The Artist's Resale Right: Navigating the Legal Landscape for Art Market Professionals
Introduction
The Artist's Resale Right (ARR) is a legal framework that empowers artists and their estates to receive a royalty whenever their original work is resold through an art market professional. For galleries, dealers, and auction houses operating in the UK, understanding the intricacies of ARR is crucial. While it provides essential financial support for artists, the ARR regime also presents challenges, including potential liability and compliance complexities. This article aims to demystify the legal foundations, common pitfalls, and practical considerations for those navigating the UK art market.
Legal Foundations
The ARR was introduced in the UK in 2006 to implement the EU Resale Right Directive 2001/84/EC, a result of a decade-long negotiation process. This Directive aimed to harmonize Artist Resale Rights across member states, addressing the practical challenges inherent in the ARR regime. Despite Brexit, the ARR remains a cornerstone of UK law, with only minor amendments introduced.
The ARR's duration is tied to the copyright of the work, typically lasting 70 years after the artist's lifetime.
When Does ARR Apply?
The ARR applies to the resale of original artwork in the UK, valued at £1,000 or more, involving an art market professional. Key terms are defined as follows:
- Resale: A sale is considered a resale even if the seller did not purchase the original work, including instances where the artist gifts the work.
- Original Work: This encompasses various forms of graphic or plastic art, such as paintings, drawings, sculptures, and photographs. For works with uncertain copyright, a case-by-case assessment is necessary.
- Art Market Professional: Any party acting in a business capacity, including sellers, agents, or buyers, is deemed an art market professional. Private sales between individuals or museums are typically exempt.
- Value Threshold: The £1,000 threshold applies to the sale price, net of taxes, regardless of whether the resale is made at a loss.
- Artist's Nationality: The artist must be a UK national or a national of a jurisdiction that provides ARR rights to the UK, such as the EU. The US and China, among others, do not offer equivalent ARR regimes.
How Much ARR is Payable?
ARR royalties are calculated on a sliding scale based on the sale price:
- Up to £50,000: 4% royalty
- £50,000.01 - £200,000: 3% royalty
- £200,000.01 - £350,000: 1% royalty
- £350,000.01 - £500,000: 0.5% royalty
- Above £500,000: 0.25% royalty
The maximum royalty payable per transaction is £12,500, requiring a sale price of £2 million or more.
Liability and Contractual Allocation
The obligation to pay ARR arises at the point of sale, with liability depending on the transaction structure:
- Default Liability: The seller and their agent (e.g., auction house) are jointly and severally liable for ARR payment.
- Seller without Agent: Liability is shared between the seller and the buyer's agent.
- No Agents Involved: The seller and buyer are jointly and severally liable.
Importantly, ARR liability cannot be transferred or waived, but the economic cost can be allocated to another party. Auction houses, galleries, and dealers may include terms requiring buyers to pay ARR, similar to import duties or transaction costs.
Enforcement and Collecting Societies' Powers
In the UK, DACS (Design & Artists Copyright Society) and ACS (Artist's Collecting Society) administer and enforce ARR. They possess broad investigatory powers, including:
- Requesting information to secure royalty payment and determine the amount due.
- Making information requests up to three years after the transaction.
- Addressing requests to buyers, sellers, or agents, though often sent to the relevant art market professional.
Maintaining accurate sales records for at least three years is essential to comply with information requests, including artist details, sale date, price, and related parties.
Recipients must respond within 90 days, or DACS or ACS can apply for a County Court order. Persistent non-compliance carries enforcement risks and reputational consequences, as evidenced by the DACS & ACS v Ivor Braka Ltd case.
DACS & ACS v Ivor Braka
In 2021, DACS and ACS sued renowned art dealer Ivor Braka for non-compliance with ARR since 2006. The case settled before a defense was filed, offering no judicial guidance. However, it highlights the collecting societies' enforcement capabilities and the art market's criticisms of ARR.
DACS and ACS justified the ARR regime and the claim, emphasizing its financial support for artists and the need for compliance.
Ivor Braka responded, expressing his disagreement with ARR, citing concerns about favoring artists with active markets, targeting art market professionals, and the absurdity of paying ARR when reselling at a loss.
Key Takeaways
- ARR imposes legal obligations on art market professionals, requiring royalty payments and responses to information requests within 90 days.
- Contracts should clearly allocate ARR costs to buyers and specify who will administer payments to collecting societies and manage reporting.
- Accurate sales records for at least three years are essential for compliance and addressing information requests.
- Court guidance is limited, but enforcement actions demonstrate the collecting societies' commitment to addressing persistent non-compliance.
- Current indications suggest no imminent reform. Art market professionals should embrace ARR as a settled feature, integrating compliance into pricing, terms, and internal processes.
