4.2 Resale Royalty Rights

Resale royalty rights aim to give artists a cut of the profits when their work is resold. This idea started in France and spread across Europe, with the EU setting standard rules. It's meant to help artists benefit from the increasing value of their art over time.

The US tried something similar with California's Resale Royalty Act, but it didn't stick. Now, there's ongoing debate about whether these rights help or hurt the art market. Some say it's fair to artists, while others worry it might make selling art more complicated.

Resale Royalty Legislation

Origins and European Implementation

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• Droit de suite originated in France in 1920 to protect visual artists' economic interests
• Allows artists to receive a percentage of the profit from resales of their work
• European Union adopted resale right directive in 2001, implemented by all member states by 2006
• Harmonized resale royalty rights across EU countries, creating uniform standards
• Applies to sales of artworks by living artists and for 70 years after their death

California Resale Royalty Act

• Enacted in 1976 as first resale royalty law in the United States
• Required 5% royalty payment to artists for qualifying resales of their work
• Applied to sales of $1,000 or more when the seller resided in California
• Faced legal challenges, ultimately ruled unconstitutional in 2018
• Highlighted ongoing debate about artist compensation in secondary art market

European Union Resale Right Framework

• Standardized resale royalty rights across EU member states
• Applies to sales by art market professionals (galleries, auction houses, dealers)
• Covers original works of graphic or plastic art (paintings, sculptures, prints)
• Sets sliding scale for royalty rates, ranging from 0.25% to 4% of sale price
• Caps maximum royalty at €12,500 per sale to balance artist and market interests

Royalty Calculations

Secondary Market Sales Criteria

• Applies to resales after the first transfer of ownership by the artist
• Typically excludes private sales between individuals
• Covers sales conducted by art market professionals or institutions
• May include online sales platforms specializing in art transactions
• Often sets minimum sale price thresholds to trigger royalty payments

Percentage and Price Considerations

• Royalty rates vary by country and sale price
• EU directive establishes sliding scale:
  • 4% for portion of sale price up to €50,000
  • 3% for portion between €50,000 and €200,000
  • 1% for portion between €200,000 and €350,000
  • 0.5% for portion between €350,000 and €500,000
  • 0.25% for portion exceeding €500,000
• Some countries set fixed percentages (Australia: 5% flat rate)
• Calculation based on hammer price or total price paid by buyer, including fees

Qualifying Artworks and Exceptions

• Covers original works of visual art (paintings, sculptures, photographs)
• May include limited edition prints, cast sculptures, or tapestries
• Often excludes works of applied art or functional design objects
• Some jurisdictions set time limits (works created after a certain date)
• Exceptions may exist for sales below certain price thresholds
• Special provisions for works by multiple artists or collaborative pieces

Artist Rights and Challenges

Lifetime and Posthumous Rights Management

• Artists retain resale rights during their lifetime in most jurisdictions
• Rights often extend to heirs or estates for a set period after artist's death
• EU directive specifies 70-year posthumous term, aligning with copyright duration
• Artists may need to register with collecting societies to receive royalties
• Some countries allow artists to waive or transfer their resale rights
• Challenges in tracking and claiming royalties for lesser-known artists

Enforcement and Implementation Hurdles

• Difficulty in monitoring all qualifying sales, especially in private market
• Varying levels of compliance and reporting among art market professionals
• Cross-border sales complicate royalty collection and distribution
• Administrative costs of collecting and distributing small royalty amounts
• Resistance from some market participants citing increased transaction costs
• Debate over economic impact on art market and potential for market relocation
• Challenges in verifying authenticity and provenance for royalty claims