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A resale royalty right for Australia

Australian artists are soon to benefit from the introduction of a resale royalty right. This is the right to receive a percentage of the sale price each time art works are resold. The resale royalty right – or droit de suite, as it is known in Europe – has long been recognised in many other countries.

Several justifications have been advanced for the introduction of the resale royalty right in Australia. One of the most important of these is that a resale right would put visual artists on a more equal footing with other creators, such as authors and songwriters whose works are distributed in multiples and who earn royalties each time a copy of their work is sold. In contrast, the main form of exploitation of an artistic work is generally the sale of the original. Visual artists own copyright in their works and have the opportunity to earn royalties when their works are reproduced, however copyright royalties are generally considerably less significant a source of income for visual artists than for other creators. One of the findings of the report Don't Give Up Your Day Job: An Economic Study of Professional Artists in Australia was that, apart from the fact that artists in general are very poorly remunerated, the proportion of income earned from copyright royalties considerably less than for writers and composers.(1)

A further justification for introducing the resale royalty in Australia is international parity. The Berne Convention for the Protection of Literary and Artistic Works has included droit de suite since the 1970s and while the enactment of the right is optional for signatories, the recognition of a resale right is increasingly gaining acceptance around the world. In addition to countries in the European Union and the European Economic Area, the right has been introduced, or is being considered, in many other countries. In our region, the New Zealand Government has recently introduced a bill providing for a resale royalty. This bill is currently being considered by a parliamentary committee.

One of the features of the Berne Convention provision on resale is the principle of reciprocity. The right may be claimed in a country of the Berne Union only if legislation in the country to which the author belongs so permits. This means that Australian artists are currently unable to receive resale royalties for sales of their works in countries which have the right. This will change when our right comes into force and we are able to offer reciprocity.

Much of the policy debate in Australia has focused on its application to Indigenous artists. There are the often cited examples of works having been initially sold for very low prices and then selling on the open market some time later at record breaking prices. One example is the resale of Water Dreaming at Kalipinypa by Indigenous artist Johnny Warangkula Tjupurrula for $486,500 in July 2000, after its original purchase in the 1970s for around $150. Another event which drew attention to the issue was last year’s resale of Emily Kngwarreye’s work Earth’s Creation for a record price of over one million dollars.

The 2002 Report of the Contemporary Visual Arts and Craft Inquiry (referred to as the ‘Myer Report’) which recommended the introduction of the resale right looked particularly at the situation of Indigenous artists and said that, ‘the disadvantaged position of Indigenous visual arts and craft practitioners in the market, and the extensive financial and social obligations of Indigenous artists to the community arising from communal ownership of cultural property and traditional imagery, has strengthened the call for the introduction of resale royalties.’(2) The Government’s arts policy statement notes that a resale royalty scheme would ‘provide additional support for Indigenous artists who have experienced a boom in the Indigenous art market’.(3)

The resale royalty right has, on the whole, been opposed by auction houses, commercial galleries and other art market intermediaries, as has been the case in other jurisdictions, such as the UK. The art trade is concerned about the potential for negative impact on its business and argues that the art market will suffer and sales will move offshore to countries which do not have a royalty. However, experiences overseas suggest this concern is overstated. A resale right was successfully implemented in the UK in 2006 without the predicted dampening of the market or the exodus of sales. In the year that it was introduced, the Design and Artists Copyright Society collected resale royalties worth 2 million euros and the art market continues to flourish.

In Australia, the Government is currently preparing legislation which is expected to be introduced in the second half of this year. There are several key issues that the legislation will need to address.

Works covered

The resale royalty is likely to apply to original ‘artistic works’, whether by reference to the definition in our current copyright act which includes painting, drawing and sculpture, or the more expansive definition included in the UK legislation and based on the European Directive. The resale right may also apply to limited edition copies, as it does in the UK.

Duration

It is expected that the right to receive resale royalties will last for the same length of time as copyright protection for artistic works, which is the lifetime of the artist plus 70 years. In the UK the right originally applied only to the works of living artists but is to be extended to estates from 2010.

Sales covered

Resale royalty regimes generally apply to sales involving art market professionals, including auction houses, galleries and dealers. Applying the right to private sales would pose problems for the effectiveness and enforcement of the scheme.

Another feature of resale schemes applying in other jurisdictions, including in the UK, is a threshold price which must be reached before a resale royalty is payable. This feature of the scheme is designed to limit the impact of the royalty on the lower end of the art market and to ensure that the cost of collection does not outweigh the royalty payable. The threshold applying in the UK is 1,000 euros.

Rate

Two options being considered by the Government are a flat rate applying to all sales whatever their value, and a tiered rate structure pegged to the sale price.

The UK scheme has adopted the tiered rate structure as follows:

From 0% to $100,000 – 4%
From $100,000 to $400,000 – 3%
From $400,000 to $700,000 – 1%
From $700,000 to $1,000,000 – 0.5%
Exceeding a million – 0.25%.

Viscopy, Arts Law and several other arts organisations are in favour of a flat rate as it is more consistent with a right which does not diminish according to the price of the work. It is also more straightforward and would therefore be simpler to administer.

Liability

It is clear from overseas experience that joint liability for payment of the royalty on the part of buyers and sellers is an important feature of a workable resale scheme. Joint liability is preferable because without it the royalty would be difficult to collect from private individuals.

Administration

It is also evident from overseas experience that collective administration of the resale royalty right is the only effective means of operating the right. There are several examples of countries where the right has been legislated but where there is no visual arts collecting society to administer it. One such example is the Philippines. In these countries it is effectively unenforced, as administration and enforcement by individual artists is impractical. Collective management keeps costs down for artists, encourages compliance from the art trade, brings accountability to the process and minimises the compliance burden on businesses.

One option is to allow for more than one collecting society to manage the right and the other is to appoint a single society with an exclusive mandate to collect the royalty. The Government has indicated that it favours the latter option and is proposing to hold an open selection process for the appointment of the collecting society once the legislation is in place.

The introduction of an Australian resale scheme will be the culmination of many years of advocacy on the part of the arts community, including the National Association for the Visual Arts, the Arts Law Centre, the Australian Copyright Council and Viscopy. This important new right, which will hopefully will be operational by mid-2009, will help visual artists to share with dealers and collectors in the increasing value of their work, help to correct some of the injustices experienced by Indigenous artists, and encourage Australian artists to continue to keep making work and contributing to the creative economy and the cultural landscape.
 

Footnotes

(1) David Throsby and Virginia Hollister, Don't Give Up Your Day Job: An Economic Study of Professional Artists in Australia’, Australia Council for the Arts, 2003.
(2) Department of Communications, Information Technology and the Arts, Report of the Contemporary Visual Arts and Craft Inquiry (2002).
(3) Ibid.

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