Artist’s Resale Right (Droit de Suite)

From Max-EuP 2012


by Clemens Trautmann

1. Object, terminology and nature

The artist’s resale right is an intellectual property right which grants the author of an original work of art a share in the proceeds of subsequent sales on the professional art market. It was harmonized in the European Union by Dir 2001/ 84 of 27 September 2001 (Resale Right Directive) prompting in the course of its implementation the first introduction of such a right in some Member States. The directive defines the resale right as an inalienable right, enjoyed by the author of an original work of graphic or plastic art, to an economic interest in successive sales of the work concerned (recital 1).

Even beyond France, this right is commonly known as droit de suite. The term originates from French real estate law (denoting a right of follow-up) and is today used in several jurisdictions in a translated form, for example in Denmark (følgeret), Germany (Folgerecht), Italy (diritto di seguito) and the Netherlands (volgrecht). However, the English terms ‘artist’s resale right’ and ‘resale royalty right’ describe the underlying factual situation more precisely. The ECJ identified two main objectives of the Resale Right Directive in a recent judgment (ECJ Case 518/08 – Fundación Gala-Salvador Dalí and Visual Entidad de Gestión de Artistas Plásticos (VEGAP) v Société des auteurs dans les arts graphiques et plastiques (ADAGP) and Others, 15 April 2010, [2010] ECR I-0000, para 27), namely to ensure that authors of graphic and plastic works of art have a share in the economic success of their original works of art (recitals 3 and 4) and to put an end to distortions of competition in the European art market, as the payment of a royalty in certain Member States might lead to a concentration of art sales in other Member States which did not apply the resale right (recitals 9 and 10).

Historically, the droit de suite takes account of the fact that artists are often forced to sell their originals at relatively low prices in order to secure a living. Therefore, a subsequent increase in value of a given work should not exclusively benefit the art dealer, particularly since the artist contributes to a higher valuation by producing, exhibiting and marketing further works. Moreover, the resale right compensates artists for the lack of proceeds which comparable copyright holders (copyright) such as composers or authors collect as royalties by reiterated exploitation of their works.

As regards its legal nature, the directive conceives the resale right as ‘an integral part of copyright’ (recital 4 Resale Right Directive), which is in line with the prevailing view in most continental jurisdictions. As opposed to exclusive exploitation rights granting injunctive relief, it merely represents a pecuniary claim. In common law jurisdictions, though, it is rather seen as an adjunct to the ordinary laws of personal property rendering the seller of the chattel a trustee for the benefit of its creator (trusts). Considering its social objective, the resale right is sometimes compared to a levy and was codified as such in the EEA states Norway and Iceland until recently. Since according to the directive the resale right is inalienable and unassignable (Art 1(1)), some commentators regard it as a variant of droit moral (copyright), although this provision merely intends to prevent advance waivers.

2. Development

The resale right was first introduced by France in 1920 as a result of long and fierce debates on the rather pitiable situation of contemporary artists. The French example was followed by Belgium (1921), Czechoslovakia (1926), Poland (1935) and Italy (1941). In the international field, the resale right was finally adopted into the Berne Convention in 1948 and can be found—after the revision of Stockholm/Paris (1967/1971)—in the Convention’s Article 14ter. After the Resale Right Directive was passed, the European Union declared its intention to work towards transforming Art 14ter Berne Convention into a compulsory minimum protection standard in order to mitigate the competitive disadvantages of the European art market. Therefore, third-country nationals are only entitled to resale right royalties if reciprocity is warranted (Art 7 and recital 7).

Subsequent to the adoption of the resale right into the Berne Convention, further countries introduced resale right provisions in their national copyright legislation, eg Germany (1965, revised 1972), Portugal (1966) and later on also Spain (1987), Greece (1993) and Sweden (1996). The enacted provisions differed considerably with regard to the privileged works of art, the circumstances of relevant sales, the base value as well as the exact percentage. This prompted harmonization attempts by the European Commission from 1977 onwards.

The need for harmonization was heightened by two notable court decisions of the 1990s which reinforced a tendency that sales of art works were concentrated in Member States in which the resale right was not applied. The |ECJ held in the Phil Collins case (Joined Cases 92/92 and 326/92 – Phil Collins v Imtrat Handelsgesellschaft mbH and Patricia Im- und Export Verwaltungsgesellschaft mbH and Leif Emanuel Kraul v EMI Electrola GmbH, 20 October 1993 [1993] E.C.R. 5145) that copyright and related rights are subject to the general principle of non-discrimination on grounds of nationality. Consequently, artists from EU and EEC Member States which did not provide for a resale right could nonetheless enjoy its benefits in other Member States even though the condition of reciprocity was not met. Thus, there was no incentive for such states to introduce a resale right. The famous Beuys decision of the German Federal Supreme Court (Bundesgerichtshof. BGH) (16 June 1994, BGHZ 126, 252), turning on choice of law issues after a work by Beuys had been sold by a German collector at an auction in London, further aggravated the distortion of competition in Europe. The court held that in cross-border art transactions neither the place where the lot was consigned for auction nor the citizenship/domicile of the involved individuals was decisive for the applicability of the national resale right provisions, but only the place of sale.

