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Quiggin, Robynne --- "The Resale Royalty (Part Two)" [2004] IndigLawB 61; (2004) 6(6) Indigenous Law Bulletin 7


The Resale Royalty - Part Two

By Robynne Quiggin

The Federal Government continues to consider the introduction of a resale royalty, or droit de suite, for artists, however support for a resale royalty arrangement in Australia does not extend uniformly across the arts sector. Both advocates and opponents of the introduction of a resale royalty arrangement frame their arguments in terms of the best interest of the artist and the art market. The contentious policy issues straddle a mix of economics, business and philosophy, raising questions such as:

  • Would a resale royalty system have a detrimental effect on the art market and emerging artists?
  • Does a resale royalty really provide an economic benefit to artists or does it only benefit famous and, presumably, wealthier artists? If so, does this mean that the resale royalty should not be implemented?
  • Would potential financial benefits to artists disappear into administration costs?

Those who support the introduction of a resale royalty arrangement do so because of the perceived benefits to artists. These benefits are illustrated by the following account of the sale of a complete set of Tracey Moffatt's series of photographs, Something More, by the Christie’s auction house in 2002.

When first sold through the Mori Gallery in Sydney in 1989, the Moffat series went for around $1000. Moffat would have received around 60 per cent of the 1989 price under the normal commission arrangement between gallery owners and artists. For the Christie's sale she would not have seen a single dollar. If, however, she was French and not Australian she would have automatically got 5 per cent of the $230,000 under legislation called the droit de suite (right to follow) a resale royalty introduced in the 1920s.[1]

Despite the claims by opponents of damage to the art market and therefore the interests of artists, most arts organisations support and strongly advocate for the introduction of the resale royalty. Many, but certainly not all, secondary art dealers oppose a resale royalty. Some art dealers are strong advocates of a royalty right, although the means of implementation is frequently different from that proposed by the majority of art organisations.

Opposition to a resale royalty system is often based on perceived weaknesses of resale royalty schemes in other jurisdictions and projections about the failure of an Australian scheme. Key features of these anticipated shortcomings include a failure to provide strong financial benefit to a broad range of artists and claims of damage to the art market.[2] These claims, however, must be considered in relation to the expectations and demands placed on a proposed resale royalty arrangement.

If a resale royalty is expected to remedy or uniformly ameliorate the financial disadvantage suffered by artists, it is destined to be considered a failure, at least in the short term. The purpose of a resale royalty is not to uniformly cure visual artists’ financial disadvantage. It is one measure, among many, to financially support Australia’s visual arts sector, recognise its enormous contribution to the national economy and bring Australian laws into conformity with trends in the European Union (‘EU’).

The Research

For numerous reasons, there is an absence of comprehensive research data upon which to validate projected outcomes or to postulate the results of various royalty structures. The most recent economic study of professional artists in Australia, Don’t Give Up Your Day Job,[3] surveyed artists across Australia, including urban-based Indigenous artists ‘working in the “mainstream”’, yet it did not survey Indigenous artists in remote Australia.[4]

The recent Department of Communications, Information Technology and the Arts (‘DCITA’) ‘Proposed Resale Royalty Arrangement’ Discussion Paper[5] (‘DCITA discussion paper’) was unable to include detailed information about commercial gallery sales as this is not made available, nor is demographic information on buyers of art from auction houses or galleries.

The DCITA discussion paper provided important information on the sales of Indigenous art by commercial galleries and auction houses.

In 1996-7, commercial galleries sold $14.6 million worth of Indigenous artworks. Of the 457 identified galleries, 72 were involved in first sales (totalling $4.4 million) and 57 in secondary sales ($10.2 million). In terms of total arts sales, this accounted for 7 percent of total first sales of Australian art and 15.5 percent of secondary sales.[6]

Auction house sales of Indigenous art have increased from $873,000 in 1988 to $9.5 million in 2003.[7]

Would the Resale Royalty Damage the Art Market?

One argument made against the resale royalty is that it will damage the Australian art market because the imposition of an additional cost will deter purchasers. Further, some opponents argue that ‘artists who do not have a resale market, will suffer since purchasers will nevertheless pay less in the primary market, factoring in a possible future royalty.’[8]

Arts advocacy organisations note, however, that the introduction of the buyers’ premium has had no identifiable detrimental impact on the art market. The buyers’ premium is a charge of between 10 and 20 per cent[9] levied on the final bid price by auction houses. Goods & Services Tax (‘GST’) may also be payable on the sale price, including the buyers’ premium. And while anecdotal evidence exists of buyers’ resistance to the GST, there is no evidence in the sale figures that buyers have stopped purchasing artworks.

