25 February 2009

Resale Royalty Right for Visual Artists Bill 2008

On 27 November 2008, the Minister for the Environment, Heritage and the Arts, Peter Garrett, introduced the Resale Royalty Right for Visual Artists Bill 2008. The Bill was referred to the House Standing Committee on Climate Change, Water, Environment and the Arts, which released its report on February 2009.

More:

• Committee's report
• Resale Royalty for Visual Artists Bill 2008

Background to the Bill

In its 2007 arts policy, New Directions for the Arts, the Federal Government promised to implement a resale royalty scheme for visual artists. The introduction of the right was recommended in the 2002 Report of the Contemporary Visual Arts and Craft Inquiry (Myer Report). Private Member’s Bills to grant artists a resale right were introduced by Senator Kate Lundy in 2004 and by the Hon Bob McMullan in 2006.

In the May 2008 budget, the Government allocated $1.5M over 3 years to support the establishment of the scheme. Also in May, the Department of Environment, Water, Heritage and the Arts (DEWHA) sought responses to a paper entitled 'Artists Resale Royalty Scheme for Visual Artists – Framework and Parameters', and consulted with key stakeholders. The Government confirmed its commitment to introduce a resale royalty scheme in August 2008 in its response to the 2007 Senate Committee report, 'Indigenous Art – Securing the Future'.

How a resale royalty right works

A resale royalty right entitles artists to a percentage of the sale price each time their work is resold. The artist receives the royalty even if the copyright in the work is owned by someone else. The entitlement to the royalty cannot be transferred to anyone else, but passes to the artist’s estate when the artist dies, and lasts for 70 years after the artist’s death.

The artists’ resale right is regarded as a copyright right, partly because the major international copyright treaty, the Berne Convention, includes a provision on it. More than 50 countries have a resale royalty scheme, including all members of the European Union (as a result of the 2001 EU Directive on the resale right).

Reasons for introducing a resale royalty right

A major reason for introducing a resale royalty right is that visual artists tend to benefit less from copyright than other creators, such as writers and songwriters, because artists’ works are not disseminated in ways that generate copyright royalties. Another major reason is that it is inequitable that many people benefit from the increased value of artists’ works, but the artists themselves do not. The Government’s arts policy says that a resale royalty scheme “would provide additional support for Indigenous artists who have experienced a boom in the Indigenous art market”. The objectives of copyright protection – providing incentive and reward for creative endeavour – would be better realised for artists if they could benefit from the increased value of their work.

Main features of the Bill

The main features of the Bill are:

• The right will apply to original works “of graphic or plastic art”, including pictures, collages, paintings, drawings, engravings, prints, lithographs, sculptures, tapestries, ceramics, glassware and photographs.
• The right will last for the artist’s lifetime + 70 years
• The right will apply to commercial resales, for more than $1,000, of works acquired after the legislation comes into force. It will not apply to private sales between individuals, where there is no art market intermediary.
• The royalty will be 5% of the resale price, with no cap on the maximum royalty payable.
• The seller is liable to pay the royalty. The seller’s agent, or the buyer’s agent, or the buyer is also jointly liable.
• The Bill enables the Minister to appoint a sole collecting society to collect and distribute the royalties. The society must meet the criteria set out in the Bill – for example, it must be a company limited by guarantee and entitle all people entitled to royalties to become its members.

The major problem: royalty is only for works acquired after commencement

The royalty would be payable only on works acquired after commencement of the legislation. In all other countries where the right has been introduced, the royalty is payable on resales, after commencement, of works acquired before commencement as well as after commencement.

For example, an artists’ resale royalty right came into effect in the UK in February 2006. The royalty applied to resales made after February 2006 of works acquired before February 2006, as well as those acquired after.

How often do works resell?

The Bill provides that for works acquired before commencement, the royalty will not be payable until the second resale after commencement. Analysis of the last 10 years’ auction sales by Viscopy shows that, for 94% of works, the period between resales is more than a decade: of works sold by auction in 1998, only 6% had resold by 2008.
 
The government has relied upon modelling, carried out by Access Economics, that was based on a groundless assumption that all works resell more than once in a 10 year period. Unfortunately, the government did not ask Access Economics to test this assumption against actual sales data before doing the modelling. The government’s apparent view that, after 10 years, royalties would be payable on all works in copyright is therefore untenable.

Effect on the art market

The experience in the UK is that the art market has boomed in spite of the introduction of the resale right.
In the Australian context, a 5% royalty is small compared to the commissions paid to art market intermediaries. Auction houses charge a seller’s commission of up to 25% of the sale price, and a buyer’s premium of up to 15%. The introduction of the buyer’s premium about 10 years ago has not had a deleterious effect on the art market. Commercial galleries charge a seller’s commission of up to 25%.

Constitutional requirements for a resale royalty right

Resale royalty legislation must comply with all requirements of the Australian Constitution, or risk being held invalid by the High Court.

The Coalition for an Australian Resale Right (CARR ) has received advice from a Senior Counsel specialising in constitutional law that the Government could introduce a resale royalty right, consistently with the requirements of the Australian Constitution, that applies to works acquired before as well as after commencement of the legislation.

Entitlement to royalties collected under resale royalty legislation in other countries

Article 14ter of the Berne Convention, to which Australia and 163 other countries are signatories, provides for a resale right for artists.

Countries that are parties to the Berne Convention are not obliged to grant artists a resale right. If a country does grant a resale right, however, its artists may be entitled to royalties from resales in other countries that have a resale royalty right, and foreign artists may be entitled to royalties under its legislation.
Because the Bill only applies to resales of works acquired after the commencement, it is not clear that it would entitle Australian artists to royalties from other countries such as the UK.

Administration costs

The administration cost for most resale royalty schemes is 15% of the money collected.

A survey in the UK indicated that the time taken by art market professionals to meet their obligations under the resale royalty scheme was, on average, 10 minutes a month.

There are, of course, economies of scale in collective administration. Given the small number of resales to which the Bill will apply, the administration costs are likely to be much higher than they would be for a right applying to resales of works acquired before as well as after commencement.