In order to mitigate these consequences, the European Union passed the Resale Right Directive based on Art 95 EC (Art 114 TFEU), which encountered heavy resistance from the United Kingdom with its prospering art market in London. The Resale Right Directive was incorporated into the European Economic Area Agreement by a 6 December 2002 decision of the EEA Joint Committee. Thus, Iceland, Liechtenstein and Norway were also obliged to harmonize their national copyright laws.

The deadline for transposition was 1 January 2006. By that date, England, Ireland, Austria and the Netherlands (countries where a droit de suite had previously been unknown) introduced a resale right act; the other Member States adapted their national provisions to the standards of the directive. Spain failed to implement the directive in time and thus was held to be in breach of its European commitments (ECJ Case C-32/07 – Commission v Kingdom of Spain, 31 January 2008, OJ C 79, 29 March 2008, p 6), finally enacting a resale right statute in December 2008.

The [Directive|directive]] allows for considerable transition periods, especially with regard to the extent to which the author’s heirs are entitled to the benefits from the resale right (Art 8(3) Resale Right Directive). As the directive also gives the Member States considerable leeway with regard to a number of important details (for example minimum sale price, shared liability of persons other than the seller, privileged sales, compulsory or optional collective management of the royalties), significant differences in the national legislations will continue to exist. Also, some national resale right statutes (Italy, Portugal) include original works such as manuscripts which is in line with Art 14ter Berne Convention but is not covered by the Resale Right Directive.

Therefore, the choice of law issue (choice of law by the parties) already addressed in the Beuys decision will remain relevant for the time being, especially since cross-border transactions are very common in the professional art market. The [Directive|directive]] does not contain an explicit choice of law rule. Since, however, it considers the droit de suite a copyright claim, the general rule of lex loci protectionis applies. There is still some uncertainty as to the exact definition of the connecting factor. Some commentators favour the place where the passage of title occurs, while others also recognize the place where the parties conclude the sales agreement (in the latter sense, see a recent decision of the Bundesgerichtshof, 17 July 2008, BGHZ 177, 319).

Considerable criticism is still being levelled at the very concept of droit de suite by academics as well as practitioners. There is a rather widespread view that only a small group of established artists whose works are being traded on the secondary art market (galleries, auctions) benefits from the droit de suite, whereas the first sale is the most important income source for the majority of artists. Moreover, the resale right is said to reduce incentives for art dealers to promote works which are subject to droit de suite. However, there is little empirical data to support or refute this criticism. The Resale Right Directive provides for a study on the implementation and practical effects of the instrument (Art 11). It is unlikely, though, that the results will prompt a fundamental reassessment of the directive, particularly since the review focused on royalty rates and the minimum sales price.

There is a recent tendency whereby auction houses try to avoid the payment of resale royalties by passing on the respective amount to the seller, sometimes by means of general terms and conditions (standard contract terms). The effectiveness of such efforts warrants close scrutiny.

3. Main features of the Resale Right Directive

The Resale Right Directive aims at full harmonization, though the Member States have exercised the leeway they were given in rather different directions. Compared to the resale right rules previously in effect in many European jurisdictions, the directive generally decreased the standard of protection, balancing the authors’ interests against the competitiveness of the European art market. At the same time, however, the mechanisms for the enforcement of the resale right were improved.

a) Requirements

In order for the author’s claim to arise, the Resale Right Directive requires a resale of an original work of art involving art market professionals such as sellers, buyers or intermediaries (Art 1(1), 1(2)). The term of protection of the resale right, which corresponds to the Copyright Duration Directive 93/98/EEC (Art 8(1)), is seventy years post mortem auctoris.

The directive defines the term ‘original work of art’ as a work of graphic or plastic art and gives a number of examples, such as pictures, collages, paintings, drawings, engravings, prints, lithographs, sculptures and photographs (Art 2(1)). As ceramics, glassware and tapestries are mentioned as well, this leads to the conclusion that products of applied art are not excluded per se. The requirement of an original work of art can be further problematic in cases of casts, replicas, proofs and other forms of copies. The criteria given in the directive (execution by the artist himself or under his authority, artist’s signature, issuance of limited edition) are helpful, but not completely selective.

The droit de suite is triggered by any ‘resale’, ie any sale subsequent to the first transfer of the work by the author, provided an art market professional is involved (Art 1(1)). Therefore, initial sales on commission for the account of the author, which is a rather common phenomenon in the art market, are not covered. There is some uncertainty as to the interpretation of the term ‘resale’. One question is whether it needs to be construed by reference to national criteria or autonomously (the latter seems more in line with the principles of EU law, especially since the directive intends a full harmonization); another open issue concerns the distinction between disposition and executory agreement (most commentators regard the passage of title as relevant).