Reciprocal Arrangements

For Indigenous artists, 50 per cent of the works sold in 2003 were sold to international bidders, and most based in Europe and America.[10] This is important because an Australian artist may be entitled to a royalty if their work is sold in a nation with a resale royalty scheme, but only if Australia also adopts a resale royalty arrangement.

Many resale royalty schemes contain a provision entitling foreign artists to receive resale royalties: this is usually predicated on reciprocal arrangements between the two jurisdictions. Thus the passage of resale royalty legislation in Australia may allow Australian artists to receive a royalty from certain overseas sales of their work. Of course, this would also mean that foreign artists could also receive royalties from the sales of their work in Australia.[11]

Which Works would be Covered by a Resale Royalty Arrangement?

One of the arguments in favour of a resale royalty for visual artists is that, unlike musicians and writers who receive royalties from the sale of reproductions of their works, visual artists have no mechanism to benefit from ongoing dealings with their works.[12] The resale royalty would provide one means to achieve that parity of benefit for visual artists.

The royalty right would apply to the original embodiment of particular artistic works upon their resale. Artistic works as defined in the Copyright Act 1968 (Cth)[13] would be included, except buildings or permanent, non-removable parts of a building. Reproductions made under the direction of the artist in limited numbers would also be included. [14] The definition of artistic work may need to be modified to take account of developments in new artistic media.[15]

A number of submissions to the DCITA discussion paper refer to Recommendation 3.8 of the Report of the Contemporary Visual Arts and Craft Inquiry[16] (the ‘Myer Report’) which advises monitoring of case law in relation to the definition of an artistic work, with a view to legislative change if required. Specific works that might not be covered by the current definition include installations, performance art, art involving biological, chemical and natural processes, and computer generated art.[17]

Who Would Benefit from a Resale Royalty?

Most supporters of the royalty agree that it should be paid to all living artists and their heirs whenever the artist’s work is resold. For Indigenous artists, this method of payment is consistent with the principles of self determination and respect for individual artists to deal with remuneration in ways they see fit.

An alternative proposal, advocated by the Art Trade Association is that an amount be paid to ‘a communal fund dedicated to the support of targeted programs in the areas of health, education, community development, and crisis management.’[18] An example of this model is an arrangement brokered by Art Trade whereby the Lawson Menzies and Deutscher Menzies auction houses voluntarily pay two per cent of the resale price into the Artists Benevolent Fund, a company limited by guarantee and run by trustees. The trustees use the initial resources to support ‘organisations and projects that are cost effective and demonstrably beneficial programs in the field of Indigenous health, education and community welfare.’[19]

Other advocates of the royalty envisage an arrangement in which the establishment of trusts and other collective arrangements are an option to be exercised at the artist’s discretion. The resale royalty is conceived as a mechanism to provide immediate benefits for some artists, but with the seeds of potential to achieve long term benefits for greater numbers.

The submission of ArtsWA[20] sets out a number of aims of a resale royalty. It acknowledges that established artists will benefit, but takes a view which combines both a longer term perspective and a choice for artists:

ArtsWA understands that it may be the more established artists who benefit from this arrangement, however, the effects of income on an ongoing basis could be invested in the preservation of works from Australian artists into the future, and it possibly could give the means of artists estates to create charitable trusts for future support of more emerging arts practices.[21]

If it was made available to Indigenous artists, this model has the potential to combine principles of self determination with the potential for development of charitable structures over time.

The resale royalty is often criticised for providing a benefit to few artists, generally those who are successful and financially secure as a result of their success. But this criticism has two flaws. Firstly, the road to financial success can be slow and complex for many Indigenous artists; even successful artists and their heirs may not be wealthy.[22] Secondly, the resale royalty is not premised on uniform returns. It is premised on returns to artists for commercial success in the marketplace.

