By Alison Davis with assistance from Peter Ton*.
First published in ART+law, September 2000.
There is a new wave of interest from the visual arts sector in advocating federal legislation that introduces artist resale royalties. Why? Because Australian visual artists do not currently receive the compensation they, arguably, deserve from subsequent sales of their own work.
The principle value of a visual artist’s work derives from its original, rather than its reproduced state. Visual artists who sell their work receive the sale price, and that generally constitutes the full amount of their compensation for their work. Australian visual artists do not enjoy the benefit of a revenue stream from the subsequent sale of their original work in the way that composers or writers are able to do. Implementation of an artist resale royalty would compensate visual artists for this disparity.
The value of new and emerging artists’ work is generally low, and it is only once their work becomes known and highly regarded that it attracts large price tags. A highly publicised example is Johnny Warangkula Tjupurrula, who reportedly sold his painting, Water Dreaming, in 1973 for $150. It was recently reported that it sold at auction for $486,500. Mr Tjupurrula receives no direct benefit from the fact that his work is now worth over 3,000 times its value when he sold it. Those that benefit from the escalation of artwork’s value are generally the collectors, gallery owners and auction houses. An acclaimed artist may receive publicity and even a bit of fame, but they generally don’t obtain any financial gain from the subsequent sale of their work.
The idea behind artists’ resale royalties is to create an ongoing economic interest in the work beyond the initial sale transaction. In practical terms, this would means that an artist who sells their work would benefit from subsequent sales, receiving a percentage of each sale price. If Mr Tjupurrula had received a resale royalty of even 5%, he would have received a very healthy $24,325 (before any deductions for administration of the resale royalty scheme) for the most recent sale of Water Dreaming alone. A resale royalty scheme would ensure that if, and when, the value of an artist’s work increased, the artist would receive a percentage of the resale price.
Opponents of the scheme have suggested that the expense and difficulty in administering it are prohibitive, and that it will drive art sales down. The international experience, however, does not support these claims.
Resale royalties exist in many other jurisdictions that continue to enjoy thriving visual art markets, including California, France, Germany, Italy and the Czech Republic. The way in which the scheme operates varies from place to place. In the Czech Republic, for example, the royalty applies to all intellectual property. In California, it applies only to original paintings, sculpture, drawings or original works of art in glass.
The methods of enforcing the scheme also vary. In France, a collecting society collects and distributes receives and distributes the royalties, after deducting its administration costs of 20%. Whilst dealer sales are theoretically subject to resale royalties, in practice this is not enforced due to the difficulty in administering the system. In California, there is an onus on the person making the sale to withhold 5% of the amount of any sale over $1,000 and to pay the royalty directly to the artist within 90 days.
Issues to consider in implementing such a scheme include:
- the percentage to be levied and whether it should be fixed or on a sliding scale;
- whether there should be a maximum or minimum sale value to which resale royalties apply;
- whether the right to royalties should extend beyond the duration of the artist’s life; and
- whether it should apply only to auction sales or to all sales.
Arts Law is aware of at least two Sydney galleries, Watters Gallery and Legge Gallery, which voluntarily collect resale royalties of 10% for their artists, thereby recognising an artist’s ongoing rights in their work. The galleries take the amount out of their dealer’s commission and distribute it directly to the artist, allowing the artist to share in profits received from sale of his or her artwork. Most artists, however, do not enjoy the benefit of a voluntary resale royalty scheme. Implementation of a compulsory resale royalty scheme would ensure that artists do not have to rely on the goodwill of galleries and auction houses to receive a return from sales of their own work.
Artist may seek royalties by means of a written contract entered into with the initial purchaser, however it may be impossible to enforce such an agreement in future sales of the work.
*Alison Davis was a legal officer at Arts Law in 2000 and Peter Ton volunteered at Arts Law in 2000.