The central element ‘art market professional’ is explained by means of an exemplary enumeration (Art 1(2)): it includes salesrooms, art galleries and any dealers in works of art in general. Involvement of an art market professional is given whenever he acts as seller, buyer or intermediary in a resale. Certain types of resales involving art market professionals can be privileged, though, namely acquisitions by public museums from private individuals (recital 18 Resale Right Directive) and resales up to a value of €10,000 by galleries who purchased the work directly from the author (Art 1(3)).

In order to avoid disproportionate administrative costs compared with benefit to the artist, the resale price must exceed a minimum threshold which can be determined by the Member States, but may not be set beyond €3,000 (Art 3). Critics argue that works of art in the low price segment, especially photographs and prints as well as works of less established artists, could be factually exempt from droit de suite due to the minimum sales price. Therefore, Germany and France have chosen thresholds significantly below €1,000, whereas Austria, Ireland and Italy have opted for the maximum amount permissible. Belgium, the United Kingdom and Spain have set thresholds in between.

b) Scope and enforcement

The basis for determination of the royalties is the sales price net of tax (Arts 4 and 5). Profit-based royalties would better reflect the directive’s objective to ensure the author’s participation in the economic success of his work, but the European legislature has opted against that model for the sake of practicability and accepts that royalties are also owed if the art dealer incurs a loss (this can be justified, because of the high importance of originals). The directive provides a schedule with price bands to which a regressive rate scale is applied, eg for the portion of the sales price up to €50,000 the royalty is set at four per cent (Member States are at liberty to increase that rate to five per cent), while the portion beyond €500,000 will only be subject to a 0.25 per cent royalty. The total amount of royalty is capped at €12,500. The motivation for these relatively moderate rates was the presumed risk of sales relocations to third states.

In principle, the debtor of the resale right is the seller (Art 1(4)), that is the person or undertaking on whose behalf the resale is concluded (recital 25). Thus, the commission merchant is also liable. Member States may derogate from that principle, however, and provide for sole or joint liability with other art market professionals involved in the sale (eg buyers, intermediaries, principals). The majority, including Austria, France, Germany, Italy, Spain and the United Kingdom, have made use of that option and have stipulated joint liability (while some prescribe a higher-ranking liability of the seller). The royalty provided for under the directive is payable to the author and, after his death, to his heirs. The ECJ recently held in a case concerning a testamentary legatee that it is permissible for Member States to make their own legislative choice in determining the categories of persons capable of benefiting from the resale right after the death of the author (ECJ Case 518/08 – Fundacion Gala-Salvador Dalí, 15 April 2010, [2010] ECR I-0000, paras 33, 36).

The enforcement of the resale right and management of the royalties can be transferred to collecting societies (Art 6(3) Resale Right Directive), either optionally (as implemented in Austria, Germany and Spain) or in a compulsory manner (Italy, United Kingdom). In practice, collective management is more common than individual collection and enforcement.

The ancillary right to obtain information (Art 9) facilitates the enforcement of the resale right considerably: persons entitled to receive royalties may demand information necessary to secure payment from any art market professional. Many Member States have implemented the monitoring procedure in a way that only collecting societies may exercise the right to obtain information (in accordance with recital 30). Some Member States, such as Italy and Spain, have even shaped the monitoring procedure as an obligation of art market professionals to give notice of relevant art sales.

Literature

Paul Katzenberger, Das Folgerecht im deutschen und ausländisches Urheberrecht (1970); Carine Doutrelepont, Le droit et l’objet d’art: Le droit de suite des artistes plasticiens dans l’Union Européenne (1996); John Henry Merryman, ‘The Proposed Generalisation of the Droit de Suite in the European Communities’ [1997] IPQ 16–36; Dieter Schmidtchen and Roland Kirsten, ‘Die EU-Richtlinie zum Folgerecht—Eine ökonomische Gesetzesfolgenanalyse’ GRUR (2002) 860–6; Paul Katzenberger, ‘Die europäische Richtlinie über das Folgerecht’ GRUR Int (2004) 20–7; Sam Ricketson and Jane Ginsburg, International Copyright and Neighbouring Rights, vol 1 (2nd edn, 2006) 669–81; Nobuko Kawashima, ‘The droit de suite controversy revisited: context, effects and the price of art’ [2006] IPQ 223–55; Joanna Cave, ‘An Overview of the European Artist’s Resale Right Directive 2001/84/EC and its implementation in the UK via the Artist’s Resale Right Regulations 2005’ [2006] JIPLP 242–6; Simon Stokes, Artist’s Resale Right (Droit de Suite): Law and Practice (2006); Pierre Valentin, Droit de Suite, [2006] EIPR 268-275; Hendrik Vanhees in Thomas Dreier and Bernt Hugenholtz (eds), Concise European Copyright Law (2006) 405–21; Matthias Weller, ‘Die Umsetzung der Folgerechtsrichtlinie in den EG-Mitgliedstaaten: Nationale Regelungsmodelle und europäisches Kollisionsrecht’ (2008) 16 ZEuP 252.

Retrieved from Artist’s Resale Right (Droit de Suite) – Max-EuP 2012 on 19 May 2022.

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