The marketplace provides musicians and writers with royalties and the amounts are partly determined by the commercial success of their work.[23] While the resale royalty is fundamentally different from royalties derived from the use of copyright material such as music and books, it does provide visual artists with a return for their commercial success. It remains one means of rewarding excellence and should not be abandoned because it lacks uniformity of application or short term gains. Nor should it be understood as anything but one in a set of support mechanisms for artists.

The resale royalty is also one form of recognition of the ongoing relationship of artists to their artwork. For Indigenous artists, an important feature of this relationship can include the role of visual art in the expression and transmission of Indigenous culture.

Richard Bell, winner of the 2003 Telstra National Aboriginal and Torres Strait Islander Art Award states:

Basically I'm telling Dreamtime stories only they're from the present day and from events during my lifetime and just preceding my lifetime that I've heard stories come down from my family. So in 1,000 years time they'll look back on this period as being part of the Dreamtime, and I'm recording what's happening now for our future generations.[24]

On the resale royalty he states:

Australians, settler Australians have done very well out of Aboriginal people. They've got a whole continent for free, and they got to treat us appallingly and they owe us more than they can ever repay, so just giving us 5% resale royalty on our paintings would be fantastic.[25]

How Much Should be Paid?

There are two main issues which need to be resolved in relation to the amount to be paid as a royalty. The first issue is the percentage rate. The EU directive[26] allows nation states the discretion to implement a scheme with a rate between three per cent and five per cent. Most Australian arts organisations advocate a five per cent flat rate because it maximises returns to artists and is less administratively complex.[27] Some Indigenous arts organisations have suggested a sliding scale, which reduces from two-and-a-half per cent for the portion of the sale up to $200,000 to three quarters of a per cent for the portion of the sale price up to $500,000 and one quarter of a per cent for sales exceeding $500,000.[28] Establishing the most appropriate percentage may benefit from further investigation.

The second issue is whether there should be a threshold, or minimum price, which must be reached before the royalty applies to the sale. This is normally set to exclude payments which would be completely absorbed by administration costs, with no returns to artists. Determination of the threshold issue is largely dependent on the cost estimates of collecting societies. Viscopy, the Visual Arts Copyright Collecting Agency, is currently conducting research into this issue.

How Would it be Administered?

Complex administration has been another major objection to the royalty. Increasingly, however, administrative costs are driven down by technology. Further, transactions already require vendors and purchasers to calculate amounts including buyers premium, GST, Capital Gains Tax (‘CGT’) and currency exchange rates. The addition of a five per cent flat rate resale royalty is no more complex. Calculation and distribution of royalties for musical, artistic and literary works is currently conducted by industry collecting societies.

Conclusion

Despite opposition, it is clear that the resale royalty is a right which artists in Australia seek, overwhelmingly, to have implemented. They are joined in this campaign by sections of the secondary art market and others. The EU’s directive to harmonise laws in favour of the resale royalty is a firm endorsement of the importance of the right.

The resale royalty ought not be seen as the panacea to the economic difficulties of Indigenous and non-Indigenous artists, but as one of a suite of measures, derived from the right of visual artists to benefit from commercial success, the right of visual artists to benefits from dealings with their work, the right of artists to recognition of their ongoing relationship to their work, and to share in the benefits arising from reciprocal arrangements in other jurisdictions.

Robynne Quiggin is an Indigenous lawyer currently working as a Senior Researcher at Jumbunna Indigenous House of Learning, UTS.


[1] ‘Royalties for Art’s Sake’, Sydney Morning Herald, (Sydney), 6 September 2002 <http://www.smh.com.au/articles/2002/09/05/1031115911326.html?oneclick=true> at 25 October 2004.

[2] See, eg, Jon Stanford, ‘An Economic Analysis of the Droite de Suite – the Artist’s Resale Royalty’ (Discussion Paper No 301, School of Economics, University of Queensland, 2002).

[3] David Throsby and Virginia Hollister, Don’t Give Up Your Day Job: An Economic Study of Professional Artists in Australia, Australia Council (2003).

[4] This omission resulted from the structure and administration of the survey. The authors strongly ‘recommended that a specific survey targeted at these artists be undertaken at some time in the future.’ Ibid 116.

[5] Commonwealth, ‘Proposed Resale Royalty Arrangement’, Discussion Paper, Department of Communication, Information Technology and the Arts, 2004.

[6] Ibid 14-15.

[7] Of the three major auction houses, Sothebys auction generated $7.9 million in 2003. Ibid 15.

