11 Mar 2010

Resale Royalty Right for Visual Artists Act about to commence

by Mary Still

The Resale Royalty Right for Visual Artists Act 2009 (Cth), which is set to commence on 9 June 2010, will enable artists who derive their income from the initial sales of their creative works to share in the commercialisation of their work on the secondary art market.

The rationale behind the legislation

This legislation is an important development for the Australian art market. Visual artists do not have the same range of opportunities as other creators, such as writers and composers, to earn money through licensing reproductions, public performances or the broadcast of their works. And until now, visual artists have been unable to share in the benefits of the secondary art market which has seen recently seen substantial activity. According to the Government, works by 1578 Australian artists were sold at auction in 2007 for $175 million and the value of the auction sales market increased by 75 percent in that year.

The resale royalty right is seen as an economic reward and incentive for creators of high-quality art when the value of a work is not recognised at the time of the original sale but increases over subsequent resales. It not surprising that Australian visual artists and their advocates have been campaigning for a resale royalty right for the past decade.

Resale royalty rights have already been recognised in over 50 countries, including the United Kingdom, France and Germany. This legislation is intended to bring Australia into line with these nations.

Main features of the legislation

  • Artists will be entitled to a resale royalty right for the sale price of any commercial resale of their original works of arts valued at over $1,000. The resale royalty is a flat 5 percent of the resale price. The sale price on the commercial resale of an artwork is defined as the amount paid for the artwork by the buyer on the commercial resale including GST, but does not include any other taxes or buyer's premium payable on the sale.
  • This right is inalienable, meaning that it cannot be assigned or licensed. Artists will receive the royalty even if the copyright in the work has been transferred to someone else.
  • The right will endure for the life of the artist plus 70 years. The entitlement passes to the artist's estate when the artist dies; artists will be permitted to divide their rights in resale royalties to a number of successors.
  • The bill sets out a "residency test", where the artist and his/her successor/s (where relevant) must be a citizen or permanent resident of Australia citizen or a national or citizen of a reciprocating country under the Berne Convention for the Protection of Literary and Artistic Works.
  • Aside from individuals with a beneficial interest in the right, an entity (defined as a charity, charitable organisation or community body) with a beneficial interest in the right can also be entitled to the royalty, as long as it also satisfies the "residency test", eg. if it is a corporation, it is incorporated under the Corporations Act 2001 (Cth) or an enterprise located in Australia or a reciprocating country. The intention is that commercial bodies will not be able to hold the right, but that artists will be able to pass on the resale royalty rights to an organisation that works for the benefit of the community.
  • Buyers, sellers and art market professionals will be jointly and severally liable to make the royalty payment.
  • The scheme will be administered by a collecting society to be selected by the Government through a tenderprocess. Sellers are required to notify the collecting agency each time a work is sold on the secondary art market. The collecting society will be required to publish a notice on its website as soon as reasonably practicable after becoming aware of the commercial resale of an artwork.
  • The collecting society will be able to apply on behalf of the Commonwealth to the Federal Court or the Federal Magistrates Court for an order that a person has contravened a civil penalty provision of the Bill for failing to provide the collecting society with notice of a commercial resale.
  • While the resale royalty right under the Act is only enforceable in the Australian jurisdiction, Australia could establish arrangements with other countries under the BerneConvention for the Protection of Literary and Artistic Work to acknowledge the right to a royalty for Australian artists whose work is sold in different countries.

Implications for the scheme

The Act will have implications for both artists and sellers of artworks. Artists will need to become familiar with their rights and the operation of the collecting society arrangements once they are in place.

Art market professionals also need to be aware of their obligations. The Government has said it expects the parties to the commercial resale of the artwork to work out who will actually pay the resale royalty during contractual negotiations. Until it is, however, sellers, buyers and art market professionals will be jointly and severally liable to pay the royalty. It will be important that buyers and sellers clearly record these agreements for the liability of the payment of the royalty and that the collecting society, once identified, is notified each time a work is sold on the secondary market.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.