The bigger picture

Until 14 February 2006, when an artist sold or gave away their work in the UK they were not entitled to a share in any future increases in value, even if their reputation and notoriety meant that the work was subsequently sold for much more.

The EU resale rights directive (2001/84/EC) sought to harmonise the position on resale rights across Europe and to smooth out distortions in differing EU jurisdictions '“ in France, for example, artists have long benefited from such a right. The recent case Fundacion Gala-Salvador Dalí and Visual Entidad de Gestion de Artitas Plasticos (VEGAP) v Société des auteurs dans les arts graphiques et plastiques (ADAGP) and others (Case C-518/08) is a useful illustration of the ECJ's interpretation of the main objectives of the directive and its interaction with national law.

In Dalí, the Paris Tribunal de Grande Instance stayed proceedings to ask the ECJ if France could retain a resale right that only allowed the heirs '“ to the exclusion of legatees or successors in title '“ to benefit from the resale right of a deceased artist. The ECJ identified two main objectives of the directive. First, the authors of graphic and plastic works of art should share in the future economic success of their original works. Second, the directive should put an end to the distortions of competition in the market place, so that the payment of a royalty in certain member states did not lead to a concentration of art sales in member states which did not apply the resale right. The ECJ also decided that the directive did not preclude French law from restricting the benefit of the resale right to the artist's heirs only.

Salvador Dalí died in 1989, leaving his intellectual property rights to Spain as sole legatee under his will. VEGAP was mandated to manage and exercise copyright in Dali's works worldwide, and since 1997 ADAGP collected the sums due for the exploitation of Salvador Dalí's works in France. ADAGP paid the sums collected to VEGAP with the exception of those monies collected in respect of the resale right, which, pursuant to French legislation, were paid to the five family heirs of Dalí's estate rather than to VEGAP as representative of the legatees under his will. VEGAP challenged this decision.

The ECJ found that it was not the intention of the directive to determine the laws of succession in individual member states and showed a reluctance to interfere in such matters. As the two main objectives of the directive were satisfied by the French legislation, the ECJ found that the directive should not preclude a provision of national law such that only the heirs could benefit.

In this respect, it will be interesting to see how the ECJ's approach to cross-border succession rights and its willingness to intervene changes over the next few years in light of the recent draft European Succession Regulation.

Fashion v talent

The full impact of the introduction of artist's resale rights in the UK remains to be seen. The Artist's Resale Right Regulations 2006 only benefited living artists and the UK government has extended the derogation from the right of beneficiaries to benefit from the resale of works by deceased artists until 2012.

The debate surrounding resale rights has caused considerable controversy. Artists have drawn comparisons with authors or composers who continue to share in the economic rewards reaped from their creations and argue that it is only fair and reasonable that they should also share in subsequent increases in value given that such increases may be attributable to their talent and reputation. In contrast, the art market argues that the right is an unfair fetter on their commercial dealings, placing the art markets of countries that have it at a competitive disadvantage to those that do not. It is feared, for example, that once the regulations are fully in force, sellers will choose Switzerland, New York and Hong Kong over London to avoid the additional levy.

It is also suggested that in the contemporary art market increases in value are as much a matter of fashion as of talent and, therefore, a buyer of art, having assumed the risks that a work may not increase in value, should not have to share out any profits that may be made.

The UK Intellectual Property Office, in their consultation paper in 2008, 'Resale Right: The Derogation for Deceased Artists', noted that the impact of the regulations on the UK market had been minimal to date. By 2008, approximately ten per cent of all sales '“ by both value and volume '“ qualified for the resale right in the UK; however, the government observed that the true impact of the resale right was masked by the fact that the derogation was still in place and that if the derogation was removed 40 per cent of sales might qualify. Given that the derogation is also enjoyed by Malta, the Netherlands, Austria and Ireland, there have been calls from the art market across Europe to extend the derogation beyond 2012 and to review further the impact of the resale right on the EU market. To date, however, the EU has been reluctant to do so and lawyers dealing with artistic rights should watch for developments.