[8] Bernhard Berger, Why Resale Rights for Artists are a Bad Idea (2001) Harvard Law School <http://www.law.harvard.edu/faculty/martin/art_law/why_resale_rights_for_artists.htm> at 13 October 2004.

[9] Australian Art Sales Digest, Prices Shown <http://www.aasd.com.au/using07.cfm> at 13 October 2004 and Deutscher-Menzies, Buying at our Auction <http://www.deutschermenzies.com.au/page/buying_at_our_auction.html> at 13 October 2004.

[10] Commonwealth, above n4, 15.

[11] Emily Hudson and Sophie Waller,Droite de Suite Down Under: Should Australia Introduce a Resale Royalties Scheme for Visual Artists?’ (Working Paper No 11/04, Intellectual Property Research Institute of Australia, 2004) 12.

[12] Australian Copyright Council submitted that the resale royalty should be implemented by amendment to the Copyright Act 1968 (Cth). Australian Copyright Council, ‘Response to the Discussion Paper on Proposed Resale Royalty Arrangement’, (Submission to DCITA, 2004), 2.

[13] Copyright Act 1968 (Cth) s 10.

[14] Resale Royalty Bill 2004 (Cth). s 250 proposes the definition of artistic works in s 10 of the Copyright Act 1968 (Cth), with the exclusion of buildings and models of buildings and includes numbered copies authorised by the artist and non-traditional forms of expression such as installations and multimedia works. Australian Copyright Council, ‘Response to Discussion Paper on Proposed Resale Royalty Arrangement’ (Submission to DCITA, 2004) 5.

[15] National Association for the Visual Arts (‘NAVA’), Arts Law Centre of Australia, Australian Copyright Council and Visual Arts Copyright Collecting Agency (‘Viscopy’), ‘Resale Right: The Major Legislative Issues’ (Joint submission to DCITA, 2003) 2.

[16] Commonwealth (DCITA), Report of the Contemporary Visual Arts and Craft Inquiry, (2002).

[17] Ibid 135 and see Recommendation 3.8, 13.

[18] Adrian Newstead, ‘Submission on the Proposed Introduction of a Resale Royalty in Australia with Particular Reference to Indigenous Artists and their Communities’, (Submission to DCITA, Australian Indigenous Art Trade Association, 2004) 7.

[19] Ibid 12. See also above n11, 31. Hudson and Waller note a resale royalty model adopted in Germany, based on the payment of the royalty by art dealers and auction houses into a social security fund for artists.

[20] A Division of the Western Australian (‘WA’) Department of Culture and the Arts responsible for the development and support of the WA arts sector.

[21] WA Department of Culture and the Arts: ArtsWA, ‘Resale Royalty Submission’ (Submission to DCITA, 2004) 3.

[22] Exclusions from the labour market by racism, removal from the land base, unpaid wages child endowment, workers’ compensation and deceased states have slowed accumulation of wealth by Indigenous people. See Professor Marcia Langton, ‘A New Deal? Indigenous Development and the Politics of Recovery?’ (Speech delivered at the Dr Charles Perkins Memorial Oration, Sydney, 4 October 2003) <http://www.media.usyd.edu.au/speeches/2002/langton.pdf> at 27 October 2004.

[23] Royalties are paid to authors of literary and musical works for use of their copyright material. While the resale royalty for visual artists is separate to copyright in the work, one means of legislating for it is by amendment of the Copyright Act 1968 (Cth).

[24] ABC, ‘Stretching the Canvas: Investing in Art in Australia’, ABC Radio National, 11 August 2002 <http://www.abc.net.au/rn/talks/bbing/stories/s647142.htm> at 25 October 2004.

[25] Ibid.

[26] Directive 2001/84/EC of the European Parliament and of the Council on the resale right for the benefit of the author of an original work of art [2001] OJ L 272/32.

[27] Much has been made of the potential of a resale royalty system to drive art sales offshore. The contrary view is that Australia’s geographical isolation makes this unlikely. Further, the five per cent flat rate can be confidently supported as it is unlikely to drive sales away. NAVA, Arts Law Centre of Australia, Australian Copyright Council, Viscopy, above n15, 2.

[28] Desart Inc, ‘Submission: Resale Royalty Arrangement’, (Submission to DCITA, 2004).

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