Resale royalty rights for visual artists

Resale royalty rights for visual artists

Resale royalty rights for visual artists

On 9 December 2009, the Federal Government fulfilled its 2007 election promise to implement a scheme providing for visual artists to receive a royalty on resale of their works, by passing the Resale Royalty Right for Visual Artists Act 2009 (Act). From 9 June 2010, visual artists will have a right to receive a five per cent royalty payment on secondary sales of their works over $1,000, for the duration of copyright in that work (the life of the artist plus 70 years). Although the scheme has already commenced, there is still some way to go before benefits under the scheme start flowing to artists.

What “works of visual art” are covered by the scheme?

The right to receive a royalty will attach to resales of original “works of visual art” covered by the Act, which is defined to include works such as batiks, carvings, ceramics, digital and multimedia artworks, drawings, engravings, fine art jewellery, glassware, paintings and tapestries.

According to the Explanatory Memorandum to the Act, the scheme is intended to cover multiple originals produced in a limited edition (such as etchings or bronze sculptures), but exclude items such as posters, mass-produced photographic or other prints, films and industrial designs.1

What sales are covered?

Artists will have a right to receive a royalty in respect of “commercial resales” of their works of visual art. A sale will be a commercial resale if:

  • ownership of the work is transferred;
  • the sale price is over $1,000 (inclusive of GST);
  • the transaction involves an art market professional (an auctioneer, owner or operator of an art gallery, the owner or operator
  • of a museum, an art dealer or any other person otherwise involved in the business of dealing in artworks); and
  • the transfer is not the first transfer of ownership.

Who holds the resale royalty right?

Where artwork is created by a single, living artist, that artist will be entitled to receive the royalty from secondary sales of that artwork. Where an artist is deceased, that artist’s successor in title will be entitled to receive the royalty. If the artwork is created by multiple artists, each artist will be entitled to an equal share of the royalty, unless they have agreed to an alternative apportionment. If one of those artists has since died, that artist’s successor will be entitled to the deceased artist’s share.

Each artist must also satisfy a residency test to be entitled to the royalty. A living artist will satisfy this test if he or she was an Australian citizen, permanent resident or national citizen of a country prescribed as a reciprocating country (discussed below) at the time of the commercial resale. In the case of a deceased artist, the artist must satisfy that test immediately before his or her death and the successor must satisfy that test at the time of the commercial resale giving rise to the right to receive a royalty. Successors will also need to satisfy a succession test which, broadly, sets out the types of entities to whom the right may be bequeathed and prescribes the circumstances of how that right must be bequeathed. Except to the extent that the right is transferable to entities which satisfy the succession test, the resale royalty right is absolutely inalienable; it cannot be assigned or otherwise transferred to a third party.

Collecting society

The Federal Government has appointed the Copyright Agency Limited (CAL) as the collecting society to implement and administer the resale royalty scheme. Under the Act, CAL must set up and administer the scheme, collect and pay royalties to artists, and prosecute any breaches under the Act. CAL has also been charged with the responsibility of educating visual artists about the scheme and developing a reciprocal arrangement with other countries. CAL has announced that it will set up two advisory panels – one to represent artists and the other to represent art market professionals – to ensure that the implementation of the scheme and its administration works within existing industry practices.

CAL is currently meeting with auction houses, commercial galleries and other interested organisations. Further information about CAL’s administration of the scheme will be available on CAL’s dedicated website: www.resaleroyalty.org.au.

Sellers’ obligations

Under the Act, sellers are required to notify CAL of all commercial resales of artworks within 90 days of a sale. If CAL reasonably believes that an art market professional has been involved in a commercial resale, then that art market professional is required to provide that information to CAL within 90 days of CAL’s request.

Sellers and art market professionals face civil penalties of up to $110,000 for a corporation and $22,000 for an individual if they fail to comply with these obligations. Sellers, buyers and art market professionals will need to ensure that they agree who will be responsible for paying the royalty in any particular transaction, as the Act provides that they will all be jointly and severally liable to the artist for the relevant amount. Ideally, the parties will agree these details in a contract of sale for the artwork before the royalty becomes payable.

