring artists‚Äô rights more closely in line with those of musicians and writers, who receive a royalty for each copy of a book or record sold. However, although the royalty payments operate on a sliding scale, the cap of ‚ā¨12,500 limits the amount artists will receive on resales of very valuable works.

… or a devastating effect on the British art market?
The British Art Market Federation, Gillian Ayres, Ian Davenport and others believe that the valuable London art market will be adversely affected by the new law. David Hockney voiced his opinion in The Times on 21 January 2006, saying that the resale right will envelop the market in red tape and discourage dealers from buying works. Many auctioneers and dealers think that prices will drop to take account of the extra payment to artists and fear that there will be a loss of business to markets such as New York, where no royalty on resale is paid. Alternatively, more sales may take place privately, as the royalty does not apply to private sales.

There will be an increased and continuous administrative burden for the art market, in addition to the initial effort, as auctioneers and dealers change their computer and accounting systems and contracts to adapt to the change. There is also concern that the collection society’s costs may be high.

In addition, there is also confusion as to what exactly is meant by ‚Äėworks of art‚Äô. The Regulations define a ‚Äėwork‚Äô as ‚Äėany work 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‚Äô (para 4(1)). While it is clear that a limited number/authorised copies of relevant works will be subject to the resale right, it is uncertain whether items such as furniture and jewellery will be caught.

Will the new law work?
If the administrative costs of collection and distribution of the royalties are high then payouts to artists may suffer. If the aim of the resale right is to help struggling artists, it is doubtful whether it will succeed; after all, many young artists do not sell works for over ‚ā¨1,000. Also, if the law causes the predicted severe damage to the London art market, artists may find that their work is less marketable. It will be a terrible irony if this is the effect of a law intended to help artists.

By Joanne Butler and Charlotte Partridge.
E-mail: joanne.butler@harbottle.com.

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