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    ‘Droit de Suite’ Debate Heats Up as U.K. Expands Law

    On both sides of the Atlantic, the issue of artists’ resale rights has jumped to the fore.

    NEW YORK—On both sides of the Atlantic, the issue of artists’ resale rights has jumped to the fore. As of the start of 2012, the U.K., which adopted a resale royalty law for living artists in 2006, expanded that law so that it now applies to artists deceased 70 years or less. Dealers and auctioneers are going to be closely watching its effect on sales in the year ahead, particularly since the new application will apply to far more sales which are also likely to be of higher average value. The implementation of the resale royalty was staggered in order to allow the art market to adjust to the new requirement.

    Jussi Pylkkänen, president of Christie’s Europe, called the “extension of the artists’ resale right to deceased European artists” in 2012 “a matter of real concern. It will affect the modern art market, which is a key aspect of Christie’s activities in London.”

    According to a 2010 market report commissioned by the organizers of the annual art fair TEFAF in Maastricht, the Netherlands, and authored by Dr. Clare McAndrew: “an EU art tax, due to be extended in the U.K., Ireland, the Netherlands and Austria next year, risks further damaging an already weakened European art and antiques market by encouraging vendors to sell elsewhere.”

    The British law sets a minimum sale price above which the resale royalty comes into play at €1,000, and royalties are set on a sliding scale at rates of: four percent for profits up to €50,000; three percent for profits from €50,000.01/200,000; one percent for profits from €200,000.01/350,000; one-half of one percent for profits from €350,000/500,000.01; and one-quarter of one percent for profits exceeding €500,000.01. The single maximum payment for any one sale is set at €12,000.

    The London-based Design and Artists Copyright Society, one of the two main nonprofit agencies collecting and distributing resale royalties, estimates that artists there have been paid £15.5 million since 2006. When sales of famous deceased artists are added to the mix, the value and volume of royalties are expected to increase fourfold, perhaps more, experts said.

    A 2010 report on artists’ resale royalties, commissioned by the European Art Market Coalition, found that in continental Europe, 74 percent of all the royalties collected went to artists’ heirs, 20 percent went to the collecting agencies and only six percent went to living artists. Helping older artists may be the intended goal, but critics claim the practice has largely benefited the heirs of already successful artists like Pablo Picasso, Georges Braque and Henri Matisse.

    “The problems with the law are already evident, and they’re just going to get worse,” said Anthony Browne, executive director of the British Art Market Federation. The artists’ resale royalty “is expensive and complicated to administer, and it will shift buyers and sellers from the U.K., which has lost a considerable amount of global art market share in the past five years, to countries where there is no royalty to be paid”—such as the United States.

    Dealers and auctioneers expressed similar worries when the first stage of the artists’ resale rights law was enacted in 2006. “I don’t see the law putting any dealer out of business,” said Jonathan Dodd of the London-based Waterhouse & Dodd gallery. “If any dealer goes out of business, it won’t be solely because of the law.”

    However, Christopher Battiscombe, director general of the Society of London Art Dealers, told ARTnewsletter that his member-dealers coped with the law by absorbing the increased costs—largely, paying the royalty fees themselves—rather than passing them on to buyers in order to minimize its impact. Profit margins have suffered even more when dealers purchase works by contemporary artists at auction (the law requires that buyers pay the royalty) and then resell the works. “At that point, the dealer has paid a royalty twice,” he said.

    In the U.S., over the past 15 months, several lawsuits have been brought by artists against collectors, galleries and auctioneers Christie’s, Sotheby’s and even eBay for failing to pay royalties when artworks are sold in California on the secondary market. The lawsuits are based on a five percent resale royalties law enacted in 1977 in the state of California, where it has been widely ignored by galleries, auction houses and artists themselves until recently. Since 1977, the California Arts Council, a state agency which, among other activities, handles collection of royalties in instances where artists must be tracked down to remit payment, has only collected about $350,000 for the payment of more than 400 artists, according to a spokesperson.

    Auctioneers have responded by challenging the constitutionality of artists’ resale royalties, claiming that it conflicts with the Commerce Clause, which grants the federal government alone the right to regulate commerce between states.

    One of the main reasons for applying the artists’ resale royalties law, which no other state besides California has chosen to enact, is that artists often sell their work very cheaply at the outset of their careers. When that work rises in value, it is usually a result of the artist’s growing reputation. Resale royalties return some of that value to the artist when the artwork hits the secondary market.

    “In general, I think resale royalties are a pretty good idea,” said painter Chuck Close, who, with a number of other artists, filed a class-action lawsuit against the auction houses this past October. “I know some artists who were successful in the 1960s and ’70s and have since fallen on hard times and could really use the money,” Close said.

    Damien Hirst has expressed his support for the law, while British sculptor Anthony Caro and painter David Hockney are among a group of artists who signed a petition against it. Caro claimed in a recent email that the law, generally, “will mainly benefit artists who are already successful.”

    Recently in December, two members of Congress, Wisconsin Democratic Senator Herb Kohl and New York Democratic Representative Jerrold Nadler, introduced into Congress a similar piece of legislation: the Equity for Visual Artists Act of 2011, which would take the provisions of the California artists’ resale royalties law and make them national.

    Some who oppose the resale royalties point out that collectors—particularly those who buy contemporary art—are taking a risk and should not be penalized for their discernment but should instead enjoy the rewards.

    Correction: An earlier version of this article misstated the minimum price at which artist resale royalties are applied. The correct price is €1,000.