Key issues

Although the scheme has already come into effect, the Act raises a number of issues that will impact on an artist’s ability to receive a royalty in the future.

First commercial sale after scheme commences is excluded

One of the most controversial aspects of this scheme is how it applies to art works existing before commencement of the Act. Section 11 of the Act provides that there is no right to receive a royalty on the first transfer of ownership of works of visual art in existence when the Act commenced, even if that transfer is a commercial resale.

This section has a significant impact on when artists (or their successors) are likely to start receiving royalties on artwork existing when the scheme commenced, particularly given how infrequently sales of artwork occur in the Australian art market.
According to the Explanatory Memorandum, the prospective application of the right will help protect the property rights of people who bought artworks not knowing that a resale royalty would be payable when they resold them and will allow the art market to adapt gradually to this new right.2 More relevantly, though, the Government included this provision on the basis that it received advice that the application of the scheme to first sales after commencement would amount to an acquisition of property by the Commonwealth under s 51(xxxi) of the Constitution and, accordingly, such acquisition would need to be “on just terms”.

Before enactment, the House of Representatives Standing Committee on Climate Change, Water, Environment and the Arts’ (‘the Committee’) was asked to consider this and other issues raised by the Bill.

In submissions to the Committee, the Arts Law Centre of Australia and Viscopy were both vocal opponents of this provision, principally on the ground that the average period of turnover of artwork in Australia is close to 20 years. On that basis, they argued that it will take around 40 years before all artists will benefit from the resale of their work3 and that this will deny benefits under the scheme to the current generation of artists. The Committee concluded that if the period of turnover of artwork in Australia is closer to 20 years, then including this provision will mean that artists receive minimal benefits from the scheme.4 The Committee recommended that the Government reconsider including this provision. While it is not clear whether the Government followed the Committee’s recommendation, this provision nevertheless remains in the enacted scheme.

As a consequence, artists should not expect to receive royalties under this scheme for some time, if indeed during their lifetime.

Reciprocal arrangement with other countries

The Federal Government has outlined its intention for the scheme to apply to works by Australian artists sold overseas, and has charged CAL with the responsibility of establishing reciprocal arrangements with other countries who recognise a resale royalty right (such as France, Germany and the United Kingdom). While such an arrangement will greatly benefit visual artists whose works are sold overseas, no reciprocal arrangements have yet been established.

Concerns have been raised as to whether other countries will be willing to enter into a reciprocal arrangement in light of Australia’s restriction on the right applying to first sales after the scheme commenced, given that a royalty is payable on all resales from the date of commencement in all other countries where a similar scheme has been introduced.5

While the Committee was asked to consider this issue, it appears that advice from the Department of the Environment, Water, Heritage and the Arts that such a risk would be low assuaged any concerns about this issue. It will be interesting to see whether other countries will be prepared to enter into reciprocal arrangements with Australia, particularly given that a royalty will not be payable on first sales of works of foreign national artists made in Australia after the commencement of the scheme.

Endnotes

1 Explanatory Memorandum, Resale Royalty Right for Visual Artists Bill 2008 (Cth), pp 4, 5
2 Explanatory Memorandum, Resale Royalty Right for Visual Artists Bill 2008 (Cth), p 7
3 Arts Law Centre of Australia, Submission to House of Representatives Standing Committee on Climate Change, Water, Environment and the Arts – Submission No. 35, p 3; Viscopy, Submission to House of Representatives Standing Committee on Climate Change, Water, Environment and the Arts – Submission No. 36, pp 5, 6
4 House of Representatives Standing Committee on Climate Change, Water, Environment and the Arts, Resale Royalty Right for Visual Artists Bill 2008, 2009, p 13
5 Access Economics, Design Aspects of an Australian Resale Royalties Scheme, 7 April 2008, p 23