Under European law, the artist's resale right is defined as an “inalienable right [for the author], (…) to receive a royalty based on the sale price obtained for any resale of the work, subsequent to the first transfer of the work by the author”. (Article 1 of the Directive 2001/84/EC of the European Parliament and of the Council of 27 September 2001 on the resale right for the benefit of the author of an original work of art).
Under Belgian law – which has implemented the aforementioned European directive – an artist is entitled to claim payment of a percentage calculated on the resale price if its work of art is sold, after a first sale, through the intermediation of an art market professional, for a price higher than EUR 2,000. The percentage applicable ranges from 4% for a sale price up to EUR 50,000 to 0,25% for the price segment that exceeds EUR 500,000 (Articles XI.175 and after of the Belgian Code of Economic Law).
Each European state may set a different minimum price under which the resale right shall not apply. In France, the minimum resale price amounts to EUR 750,00 whereas in the UK, the trigger is set at EUR 1,000.
Important to remember, neither US law (except in the State of California) nor Chinese law provide for such a resale right.
An unique platform
In Europe and until recently, whenever the legal requirements were met, the art dealer had to make a declaration to the collecting society managing the artist's rights. The art dealers were facing a practical issue : which collecting society managing the artist's rights should they contact? Indeed, collecting society in Belgium and throughout Europe are numerous. Furthermore the artist (or his heirs) could also manage on his/her own the artist’s rights. In practice, art market actors, including but not limited to auction houses, had to find out who was the authorized person to manage the abovementioned rights and then proceed with the ad hoc declaration.
Taking into account the need for a centralized service, the Belgian lawmaker has implemented these aspects in the new Code of Economic Law by creating an unique platform to which any resale rights will be declared. A complementary Royal Decree is expected in a near future.
Innovative case law
The topic is not only moving from a legislative point of view. The European Court of Justice has recently issued a landmark decision about the resale right.
So far, any seller that offered to sale a work of art had to bear the cost of the resale royalty. In France, this was even mandatory by law.
However, recently, the European Court of Justice has considered that in a situation where a Member State adopts legislation which provides that the seller or an art market professional involved in the transaction is to be the person by whom the royalty is payable, Directive 2001/84 does not preclude those persons from agreeing, on the occasion of a resale, with any other person, including the buyer, that that other person will definitively bear the cost of the resale royalty due to the author, provided that a contractual arrangement of that kind does not affect the obligations and liability which the person by whom the royalty is payable has towards the author (CJEU, C41/14, 26th February 2015).
According to the Court, the final buyer might bear the resale rights if this has been agreed by the parties to the sale. It is likely that art auction houses will use this opportunity and adjust their general terms and conditions accordingly.
Prospective buyers should now be aware that the fixed price (“hammer price”) is likely to be increased by both (i) auction costs (as in the past) and (ii) resale royalties.
Rulkin and Partners
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